In its ongoing efforts to bring costs in line with revenue, Reader's Digest announced last week that it plans to eliminate another 380 positions in its worldwide operations. The new round of cuts, which are expected to be completed by the end of the year, are in addition to the 200 jobs the company said it was eliminating in April, bringing the total reduction to 580 positions, or 12% of its workforce. The company said most of the new cuts will come in its international operations.
Word of the latest restructuring came as RD announced results for the fiscal year ended June 30, in which revenue rose 4.4%, to $2.47 billion, but earnings dropped to $61.3 million from $91.2 million. The profit decline was due mainly to a 54% drop in earnings from RD's international operations, which suffered from disappointing results in most major European markets as well as Mexico. RD's North American operations had a dramatic turnaround in the year, with operating profits of $60.6 million, compared to a loss of $2.2 million in fiscal 2002. The improvement was attributed to the inclusion of results from Reiman Media as well as an 80% reduction in losses at its U.S. books and home entertainment division. Operating profit in the consumer business services division rose 2%, to $90.6 million, mainly due to higher earnings from the Young Families division and the absence of losses from gift.com.
Under its new reporting structure, RD's book operations are scattered among the three operating units. In some comments on its book-related divisions, RD said sales at Books Are Fun increased by 4% to 6%, but profits were flat due to bad weather in the second half of the year, leading to the cancellation of numerous events. Lower costs resulted in improved operating results in each of the U.S. BHE units—home and health, entertainment and the reading series. The higher profits at Young Families came on lower sales as the division eliminated a number of unprofitable product lines.
Company chairman Tom Ryder said he expected fiscal 2004 to be a transition year, with a gain in earnings on flat revenue. Ryder predicted that sustainable revenue and profit growth will begin in fiscal 2005.
