With Hef & Co., (market) size matters

Restructuring helped Playboy's earnings, but with a lot of red ink, its best hope may be for a buyout.

By InvestorPlace Feb 18, 2010 3:05PM

InvestorPlacePlayboy Enterprises (PLA) is still in the red, but the company is making huge strides in its restructuring and has cut its quarterly loss to just 83 cents per share from $4.40 a year ago. Segment income also nearly doubled, from $1.1 million to $2.1 million.

 

This is a dramatic leap ahead for the bunny brand at a time when consumer confidence appears to be on the mend. But is Playboy gaining momentum at the perfect time to make a dramatic comeback, or does Hugh Hefner's media empire still have serious troubles ahead as it struggles to rebrand itself in the digital age?

Chances are it's the latter. After all, a loss is still a loss no matter how much things have improved in Playboy's latest earnings report. And the reality is that the company hasn't posted a quarterly profit in well over a year. Adding to the negative outlook is the fact that lower revenues in PLA's media businesses led to a 13% decline in fourth-quarter revenues year-over-year from $69.8 million to $60.6 million.

 

Did Hef make the list of the 100 Least Powerful People Under 100? -- find out here.

 

Playboy's CEO was rightly subdued in his assessment of Playboy's earnings improvement. Chief Executive Officer Scott Flanders said, "We are a long way from effectively monetizing the power of the Playboy brand and that our operations are subscale in industries dominated by large players."

 

That's not exactly a ringing endorsement of the Playboy brand. However, bulls on the bunny are right when they say PLA is moving in the right direction. Perhaps a few more quarters of improvement could see the company return to profitability.

 

But at this point, perhaps the most realistic goal for Playboy is to improve its operations enough to spark interest in a buyout from someone who could really leverage the brand to maximum profits. As Rick's Cabaret (RICK) proved with its plan to buy out rival "gentleman's club" operator VCG Holding Corp (VCGH), size really does matter in the adult entertainment industry.

 

Playboy simply doesn't have the impact it once did, and will continue to see a rough road for quite some time. A buyout is the quickest and simplest solution for execs and shareholders -- but it will take a few more quarters of improving results for us to reach that point.

 

Related Links:

8Comments
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

120
120 rated 1
265
265 rated 2
460
460 rated 3
719
719 rated 4
629
629 rated 5
629
629 rated 6
622
622 rated 7
437
437 rated 8
319
319 rated 9
116
116 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.