Firstly do remember he is very young still (I guess year 1 or its equivalent) and he still has plenty of time to more than catch up. It's also completely understandable that you feel upset when this has come out of the blue. Are you happy to share his book band level if you know it as parents of children who were at a similar level at this point/age can likely reassure you too? Also how does he approach reading, does he tend to sound out words methodically, or does he guess quite a lot?
This is a quote from a website regarding Reading Recovery:
Reading Recovery is a well-established intervention scheme for children with reading difficulties. The programme provides daily half-hour sessions with specially trained Reading Recovery teachers for six-year-olds who are in the bottom 20% of their class in terms of reading.
So in a class of 30 this will be the bottom 6, however good at reading the cohort are as a whole. What I mean is, in another school he may well not be in the bottom 20%.
Also are you in the UK? I ask because UK state schools have a statutory duty under the new National Curriculum, to teach children to read using a synthetic phonics programme.
In the past I believe that Reading Recovery did not use any sort of synthetic phonics programme and only used look and say books, however having just had a look I have discovered this information on "Phonics Counts" and if I were you I would be finding out from the school exactly where they think your DS's literacy issues lie and whether or not their Reading Recovery teacher is also aware and trained in Phonics Counts.
I have no idea whether Phonics Counts is a quality synthetic programme, however if you wish for any support regarding phonics then please ask, there are some very experienced teachers here who are only too happy to help!
I should add I'm 'just' a mum, but successfully taught my DD to read (despite rather than because of her school), after much on-line research along with help gained right here.