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Playboy Posts Third Quarter Loss

LOS ANGELES – Playboy Enterprises Inc. on Wednesday posted a wider quarterly net loss due to higher interest expenses and taxes, but raised its 2003 operating profit outlook by 14 percent from strength in publishing, online operations and licensing fees.

Chief Executive Christie Hefner said the Chicago-based publisher of Playboy men’s magazine and operator of subscriber- based adult television channels and Web sites expects revenues and profits to rise further in 2004.

“Even in a year when we had anticipated a decline in entertainment profits, we were able to triple overall company profitability,” Hefner told Reuters in an interview.

Playboy’s widely-held class B shares reached $16.44 on the New York Stock Exchange, their highest since April 2002, before settling back to $16.21, up 37 cents, or 2.34 percent on the day.

The company forecast a full-year operating profit of $25 million, up from $22 million and ahead of 2002’s $8.6 million.

Playboy recorded a third-quarter net loss of $944,000, due to higher debt expense and foreign taxes, compared with a loss of $639,000 last year. Excluding a preferred stock dividend to founder Hugh Hefner, the quarterly loss was $610,000.

Playboy’s net loss was 3 cents a share, compared with 1 cent last year. Analysts had expected a 2 cent share loss, according to Reuters Research, a unit of Reuters Group Plc.

Operating income jumped 35 percent to $5.7 million, reflecting an 11 percent rise in revenue to $74.4 million.

“They did very well in the quarter,” said research analyst Dennis McAlpine, of McAlpine Associates.

Playboy’s shares have gained 60 percent year-to-date amid a major revamp at the magazine that has added more lifestyle and fashion features after losing newsstand sales to rivals such as Maxim and FHM.

Hefner said a recent six-month report by the Audit Bureau of Circulation showed Playboy’s newsstand sales up 5 percent versus reduced sales of Maxim and another men’s magazine, GQ.

Playboy has also added celebrities to its pages and Hefner said that trend would continue into 2004.

The 50th anniversary issue of Playboy is to go on sale Nov. 28 and it will be the largest issue in 15 years with 300 pages overall and roughly 100 ad pages.

The range of advertisers has broadened, too, with designers like Tommy Hilfiger and Hugo Boss taking out ads.

“Advertisers are not coming in a on one-time basis, but are making a commitment to being in the book in 2004,” Hefner said.

Magazine strength helps drive licensing sales, as well as boost Web subscriptions and e-commerce revenues, which were up 40 percent in the third quarter. Average revenue per subscriber rose to $28.68, up 9 percent from the previous quarter.

A weak spot was domestic TV whose sales and profits have flattened in 2003, but Hefner expects it to rebound next year.



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