Although revenue at Reader's Digest fell 3%, to $2.39 billion, and operating income slipped 4%, to $133.3 million, for the fiscal year ended June 30, company chairman Tom Ryder called the year "a significant turning point," one that "went beyond a transition year." He noted that RD met 11 of the 15 metrics it had set for itself as part of a two-year turnaround plan that was at the midpoint at the end of fiscal '04. Ryder told analysts in a conference call discussing year-end results that RD is "approaching the goal" of delivering sustainable annual growth in sales and earnings.
Sales fell at all three company segments in the year, but profits rose in Reader's Digest North America and international segments, while falling in the consumer business services segment. Improvement trends seem firmly in place at RDNA, where sales were $835 million, Ryder said, noting that the U.S. Books and Home Entertainment division was in "a healthier place." U.S. BHE generated profits for the first time in several years, on flat sales. Total book sales at RDNA were down in the year, due in part to lower sales from Reiman.
Sales in the consumer business segment fell 5%, to $609.2 million, and profits tumbled 29%, to $64.5 million. The poor results were attributed to a 6% sales decline at Books Are Fun and a 7% drop in revenue at its QSP sales unit. RD said a weak product mix, particularly in the second quarter, was the main factor in dropping sales at BAF last year. Ryder said BAF has added new salespeople and taken other measures to improve BAF's performance, but he acknowledged that he was "uncertain" how the division will do this year.
Ryder had only good things to say, however, about the company's trade publishing division, where sales rose 18% in the year. The increase was driven by higher sales of children's products, led by the popularity of its Movie Theater interactive book series. In fiscal 2005, the division will launch the first products in the Music Player interactive series, as well as the first titles in its NASCAR line.
In RD's international segment, sales fell 4%, to $969.5 million, although profits rose 16%, to $57 million. Excluding favorable currency changes, sales were down 13%. Reduced costs led to higher profits in most international markets, including Australia, Mexico and France. During the year, RD also launched businesses in Romania, Croatia and Slovenia.
Depending on how well BAF and QSP perform, RD could post a slight increase in sales in 2005, Ryder said. The company is expecting double-digit profit gains at RDNA this year and mid-single-digit growth in the international market. Profits in the consumer business services segment are projected to be flat to slightly lower.