Reader's Digest continues to try new initiatives to improve results from its struggling U.S. books and home entertainment group. Its most recent effort includes cutting about 100 jobs in the group tied to the elimination of an unprofitable catalogue business, the reduction of titles in some continuity series and general books lines, and its exit from the adult video business. About 35 positions were eliminated directly from the BHE group, and 45 jobs in support functions were also cut. The remaining positions cut were unrelated to BHE.
To further cut costs, RD said it will reduce its mail promotions by about 40% in the fiscal year beginning July 1, 2002, by eliminating direct-mail campaigns that are not generating acceptable profits. Spokesperson Bill Adler said the BHE group will implement a complete overhaul of its marketing strategy, de-emphasizing the "shotgun" sweepstakes approach in favor of a much more targeted method.
The publisher will use the savings from reducing costs to invest in growing areas, which include its young families, select editions and trade publishing operations.
Results in the third quarter ended March 31, 2002, underlined the need for improvement in the U.S. BHE group. Results were "well below expectations," the company said, with declines in both sales and profits. The weakness is expected to extend into the fourth quarter. For the entire North American BHE group, third-quarter sales fell 14%, to $147 million, and operating profits dropped to $1 million from $13 million. A bright spot was Books Are Fun, where sales rose 25% and profits were up 42%.
The company said it expects its downsizing efforts to reduce revenues in fiscal 2003 in the U.S. BHE division by 25%.