Reader’s Digest UK has closed its retail arm and sacked 95 of its 120 staff
Better Capital, which acquired Reader’s Digest out of administration in 2010, announced the shake-up on Friday and is hoping it can reach an agreement with creditors via a Voluntary Company Arrangement which will allow it to close the retail side of the business while continuing to publish the magazine.
Better Capital said in a statement: “it is envisaged that the smaller business based largely around the magazine will continue to trade”.
Visitors to the 'shop' section of the Reader’s Digest website are now told: “Our shop is now closed, with the exception of Magazine Subscriptions, we will no longer be selling products.”
Better Capital said in a statement: “Better Capital’s 2009 Fund acquired the trade and assets of Reader’s Digest UK out of administration in April 2010.
“Very substantial early cost cutting enabled an improvement in profitability. However, a faster than expected decline in the business’s direct marketing sales of CDs, DVDs and books has continued to make trading difficult.
“Despite very significant progress in the operation of the business and improved customer satisfaction, no easy route to long term viability for the direct marketing business exists. Significant funds have been injected without adequate return. However, the magazine is trading profitably and some new products are showing considerable promise.”
The company said: “The objective of the restructuring is to focus the business on the profitable magazine activity whilst moving away from the loss-making direct marketing sector.
"The restructuring involves the immediate redundancy of approximately 95 employees and a restructuring of certain other liabilities of the business. The proposed Company Voluntary Arrangement process has been launched today and is expected to take several weeks to conclude. If the proposed CVA is successful it is envisaged that the smaller business based largely around the magazine will continue to trade.”
Monthly title Reader’s Digest has continued to lose sales at a sharp rate since the 2010 take-over, which absolved Better Capital of taking on responsibility for a £125m pension fund deficit. Paid-for sales of Reader's Digest have dropped from just over 360,000 in the first half of 2010 to around 250,000 in the first half of 2012.