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  • Nick Monjo

Yandy, Lovers Suffer $22M Sales Decline

Playboy revealed a combined $22 million sales decline in the first seven months at its Yandy and Lovers divisions. Meanwhile it reported an overall company net loss of $8.315 million in the second quarter, on sales of $65.414 million.

In the same quarter last year Playboy lost $8.916 million on sales of $49.851 million. The sales growth in the second quarter this year was mainly due to the acquisition of Honey Birdette, which occurred in the third quarter of 2021.

In the call to discuss the results, while pointing to sales growth for its Honey Birdette and the Playboy brands, CEO Ben Kohn admitted “Yandy and Lovers are seeing the opposite sales trends.” The situation was the worst at Yandy where, through July, there was an “over $18 million decline.” CFO Lance Barton explained that for Yandy and Lovers there was a “decline in revenue of $8 million in the second quarter [alone], the bulk of which was driven by Yandy.”

Barton continued: “Honey Birdette revenue was up 32% year-over-year to $22.4 million in the second quarter, and up 37% on a constant currency basis. Growth in HB was driven by a 15% increase in brick and mortar revenue and a 49% increase in e-commerce.”

But Barton complained that, Yandy (which Playboy acquired at the end of 2019), is “part of an unsustainable marketplace wholesale model with low margins and a highly saturated competitive set, which creates higher risk and exposure to supply chain challenges due to our supplier impacts. For example, Yandy was running a 50% out of stock rate during the first part of the second quarter, to mitigate this in the short-term, we have made an effort to secure safety stocks are our top 20 selling items as well as our Halloween merchandise.”

Barton continued that at Lovers (a chain of stores Playboy acquired in early 2021 at 41 locations) there were “significant raw material cost increases impacting product margins, and when combined with high fixed costs due to our store footprint, there is less flexibility for us to address the revenue shortfalls we have experienced due to declines in store traffic.”

Barton summed up: “within direct-to-consumer we have seen a real bifurcation of performance with Honey Birdette and Playboy achieving continued growth while Yandy and Lovers have experienced worsening trends as the year has progressed.”

The declines at Yandy and Lovers are having a significant impact on Honey Birdette according to Barton. “Although the business continues to grow nicely, we are taking a more disciplined and cautious approach to store openings this year,” adding “we want to be mindful about taking on fixed long-term liabilities in the current environment and so we better understand how, and how long these conditions may persist, and any potential impact on the Honey Birdette consumer.”

He revealed that for Honey Birdette, “each new store costs around $700,000 to build out. So we will have a roughly two year payback period on any initial cash outlay.”

Recent Honey Birdette store openings include Miami and Stratford, UK and the brand has “signed leases for Short Hills, New Jersey and International Plaza in Tampa,” the CFO explained. “But we have decisions to make on the remaining store openings that were planned for this year. Our existing U.S. stores...perform quite well, averaging a million dollars of annualized revenue per store.” But, he continued “it is hard to know what is going to happen. And we think it is prudent, when you are entering into these long-term fixed liabilities, to take a pause, see how things unfold.”

“We want to watch for the impact of inflation on the luxury market. We have seen it hit kind of the everyday consumer at Yandy and Lovers and it could end up hitting the luxury market next.”

Rising customer acquisition costs are one of the big issues confronting Yandy, Kohn complained. Last year’s Apple “IOS privacy changes have significantly impacted performance marketing, particularly for Yandy,” and have led “to a 50% year-over-year drop in Facebook conversion rates for fashion and apparel brands in Q2. As a result, brands have shifted budgets away from Facebook and toward Google, which has driven up competition in prices for keyword spending, and what has historically been one of our key customer acquisition channels.”

To help fix the problems at Yandy, Playboy’s new president of global consumer business, Ashley Kechter, suggested a “rebrand” which “will start to hit the consumer in fall. So, right, leading up to the Halloween season, you will start to see the new imagery come through with the new product that we have coming through. One thing that is important to understand is we are doing this more as a rolling change because we still have old products and imagery we need to work our way through.”

She stated that “we will continue to right size,” inventory and “will be leveraging the Playboy brand” into Yandy. “So we will have a more curated and kind of cross pollinated selling experience.” Halloween products, for example, will be sold “on both Yandy and Playboy, leveraging the bunny suit and some of the unique areas that Yandy brings to the table for the Halloween costumes.”

At the Lovers brick and mortar stores, she continued, “we are starting with the Playboy Pleasure as our intro into a Playboy sexual wellness line, that we will launch at the end of this year and will be leveraging the Lovers stores not only for Playboy apparel, but also for product in that sexual wellness space.” ­— NM


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