Playboy: Sales And Losses Declined In 2023

Above, new LindaC collection from Honey Birdette.

Playboy lost $3.758 million on net revenue of $39.364 million in the fourth quarter of 2023, compared to a loss of $10.235 million on revenue of $44.889 million in same quarter in 2022.

For the full year, the company lost $180.418 million on total revenue of $142.950 million, compared to a loss of $277.704 million on sales of $185.536 million the year before. The loss included “$154.9 million of impairments. The adjusted EBITDA loss from continuing operations was $7.3 million.”

Analyzing its income streams, Playboy reported “direct-to-consumer revenue from continuing operations declined 26% year-over-year to $78.0 million in 2023. During the year, revenues from playboy.com e-commerce declined by $16.6 million as the company completed the transition from an owned-and-operated model to a licensing model. In addition, revenue from Honey Birdette decreased by $10.7 million, or 13% year-over-year, to $72.9 million from $83.6 million. Honey Birdette reduced the days on sale during 2023 by 34%, in an effort to protect brand integrity and combat rising production and distribution costs.”

Playboy also revealed  that “licensing revenue decreased 27% year-over-year in 2023 to $44.3 million from $60.9 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, partly offset by $5.1 million of revenue recognized from prepaid royalty guarantees due to termination of our largest Chinese licensing agreement.”

On the positive side, “digital subscriptions and content revenue was up 10% compared to a year ago, to $20.7 million from $18.7 million. Revenue growth from the company’s creator platform more than offset a decrease in the company’s legacy digital business revenue.”

CEO Ben Kohn claimed the company had made progress in 2023 on five goals: “First, restructure the company and move to a capital-light business model; second, reduce overhead; third, stabilize and reposition Honey Birdette back to a premium brand; fourth, move our China business to a JV model with better accountability and control; and fifth, grow our creator platform, the Playboy Club. We made major progress on all five goals in 2023.”

He explained that the company had organized its “art and furniture collection for auction, signed contracts with two auction houses, completed one successful sale in November of fine art and plan to have two other, larger auctions in 2024, which we expect will result in the sale of a majority of our collection. We also successfully outsourced operation of our e-commerce business, eliminating approximately $11 million of direct losses, as incurred in the full year of 2022.”

Corporate overhead has also been reduced, Kohn reported, from “approximately $50 million for the full year of 2022, to this year’s projected corporate overhead of approximately $27 million. We remain burdened by long-term fixed overhead costs, such as our corporate office lease that was signed before COVID, but we are actively working to reduce overhead where we can.”

“At Honey Birdette, we brought back the former CEO from when we first purchased the business,” as well as “replaced our North American third-party logistics and global freight forwarder, identified four stores with negative four-wall EBITDA margin contribution for closure (one of which was closed in 2023), improved our product quality and, most importantly, returned Honey Birdette to the boundary-pushing designs which it was known for in the past. These changes resulted in a strong 4th quarter of 2023 for the business, as evidenced by a 14% increase in sales as compared to the 4th quarter of 2022.”

Kohn continued that “in March 2023, we signed a joint venture agreement with an affiliate of Li & Fung to manage our China business. This was important given the macroeconomic issues facing the Chinese economy and our licensees’ challenges in meeting the demands of the e-commerce platforms in China, which ultimately led to difficulties with our licensees paying the minimum guarantees they owed us. We also conducted third-party legal and accounting audits of our major licensees, in which we identified additional material violations of our agreements, including the sale of non-approved products and the sale of Playboy tags. Despite our attempts to work with the licensees to help them regain compliance with their obligations under their agreements, we could not reach satisfactory deals and were left with no choice but to terminate two of our three largest Chinese licensing agreements. We have now sued our largest former licensee for past due amounts, the acceleration of the remaining $140 million due under the agreement, as well as for monetary damages, including for the under-reporting of sales over the past few years. We have also begun to sign new agreements with new licensees and former sublicensees as we rebuild our China business.” — NM