NEW YORK – Adult entertainment company Playboy Enterprises Inc forecast a sharp decline in advertising revenue in the current quarter after posting a third-quarter loss, and its shares fell 27 percent.
Third-quarter revenue fell 15 percent to $70.4 million, partly because of Playboy’s decision to sell its television studio assets and to outsource its e-commerce operations. Analysts on average were expecting revenue of $75.5 million, according to Reuters Estimates.
“The market’s focusing on topline fundamentals, which were very poor in the quarter, and much worse than even the most pessimistic expectations,” said David Miller, an analyst at Caris & Co in Los Angeles.
Playboy publishes one of the world’s most well known adult magazines. One of its more reliable businesses lately, however, has been its licensing unit, which is responsible for placing the company’s iconic bunny ears logo on everything from T-shirts to diamond pendants.
The division’s growth has slowed sharply: it posted a 5 percent rise in segment income, while consumer products revenue rose 7 percent compared with last year.
“That’s a cause for even greater concern,” Miller said. “Licensing is usually the one unit that can deliver consistent returns, so the stock’s getting annihilated here — and appropriately.”
Playboy reported a net loss of $5.2 million, or 15 cents per share, for the quarter ended September30, after it took $6.3 million in previously announced restructuring charges and provisions for reserves.
Playboy said in October that it would close its DVD business, one of a number of steps it is taking to save $12 million a year. It has said the move would cost 80 jobs.
Excluding special charges, it reported a third-quarter profit of 4 cents per share, better than the average analyst forecast for a loss of 1 cent, according to Reuters Estimates. In the year-ago period, Playboy posted a profit of $2.6 million, or 8 cents per share.
“We were pleased to return the company to profitability, excluding charges and reserves, but we can do better,” Chief Executive Christie Hefner said in a statement, adding that Playboy’s focus on its licensing business and streamlining operations would produce profitable growth next year.
Playboy lost $1.3 million in its publishing division as revenue fell 6 percent to $21.8 million. It also expects a 17 percent decline in ad revenue in the fourth quarter compared to last year.
Like many magazine and newspaper publishers, Playboy has a brand name that is more widely known than read. Circulation has fallen as more people looking for adult entertainment and racier pictures of nude women turn to free sites online.
Shares fell to $1.75 in morning trading from their Wednesday close of $2.40 on the New York Stock Exchange.