The first quarterly sales increase in almost three years in Reader's Digest's international group offset declines in the publisher's other units, resulting in a $2-million revenue increase, to $798 million, for the second quarter ended December 31. One-time charges drove net income down 13% in the period, to $57.8 million. The 11% sales increase in the international group was aided by currency fluctuations and higher sales in most major markets, including the U.K., France, Russia and Australia.
Domestically, RD's weakest areas continue to be Books Are Fun and its fund-raising unit QSP. Sales at BAF fell 6% in the quarter and earnings were off, RD chairman Tom Ryder told analysts in a conference call. BAF's sales lagged badly early in the quarter, but improved significantly in the last few weeks of the period, Ryder said. He blamed part of BAF's problems on Reader's Choice, a new company launched by former BAF executives that had been recruiting BAF reps. RD sued Reader's Choice in November; in December, Reader's Choice president Steve Rosebrough said he was folding the business (News, Jan. 3). Although Ryder said RD has heard that Rosebrough may try to relaunch the company under another name, he predicted that BAF will have a much better second half performance due in part to the hiring of "a lot" of new sales reps.
In RD North America, sales fell $8 million, due mainly to the elimination of telemarketing programs used by the Young Families business. Among the successes during the quarter were holiday book-a-zines produced by RD's Reiman division, which sold 350,000 units before Christmas. A new RD title, Extraordinary Uses for Ordinary Things, sold 100,000 copies in its first month on sale. Ryder said the North American unit had a "fair to good quarter," adding, "I like the outloook for the second half."