Reader's Digest Restructures Its U.S. Book Business

Posted on April 17, 2002

The Reader's Digest Association, Inc. announced plans to significantly restructure the U.S. operations of its North America Books and Home Entertainment (U.S. BHE) business segment. The plans include exiting some product lines and reducing staff, while also investing in parts of U.S. BHE that show the most promise to provide sustainable growth. The company will eliminate approximately 100 jobs, mostly in U.S. BHE and associated functions in other departments. The costs related to the reorganization will be covered by a restructuring charge.

Reader's Digest also reorganized its U.S. BHE division in July, 2001. Part of that restructuring included ceasing publication of Walking magazine, which the company said was unprofitable and did not have adequate sources of new subscribers. This year Reader's Digest ceased publishing of New Choices, a lifestyle magazine for people over age 50, with a circulation over 600,000

U.S. BHE will reduce direct-mail campaigns and mail volumes, eliminate unprofitable or marginally profitable product lines and cut overhead costs. The program is designed to trim operating losses that began in the latter part of Fiscal 2001 and worsened in Fiscal 2002, exacerbated by revenue declines associated with required changes to sweepstakes promotions, and business fallout from 9/11 and anthrax in the U.S. postal system.

The cutbacks include:

Elimination of an unprofitable catalog business
Exiting the video business, except for children's videos
Reducing some continuity series and general books
Consolidation of two business units, Health and Home

"Our intention is to significantly reduce U.S. BHE's exposure in this challenging business environment, while also focusing on those areas with the most potential for near- and long-term growth," said Thomas O. Ryder, Chairman and CEO.

At the same time, Reader's Digest said U.S. BHE will expand its efforts in areas that show profit potential, concentrating on developing new customers, marketing channels, products and services. Areas of emphasis will include Reader's Digest Young Families, Select Editions, Financial Services, the combined Home and Health unit, annuals, music sold via direct-response TV, trade publishing and some new products.