Total revenue fell 4.2% at Reader's Digest, to $495 million, in the first quarter of fiscal 2004 ended September 30; and the net loss deepened to $13 million from $5 million in the comparable period in fiscal 2003. The results, said company chairman Thomas Ryder, were in line with company expectations, and RD remains on target for operating profits to begin growing again in fiscal 2005.
Results in RD's book-related operations were mixed. Ryder said that for "the first time in quite a while," the U.S. books and home entertainment group posted a quarterly profit. Lower costs and strong responses to a reading series mailing were two of the factors behind the improvement, and Ryder said the unit is on track to at least break even for the entire year.
Sales at Books Are Fun were slightly down in the quarter, which Ryder attributed to less sales per event and the loss of an unusually high number of sales reps in August. Ryder said the soft sales trend at BAF continued into the second quarter and that RD's plan to increase the number of BAF reps by 10% was behind schedule. Despite the slow start at BAF, RD is rolling out jewelry fairs, art fairs and bath and beauty fairs in the U.S. and is considering expanding BAF to two more countries.
RD's international group hit its internal forecast for the first time in six quarters in the first period, Ryder said. Business in Germany and France remained soft, although Ryder said re-engineering efforts aimed at downsizing operations are making progress. He said that by December overhead and staff levels will be reduced by 20%. The international group is bearing the brunt of RD's plan, announced earlier this year, to eliminate 580 positions. A total of 200 jobs were cut in the quarter worldwide. Ryder said that while the international group "still has issues," he believes "the worst is over."
