A Down Year for Random House

With operating EBIT (earnings before interest and taxes) falling significantly faster than sales last year, Random House's return on sales was 8.0% in 2008, the lowest since 2004, when the return rate was 7.8%. Moreover, the 137 million euros in operating EBIT is before special items of 50 million euros associated with restructuring, severance and other allowances taken by parent company Bertelsmann related to the reorganization of its trade publishing house. Total revenue for the year was 1.72 billion euros ($2.53 billion using the average exchange rate for 2008). Bertelsmann attributed the revenue decline primarily to the negative effects of exchange rates and said that excluding currency fluctuations and acquisitions, sales were flat.

The U.S. accounted for 50.8% of total RH revenue, down from 53% in 2007, despite the acquisitions of Monacelli Press and Watson-Guptill. Bertelsmann said declines in North America, particularly in the second half of the year, were largely offset by higher book sales and increased market share in key European markets. In his memo to all employees, Random CEO Markus Dohle said Random's European businesses performed well, but that the U.S. had a “shortfall in net sales in an overall difficult market.” The American group's sales of 874 million euros is roughly $1.28 billion, keeping Random the largest trade publisher in the U.S.

Dohle said that given the worldwide recession, it will be “a very challenging year for us to meet our overall sales targets and financial goals,” adding that in most countries the first quarter has been difficult. Still, Dohle said, the company's internal goals remain the same: “to stay on a growth path in Europe and to grow our U.S. business again.”