Despite a 4.3% decline in revenue, EBIT (earnings before interest and taxes) rose 6.9% at Random House in 2011, parent company Bertelsmann reported this morning. Sales slipped to €1.75 billion last year, while earnings rose from €173 million to €185 million. Bertelsmann attributed the improved earnings to cost-cutting measures (including consolidating space in RH New York headquarters), and lower return rates due to higher sales of e-books, especially in North America and the U.K. E-book sales rose by triple digits and accounted for about 15% of RH’s worldwide revenue, an increase that offset a decline in print sales, especially in English-speaking countries. Profit improvement was led by RH’s U.S. division, Bertelsmann said. Results were slightly negatively impacted by currency exchange.
For Bertelsmann as a whole, revenue from continuing operations rose 1.2% to €15.3 billion in the year, while operating EBIT slipped to €1.75 billion from €1.83 billion. Bertelsmann chairman Thomas Rabe’s remarks were more about the future than the past, stating that the company’s “primary goal is to grow the company faster, and to make it more digital and international. We plan to achieve this with four strategic approaches: First, by further consolidating and strengthening our portfolio. Second, by accelerating the transformation to digital of our core businesses. Third, by establishing new growth platforms. And fourth, by expanding into new geographic growth regions. On this basis, we will reshape Bertelsmann over the next five to ten years.” The company is also considering making an initial public offering, although one that would keep the Mohn family in charge of the company.
In his letter to employees, RH chairman Markus Dohle observed that with its 2011 performance, RH “reinforce[ed] our position as one of our parent company’s most dependable profit centers.” Like Rabe, Dohle’s letter looked more to the future than the past, noting that “Random House is in very good shape for the future. We have the financial and creative resources to further develop and invest in our business.” Through 2011, RH’s worldwide divisions had almost 40,000 e-books in English, German and Spanish, and employee count rose to 5,343 from 5,264.
Dohle outlined four areas of focus for RH going forward with the first being to ensure a “healthy and diversified physical marketplace.” To do that Dohle said, RH will “continue to invest in a variety of initiatives that strengthen our supply-chain infrastructure and enable greater efficiencies for our brick-and-mortar retail partners.”
A second priority is to “champion a digital marketplace where multiple retailers sell our books, Dohle wrote. “We will continue to invest heavily in digital-channel and content development as we explore and experiment with new products and new ways for readers to engage with our authors’ works,” he continued.
Even as it looks to strengthen ties to its retail partners in the print and digital markets, Dohle wrote that the company will strengthen its direct-to-consumer connections by leveraging its technology and sales, marketing, and publicity experience “to bring our books where readers are and drive awareness across all formats and channels.” In addition, Dohle noted RH is “connecting more with readers in person, through the efforts of our field sales reps and the unique programs and promotions they are initiating with booksellers in their local communities.”
The publisher’s fourth priority is to expand its “author-centric services,” Dohle wrote. “As a full-service publisher,” Dohle wrote, “we support our authors at every step in the publishing process—but we are committed to doing even more. Our recently launched Author Portal, which provides customized real-time sales and royalty information in addition to a range of marketing services, is one example of a new tool we created to foster the most complete communication and transparency with them.”
Looking at the balance of the year, Dohle said RH has a strong publishing lineup, and that “we are deeply engaged in driving discovery, extending our reach, and ensuring that our exciting new books are successful on every sales and technology platform. This is how we are reinventing the reading experience, attracting the next generation of readers, and paving our path forward.”