Reading through yesterday's third-quarter earnings for Playboy Enterprises
Total net revenues were $80.2 million compared with $74.4 million in 2003, good for a jump of about 8%. Operating income was $6.7 million versus $5.6 million, and net income came in at $1.9 million ($0.06 per diluted share) against a loss of $0.9 million ($0.03 per diluted share) a year ago.
Delving further, we see some more lovely highlights. Operating income for the publishing group -- one of the key drivers of the company's brand -- increased 30% to $1.2 million on a 4% rise in revenues, with advertising sales rising 35%. The online group's operating income went up more than 100% on a 9% expansion of revenues, while the licensing segment's operating income rose 47% on a 34% jump in sales. Corporate expenses did rise, however, by 13.6%.
Overall, I'm very pleased with these results, although not everything in the breakdown is rosy. Take a look, for instance, at the subscription revenues for Playboy -- they're slightly down, as are the sales for worldwide DVDs and tapes. Playboy has diversified the distribution of its brand through all kinds of media, so it isn't necessarily going to achieve growth in every single area all of the time. Nevertheless, the company must embark on a new marketing campaign to drive better increases in overall revenues; 8% is pretty good, but not outstanding.
Debt reduction is in part responsible for the company's ability to deliver these improved results, something I mentioned in a discussion on a previous earnings announcement. If the company can continue such initiatives and eventually keep costs as flat as possible, then it can focus more resources toward reinvigorating its brand. Playboy recently licensed its image for a development project in Las Vegas; more deals like this would definitely help drive shareholder value, as they are efficient ways to drive overall business.
Playboy may have failed to excite shareowners in the previous quarter, but things are looking much better; the stock closed up more than 10% yesterday. However, I think Playboy will probably remain speculative until its magazine subscriptions show some solid, quality growth. It won't necessarily ever become a true blue-chip investment, but there will most likely be some long-term value here for very patient holders.
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Fool contributor Steven Mallas owns none of the companies mentioned but is still looking for an invite to the Playboy Mansion.