The Reader’s Digest Association, Inc. reported a 5% dip in second-quarter revenue and a 19% fall in operating profits. The firm said it was “significantly affected” by the aftermath of the Sept. 11 terrorist attacks and anthrax scare.
For example, it had to repeat a major mailing at a cost of over $2 million. Response rates declined, and the firm delayed or canceled some promotions.
But the earnings results were “on the high end of the range we projected last October,” said CEO Thomas O. Ryder in a statement.
The company reported second-quarter revenue of $784 million. Operating profits totaled $127 million.
Net income declined by 24% to $78.8 million.
The firm’s Books and Entertainment unit suffered a 14% decline in sales to $211 million. Operating profits fell to $22 million, compared with $38 million during the same quarter last year.
These results were due to plummeting response rates in the wake of Sept. 11 and the anthrax scare. However, they also reflected a plan to reduce direct mail volume following an agreement with attorneys general last year to modify the firm’s sweepstakes mailings.
The unit has turned to other marketing channels, including direct response TV, telemarketing, and is also using customer lists from outside sources.
Meanwhile, U.S. magazine revenue declined by 8% to $243 million. Operating profits dropped to $69 million, compared with $75 million during the same quarter in the prior year.
This division is also trying other media. For example, it generated 126,000 new subscribers over the Web during the second quarter—a 54% increase over the prior year.
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