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  • Nick Monjo

Playboy Lost $15.1M As Honey Birdette Slides

Playboy lost $15.074 million on $33.282 million in revenue,in the three months ended September 30, compared to a much bigger loss of $264.697 million on higher turnover of $45.706 million in the same three months last year. Much of the loss last year was due to the write down of the value of various assets.

“Of the $12.4 million decline in revenue, $4.0 million was attributable to licensing, $8.9 million was attributable to direct-to-consumer products, partially offset by a $0.5 million increase attributable to the company’s digital and other segments,” according to the company. “Direct-to-consumer revenue from continuing operations declined 34% year-over-year to $17.1 million. During the third quarter, revenue from Honey Birdette declined by $4.1 million, or 19% year-over-year, to $17.0 million from $21.1 million.”

“Licensing revenue declined 27% year-over-year to $10.9 million from $14.9 million a year ago. The decline is largely attributable to the poor financial performance of our China licensees and the resulting non-payment of minimum guarantees.”

“Digital subscriptions and content revenue was up over 11% compared to a year ago, to $5.2 million from $4.7 million. Revenue growth from the company’s creator platform more than offset a decrease in the company’s legacy digital business revenue.” The firm continued that “revenues from e-commerce declined by $4.9 million as the company completed the transition from an owned-and-operated model to a licensing model.”

Playboy recounted other recent news: “We completed the sale of our Lovers business on November 3rd. We also signed two contracts with auction houses to sell our art and memorabilia collection. The first, with Bonhams, is planned to sell 10 pieces in November. The second, with Julien’s Auctions, is a much larger auction expected to take place in March 2024. Julien’s intends to sell a wide variety of furniture from the Playboy Mansion, memorabilia from Playboy’s 70-year history and fine art from the Playboy collection. Julien’s will host exhibitions touring Hong Kong, Shanghai and locations in the U.S. promoting it as a luxury and lifestyle auction. Now that we have closed Lovers, we will increase focus on exploring strategic alternatives for Honey Birdette. As we are not currently convinced about selling 100% of that business in today’s market, we are looking at ways to maximize the potential growth of Honey Birdette without burdening our balance sheet.”

The company continued that, “During the quarter, Honey Birdette’s sales were down 19% as a result of the significantly lower promotional environment; however, Honey Birdette’s gross profit margin increased by three percentage points. Going into the holiday shopping season, we will continue to limit Honey Birdette’s days-on-sale in order to maintain the integrity of the brand as a premium offering rather than a brand that chases sales through perpetual promotions. In October, a month in which we did not run a sale this year or last, our sales were up over 16% year-over-year. We are also very focused on profitability. To that end, we have made the decision to increase prices by 10%, which will take place gradually from the 4th quarter of 2023 through the 2nd quarter of 2024, to combat rising inflation. We have also eliminated free expedited shipping and raised the threshold for free standard shipping. We have not seen any impact on consumer spending from these changes at this point. We will closely monitor the overall financial impact of all of these changes when taken as a whole and make refinements as needed.”

Playboy emphasized that “its licensing business in China continues to face significant challenges. During the quarter, we conducted extensive audits, from both accounting and legal perspectives, of our top Chinese licensees. We determined that certain licensees had committed incurable, material breaches of their license agreements, including the non-payment of required royalties. In addition, we found extensive contractual violations related to complex sub-licensing agreements our licensees entered into that deprived us of significant additional royalties. In conjunction with our China joint venture partner, we made the decision to terminate certain of our major licensees in order to properly rebuild the business. We have already received interest from a number of the sub-licensees that were already manufacturing and selling our products, as well as from new licensees, all of which want to enter into new agreements to license the Playboy brand. Our goal is to better position the China licensing business for the long term, including potentially owning Chinese e-commerce storefronts, while finding the right licensees to build and operate the stores. Long term, this would give us increased control, so that if a strategic partner violates our agreements, we would own the storefront through which they sell and could quickly replace strategic partners. In addition, we have received an unsolicited offer to buy our China trademarks from a Chinese private equity firm and are in the process of negotiating terms.”

“In the third quarter, we signed two new strategic licensing deals in North America for lingerie and intimates, with Handcraft and Roma, which will contribute to our long-term revenue growth. We also completed the outsourcing of our e-commerce Playboy Shop to MC Web Services, Inc. and our spirits joint venture launched a ready-to-drink, vodka seltzer line called Play Hard. Our existing top global licensees across a variety of categories and geographies, including but not limited to Playboy Pleasures, lighters, retail collaborations, costumes, and gaming partially offset the double-digit decline in wholesale sales of our two largest U.S. apparel licensees.” — NM


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