Although not all of its problems are behind it, Reader's Digest was emphasizing its expansion efforts in its first-quarter conference call and in a new agreement signed with Chinese publisher Shanghai Press & Publication Administration.
Total company sales fell to $490 million in the first quarter ended September 30, from, $495 million, in the comparable period in fiscal 2004. The operating loss, which included a $25-million accounting charge, increased to $35.9 million from $13.5 million.
Sales in the Reader's Digest North American group were flat at $210 million. Book highlights within RDNA included solid gains in Reiman's book operations, which RD chairman Thomas O. Ryder attributed in part to the release of a new annual, Contest Winning Recipes, which sold 200,000 copies in the quarter. Reiman is testing three new annual concepts, Ryder said, adding that RD's general books group is taking a page from Reiman to publish its own annual titles. The Best of Reader's Digest and Laughter Is the Best Medicine will be released later this fiscal year. The general books unit is also developing a title for publication later in the year that had the highest pre-test of any RD book in five years, Ryder said. In addition, RD is looking to broaden the audience for its Select Edition titles by testing two new marketing ventures, Weekend Readers Club and Seasons of Reading.
Sales in the consumer business services group fell 5%, to $71.4 million. The decline was due almost entirely to a sales drop at Books Are Fun, and Ryder said the performances of BAF and QSP are RD's two major challenges for the year. Fewer school events, caused by high turnover of sales reps, hurricanes and delayed school openings, was the major reason for the sales decline at BAF, Ryder said. He told analysts RD is in "a continuing battle" to recruit new salespeople, noting that after losing reps in the first quarter it has added some in the second period. And while RD continues to invest in BAF to ward off increased competition, Ryder said early trends point toward a soft year for the display marketing unit.
RD's international group benefited from exchange rates and sales were flat at $215 million. Ryder said he was particularly pleased with how well RD's English-as-a-Second Language programs did in Eastern Europe. The international group is also developing a number of new books that will be sold in multiple countries, along the lines of its world atlas. Ryder estimated that The Reader's Digest World Atlas will sell 500,000 copies worldwide once it is available in all markets by fiscal 2006.
China Project
In a press conference held November 4, Reader's Digest unveiled the first two books released in a new joint venture with Shanghai Press. Beautiful Xiangxi and Wonderful Xinjiang each feature 300 photographs and are priced at $30. In addition to publishing books with SP&PA, RD will publish titles from a range of Chinese houses, including Shanghai Art & Literature Publishing House. RD also plans to collaborate on and coproduce other titles with Chinese publishers with Treasures of China the first book developed from this initiative.
