Improvement in its troubled U.S. books and home entertainment division helped Reader's Digest's North America Books and Home Entertainment group turn in an operating profit of $3 million in the first period ended September 30, compared to a loss of $11 million in last year's first quarter. The improvement in the North America BHE group's bottom line occurred despite a drop in sales in the quarter, to $115 million from $141 million, due to a planned reduction in sweepstakes mailings.
The lower volume of mail, which fell 52% at the U.S. BHE division, was the primary factor in driving down the division's operating loss by $10 million in the quarter. Response rates also improved, with seven of the nine products marketed by the division in the quarter performing better than predicted.
The strong start notwithstanding, RD chairman Tom Ryder said response rates are still not at acceptable levels for the U.S. BHE division, and he warned that the first-quarter results may make the division look better than it is. Positive signs in the division include a good start by its trade operation, which is now centered around Books Are Fun. Ryder had nothing but praise for Books Are Fun, which he said posted double-digit gains in both sales and profits for the quarter and is on pace to have a very strong year. The young families unit is also performing well.
