CEO says Playboy Enterprises in a transition
Playboy Enterprises, Inc. (NYSE: PLA) CEO Christie Hefner said the struggling adult entertainment company cannot provide guidance and is in the middle of important transitions. Hefner made the comments during a midday conference call.
“As we’re working through these transitional issues that include both the murkiness in publishing as well as the timing of traction in what we’re doing in digital, we don’t feel we have the visibility to be helpful yet,” Hefner said.
The chief executive said there is “untapped potential” in online and mobile media. She said Playboy plans to revamp its website with changes that will provide “meaningful growth” in the fourth quarter.
The company’s flagship magazine has been hurt by increasing postage, paper and ink costs, Hefner said, and the domestic magazine business remains “extraordinarily difficult.” The adult entertainment firm is offsetting domestic losses by launching higher-margin international editions, she said. Additionally, the cigarette company R. J. Reynolds is halting all print advertising in 2008, which Hefner said will eliminate about 20 ad pages from Playboy.
Playboy’s American television segment is facing challenges from “intensely competitive market made possible by the advent of on-demand technology.” The competition has led to a decline in market share.
“We’ve seen tremendous pressure on revenues caused by continuing declines in pay-per-view orders as cable operators have all but abandoned that delivery option in favor of delivery-on-demand,” Bob Meyers, Playboy’s president of media, said. “We will fight aggressively for every buy through a strong product lineup and improved scheduling in merchandising.”
Going forward, Playboy will benefit from the sale of a television studio, although it took a $1.9 million charge for the sale during the recently ended fourth quarter.
“This deal will be immediately cash flow positive and begin favorably impacting the bottom line in 2009, while preserving our access to that state-of-the-art facility,” Hefner said.
Meyers also noted a development deal with software maker THQ, Inc. (Nasdaq: THQI) that will lead to Playboy-branded games released this summer. Additionally, Hefner said Playboy plans to outsource its e-commerce efforts to “a partner who has had great success in handling other well-known lifestyle brands.”
“While this [e-commerce] transition will lead to a sizeable reduction in 2008 e-commerce revenues, we expect profitability will increase immediately as a result,” Hefner said.
Before the opening, Playboy reported that it swung to a fourth-quarter loss of $1.1 million, or $0.03 per share, down from net income of $3.7 million, or $0.11 per share, a year earlier. The results surprised analysts, who were expecting earnings of $0.05 per share.
“It’s important to remember that the Playboy brand is stronger and more popular than at any time in our history. We have a solid balance sheet, significant assets and the plans in place to return this company to increasing levels of profitability,” Hefner said.
Quarterly revenue fell to $85.9 million, from $86.2 million a year earlier. Wall Street analysts were looking for $88.1 million.
In afternoon trading, PLA shares are down 4.17%, or $0.36, at $8.27. Over the last 52 weeks, shares have ranged from $7.77 to $12.
