Apollo Group Inc (APOL.O), owner of the largest for-profit college in the United States, said it will cut about 800 jobs and shut down 25 campuses to save costs amid declining profit and lower student enrollments.
The parent company of the University of Phoenix forecast a weak 2013 and said it expects to cut costs by $300 million by fiscal year 2014.
Apollo's shares, which have nearly halved in value since the beginning of the year, were down 8 percent at $25.20 in extended trade. They closed at $27.49 on the Nasdaq on Tuesday.
The market leader's action is yet another sign that a recovery in the for-profit education industry is far away.
The industry has struggled to attract students ever since a U.S. government scrutiny revealed high student debt loads and low graduation rates.
New federal rules that threatened to cut away financial aid if debt loads remained high were introduced in 2011, forcing colleges to change the way they enrolled students and focus more on the quality of education.
Apollo's student sign-ups fell 14 percent for the fourth quarter ended August 31. New enrollment had tumbled over 40 percent in fiscal 2011, before posting gains for first two quarters of 2012. They started declining again in the third quarter.
The company now expects new student enrollments to grow some time in the second half of 2013, Apollo Chief Financial Officer Brian Swartz said on a conference call with analysts.
He expects first-quarter sign-ups to fall 17 percent.
For 2013, Apollo forecast operating income of between $525 million and $575 million, excluding items, and revenue of between $3.65 billion and $3.80 billion.
Analysts were looking for a profit of $3.13 per share, on revenue of $4.07 billion, according to Thomson Reuters I/B/E/S. [ID:nASA04YHZ]
The weak forecast is in part due to the company's recent move to freeze tuition at current rates. It has in the past increased rates by 3 to 5 percent per year.
The company has taken several steps over the last year to better position itself in the highly competitive market for quality students - those who would be able to repay student loans.
It has offered trial programs for its students, changed its marketing strategy and last week implemented the tuition freeze.
Apollo on Tuesday said it would shut 25 campuses and 90 learning and student resource centers, which will impact about 4 percent of total enrollment, or about 13,000 students.
The company does not expect to lose all of these students, who will have the option of either shifting to online courses or nearby campuses, it said on its call.
Following the restructuring, Apollo will be left with 112 campuses and resource centers.
It expects to incur about $175 million of restructuring and other charges, primarily from lease exit and other related costs.
Apollo is also buying back private equity firm Carlyle Group's (CG.O) 14.4 percent stake in their joint venture, Apollo Global, for $42.5 million, the company said in a regulatory filing.
Net income fell to $74.2 million, or 66 cents per share, in the fourth quarter, from $183.9 million, or $1.37 per share, a year earlier.
Excluding items, the company earned 52 cents per share. Revenue fell 11 percent to $996.5 million.
Analysts expected a profit of 49 cents per share on revenue of $1.01 billion.
(Reporting by A. Ananthalakshmi in Bangalore; Editing by Supriya Kurane, Anthony Kurian)