Playboy posts quarterly loss, shares drop

By Robert MacMillan

NEW YORK (Reuters) - Adult entertainment publisher Playboy Enterprises Inc posted a quarterly loss on Tuesday because of weaker publishing and domestic television revenue and forecast more trouble during the year, pushing its shares down 8 percent. The worse-than-expected results illustrate the trouble that Playboy and other publishers and television companies face as more people get their entertainment online, and often for free. Its results also show that, at least for Playboy, licensing its bunny ears brand and bachelor lifestyle cachet is proving a more resilient business than the magazine that created them.

"Our publishing and domestic entertainment businesses continue to face unprecedented change in the way consumers access and use media content," Chief Executive Christie Hefner said in a statement accompanying the quarterly results. Hefner forecast the licensing business would grow throughout the year but said Playboy did not expect it to offset the weaker results it anticipates in its media business. The publisher of the iconic men's magazine reported a loss of $3.1 million, or 9 cents a share, compared with a profit of $1.5 million, or 4 cents a share, in the first quarter a year ago. Excluding restructuring and severance charges, the company's loss was 6 cents a share. Analysts' average forecast was a profit of 6 cents a share, according to Reuters Estimates. Revenue fell 8 percent to $78.5 million, missing the average analyst estimate of $85.4 million.

"I think the company has a fantastic brand and I think there's a tremendous opportunity to exploit that brand across multiple platforms, particularly on the location-based entertainment side," said RBC Capital Markets analyst David Bank. "The challenge is to rightsize the other businesses, which aren't really growth businesses." Licensing revenue, not counting an art sale last year, rose 5 percent, helped by a 10 percent rise in revenue from international consumer products. Other businesses did not fare as well. Domestic television revenue fell 16 percent despite growth in monthly subscription revenue at Playboy TV. Publishing revenue fell 14 percent as circulation and ad sales at Playboy magazine fell. Advertising pages in the second quarter will be down 5 percent compared with last year. Online revenue fell 3 percent to $15.2 million because of lower pay site revenue. Hefner said the company is redesigning the Playboy.com website to attract more visitors and create a better portal to its other properties.

"This will be a transitional year as we are still in the investment stage of the retooling process, and results won't be apparent until year-end at the earliest," Hefner said. Playboy shares fell 66 cents to $7.60 in morning trade on the New York Stock Exchange.