Iowa-based Meredith Corp.-led by Chairman-CEO William T. Kerr and President-Chief Operating Officer Stephen M. Lacy-last week reported the highest earnings ever in its 103 years, $128.1 million for the year ended June 30.
With that kind of performance, Meredith executives usually don't bother trying to look flashy. "Meredith is known for being straightforward, earnest and reliable," said Jack Griffin, president of the publishing group. "There's a character to the Midwest that I don't have to tell you about that is embedded in the way we do things."
But last week there was some uncharacteristic crowing, not only from Meredith's Des Moines headquarters but also from its New York offices, where-for the first time in company history-there are now more publishing employees than there are in the heartland.
And with the July 1 close of the $350 million acquisition of Family Circle, Parents, Child, Fitness and Ser Padres from Gruner & Jahr Publishing USA, the company is entering a new era. The deal broadened and deepened Meredith's reach among American women, including younger women and Hispanics.
Mr. Kerr called the year "outstanding" in a conference call last week and welcomed G&J employees who now work for Meredith. "Together we look forward to building on our record," he said.
With its recent performance and acquisitions, following the 2002 purchase of American Baby, Meredith is suddenly turning more heads than rivals like Conde Nast Publications and Hearst Magazines. "Those ... acquisitions really elevated them in the world of consumer magazines," said Reed Phillips, managing partner at DeSilva & Phillips, the media investment bank.
In addition to titles like Better Homes & Gardens and Ladies' Home Journal and a big book publishing operation, Meredith owns or operates 14 TV stations and one radio station through its broadcast division. Publishing, however, contributes 75% of the company's $1.2 billion in revenue.
Next year will bring more changes. Mr. Kerr, who left his job as president of The New York Times Magazine Group to join Meredith in 1991, will retire next year after seven years as chairman-CEO. Many observers expect Mr. Lacy-a 1998 arrival who was named president-chief operating officer in July 2004 and, like Mr. Kerr, is a McKinsey trained executive-to ascend into the top spot. Mr. Griffin seems a likely candidate to then move into Mr. Lacy's vacated post.
Outsiders believe the company has gained an enviable position in recent years. "The story is the ensemble," said Mark M. Edmiston, managing director at AdMedia Partners, an investment bank for the media and advertising industries. "For the reader and the advertiser they have a book for just about any female interest or concern. Whether the ads are sold as a package or not is less important than the fact that a marketer to women has to make a stop at Meredith."
Beth Fidoten, senior VP-director of print services at Initiative, said advertisers are not celebrating the bigger Meredith with the same gusto that Meredith is. "From a buyer's point of view, it's always better to have more players," she said. "From a publisher's point of view it's very advantageous. It's a case of many strengths and not many weaknesses."
Mr. Phillips said Meredith should surge on the strength of its new properties, including the data on a huge number of readers that came with the acquired magazines. Time Inc. remains far and away in a class by itself, he said, but Meredith has improved its standing in the next tier with Advance Communications, parent of Conde Nast, and Hearst Magazines.
Indeed, the G&J deal catapulted Meredith from sixth place among publishers by revenue into fourth place, passing Primedia and Reader's Digest Association, according to Advertising Age estimates.
Meredith's modern powerhouse status belies its origin in October 1902, when Edwin Thomas Meredith published the first issue of Successful Farming. Ten years later, Meredith moved 200 employees into the company's current headquarters in Des Moines. In 1922, it introduced Fruit, Garden & Home, the magazine that would become Better Homes & Gardens in 1924.
That title, the company's flagship, got its own boost last week when TV Guide unveiled plans to slash its guaranteed circulation to 3.2 million from 9 million, which will propel Better Homes from fourth place among magazines by circulation to third place, at 7.6 million.
Despite the optimism, some uncertainties linger. Mr. Kerr called G&J's lackluster reader research a problem. "We did not inherit an awful lot of that kind of research," he said during the conference call.
There has been a bit of bloodletting, too, as Meredith integrates its new wards. The company offered permanent jobs to about 315 G&J employees and temporary posts to 75 more. It left another 75 to seek new jobs, including Susan Ungaro, editor in chief at Family Circle for 11 years, and Peg Farrell, VP-publisher of Family Circle.
That decision probably reflected the decline at Family Circle, where paid circulation has sunk to 4.3 million during the second half of last year from 4.6 million in the last half of 2003, according to statements filed with the Audit Bureau of Circulations.
The flagship got a lift when TV Guide cut its circulation, pushing it to third place among magazines