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Earnings Jump at RD
-- 2/7/00

Operating profits rose 121% to $86.3 million in Reader's Digest's global books and home entertainment group for the second quarter ended December 31, 1999. The company said the profit improvement was led by better results in the U.S. market due to the October acquisition of Books Are Fun, improved response rates and reengineering efforts. Earnings were also up in the U.K., Canada, Australia and France.

Revenues in the group rose 6% to $481.6 million due to the Books Are Fun purchase and growth in Eastern Europe, Brazil and Mexico. RD's decision to reduce the number of mailings and mail quantities to marginal customers resulted in revenue declines in several markets, including the U.S., where sales fell in music, general books and video products.

For the entire company, RD reported a 48% gain in operating profit to $146.2 million in the quarter, on a sales increase of 3% to $844 million. RD chairman Thomas O. Ryder is "extremely pleased" with the results, which he said reflected across-the-board strength. The gain in profits was due principally to worldwide cost reductions and the elimination of unprofitable business processes. "By adding new revenue sources such as Books Are Fun," Ryder explained, "we effectively are replacing 'bad revenue' related to less profitable operations, with 'good revenue."

For the first half of the year, operating profit in the books and home entertainment group rose 128% to $127.2 million, although revenues were down 3% to $801.3 million. For the entire company, operating profit was up 119% to $185 million, while revenues fell 2% to $1.36 billion.
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