Sales and Profits Rebound At Random House
PublishersLunch

Random House reported sales for the first half of the year of 791 million euros, up 57 million euros (or almost 8 percent) from a year ago, as operating EBIT doubled to a still-modest margin of 40 million euros. CEO Markus Dohle writes that "our performance was led by the US division, which combined bestseller dominance with lower physical returns." Stieg Larsson's sales of 6.5 million copies in the US and Germany were a "substantial" factor in the improved results.

Dohle also points to the company's "robust digital-publishing momentum." He says that within the fiscal year, worldwide digital sales will exceed $100 million. As for the more-important six months ahead, "can we maintain, and even improve upon, our first-half sales and operating EBIT in the second half of this fiscal year? Still too early to tell. We continue to get a lot of mixed messages about consumer spending, which is uneven; consumer confidence, which is uncertain; and the economic recovery, which appears to be long and slow."

Indeed, while a substantial improvement from the last two years at this stage, sales are well below the 832 million euros reported in 2007 (with operating EBIT of 44 million euros), and 859 million euros reported in 2006 (with operating EBIT of 48 million euros). While the dollar strengthened against the euro during the first six months of the year, Bertelsmann says the conversion rate reflected in their results was 1.33 dollars to the euro (compared to 1.35 dollars to the euro a year ago). Organic growth calculated at Random House, adjusted for portfolio and foreign exchange, still rose 5.5 percent in euros in 2010 so far.

Among other divisions, the Direct Group continues to show lower sales, down 8.5 percent to 532 million euros "as a result of divestments and declining membership numbers" though losses "were significantly curtailed" from 10 million euros to 6 million this period. Membership losses were most notable in Germany and France.

Parent company Bertelsmann reported "a surge in profits" for the first six months of the year, with operating EBIT of 755 million euros, "a new record," on sales of 7.4 billion euros. As a result, they raised their full-year forecast, now expecting an increase in both sales and profits.