Playboy Enterprises (NYSE: PLA) is still around? I was surprised to hear that it was, according to a news article from Reuters detailing the struggling media company's second-quarter results. Unfortunately, Playboy remains a puzzle. How in the world is management going to turn the ship around?
Playboy's top line fell by 15%. The bottom line booked a loss of 26 cents per share. Expectations were for 23 cents per share to be lost. In the year-ago period, Playboy lost 10 cents per share. I think it's plainly obvious that Playboy just isn't the force it once was. Pretty sad to see this icon slowly fade into irrelevance as the digital revolution continues to devalue its historic brand equity.
The actual company press release tells the tale in terms of strategy: cut costs. Sure, management wants to increase revenues, too, but they've been hard to come by.
One way that the company saved money was to combine the July and August issues of the flagship magazine. The strategy seemed to work. However, such success actually is troubling. It only reinforces the vicious downward spiral of the current business model. Looking at the other segments, I see nothing indicating to me that Playboy is anywhere close to a solution for its problems. Reducing expenses can only satisfy for so long.
Last month, Steven Halpern highlighted analyst commentary on Playboy that positions the stock as a speculative bet. It's a roll of the dice, to be sure. Especially at $2.44, the price that the shares closed at on Tuesday. Low-priced stocks are notoriously volatile.
Buying Playboy stock now is like fantasizing about one of the magazine's shapely centerfolds: you buy low, then sell much higher on the news of vast profit improvement or a sale to another media concern. Sure, it could happen, and making money off Playboy the stock is probably more realistic than dating a Playmate.
However, I don't want to bet on Playboy. There are safer bets in the market these days. Even for risk capital.
Disclosure: I don't own any company mentioned; positions can change without notice.
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