Revenues at Reader's Digest's North America Books and Home Entertainment group fell 17.3% to $133.7 million in the first quarter, ended September 30, 2001, and the division had a net loss of $9.8 million, compared to net income of $23.8 million in last year's first period.
RD had expected lower revenues in the period because of a 30% reduction in mailings, a lower response rate following the state attorneys general sweepstakes agreement and a soft economy. The events of September 11 also depressed sales and contributed to a larger-than-expected loss in the quarter, as did investments in new products and distribution channels. RD chairman Thomas O. Ryder said response rates to BHE mailings "were at historic lows" in the quarter. One bright spot for BHE was the response to the group's use of new lists to gain new subscribers for its Select Editions series. The effort netted 500,000 new members in the period.
RD's Books Are Fun division had higher sales in the quarter ,despite the cancellation of several hundred events. Ryder said BAF is doing well in the early part of the quarter and could have a "very good year."
Ryder said he expects the weak economy to continue to hurt results at BHE in the second quarter, and noted that the division "is limiting activity until the environment improves."
Regarding the anthrax scare, Ryder said RD is making sure its logo is prominently displayed on all envelopes and is also using a security seal on the flap. While the scare has had some impact on short-term results, Ryder said, "I don't think anthrax will be a major thing going forward."
