May 27, 2009, 12:00 AM

Despite Q1 sales decline, Playboy sees a bright future for the web

Web sales were down 39% in the first quarter for Playboy and overall sales declined 22%, but major cost-cutting efforts and a new e-commerce strategy are fueling optimism.

Mark Brohan

Research Director

Playboy Enterprises Inc., which sells online at ShoptheBunny.com and PlayboyStore.com, reported web sales of $9.3 million for the first quarter of 2009 ended March 31, a 39% decline from $15.2 million in the prior year quarter. Overall sales for Q1 2009 were $61.6 million, down $16.9 million, or 22%, from $78.5 million year over year.

The web accounted for 15% of revenue in the first quarter of 2009, compared with 19% in Q1 2008 and 18% in the same quarter of 2007. Net loss for Q1 2009 was $13.7 million, including $8.7 million of impairment and restructuring charges, the company reported in a filing with the U.S. Securities and Exchange Commission. Playboy, No. 203 in the Internet Retailer Top 500 Guide, reported a net loss $4.2 million in the same period last year.

The company attributed the decline in web sales in the recent quarter to the outsourcing of e-commerce to eFashionSolutions LLC, and lower pay-site sales. But the online business is expected to fuel future sales improvement, says Playboy interim chairman and CEO Jerome Kern. “In our business segments, we are focused on capitalizing on the growth potential of our digital and licensing businesses,” he says. “A revamped Playboy.com free site, which we recently introduced, creates a web experience that is more attractive to both consumers and advertisers. In spite of the difficult economy, we believe that the new web site coupled with cost reduction measures we`ve implemented will create a trend of improving margins and higher profits in the digital business by year end.”

Cost-cutting activities since last fall include closing Playboy’s New York office, integrating print and digital operations, trimming its workforce by more than 25%, and eliminating about $18 million in annual personnel-related costs, the company says.

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