With a new school year right around the corner, Pearson Plc. hopes that American students will purchase new textbooks this year. Unfortunately for the publisher, many have opted for more affordable rental plans. Due to the growing popularity of rental plans, Pearson has faced a steady flow of turmoil over the past four years, leading to cost cuts, layoffs, and sales. After disposing of its stake in Penguin Random House, Pearson will rely on the North American market more than ever before.
Another round of layoffs, which were announced on Friday, will attempt to offset weaker demand. The cuts will equate to 3,000 individuals losing their jobs. That is roughly ten percent of the company’s global workforce. The announcement came during the release of the company’s 1st half earnings results. Simultaneously, Pearson significantly lowered its dividend by 72 percent to just five pence per share.
The cutbacks are expected to run from 2017 to 2019. Pearson leadership believes the moves will help the company save around $395 million annually. In a drastic restructuring at the beginning of 2016, Pearson cut 4,000 jobs. As education continues to evolve rapidly, the conventional publisher has been hit hard. In January, Pearson issued a profit warning and disappointed investors.
In 2015, Pearson made itself even more dependent on the education market, by ridding itself of the Financial Times newspaper and half of the Economist Group. On Friday, Pearson confirmed it had produced a slim profit for the first half of the year. Nevertheless, profits have dropped immensely from just a year ago.
CEO John Fallon believes revenues from the American higher education market will drop by as much as 7 percent this year and next. To cope with the diminished demand, Fallon, who has been CEO since 2013, has taken steps to decrease the company’s operations in the United States. Unfortunately for Pearson, their future depends on the student and their willingness to purchase textbooks.