Total hits $74.4 mil, up 11% from last year

NEW YORK — Things are looking a bit brighter for the Bunny these days.

Announcing third-quarter operating income up 35% to a small but emotionally significant $5 million, Playboy Enterprises looks finally to have turned the financial corner. Total revenue for the quarter, ended Sept. 30, came in at $74.4 million across the company’s publishing, TV, online and packaged video/DVD businesses, an 11% improvement over the same period last year.

Chair-CEO Christie Hefner ascribed the profitability improvement in part to a 40% gain from online subscription and e-commerce revs. Entertainment, including cable and DVD sales, rose 18% overall to $33.6 million, while publishing sales dropped 2% to 28.4 million as improved circulation was overwhelmed by drooping ad sales.

Something to shout about

The 50-year-old adult entertainment brand should be able to celebrate its anniversary this quarter with a financial turnaround from the cusp of insolvency broadly achieved.

Looking to the full year, company expects to triple operating income to roughly $25 million over 2002. In the first nine months of this year, Playboy has already doubled ’02′s total operating income, said Hefner.

Wall Street was pleased with Playboy’s financial results, sending the stock up 2.59% Wednesday to $16.25 — a 52-week high — thanks in part to the improved guidance for the fourth quarter.

Company has been plagued over the last year by liquidity issues and investor apathy. But given its huge improvement in operating income, analysts expressed confidence that the Bunny is well positioned for future growth, having reduced its costs and having achieved significant scale.

Turning the page

In a conference call Wednesday, Playboy management said the upcoming 50th anni edition of Playboy will be its largest in 15 years, with 100 ad pages in a 300-page publication. Mag, on newsstands later this month, will be priced at $7.99, $2.00 higher than normal cover price. Many of the advertisers are first-timers that the company hopes to retain in 2004.

While the publishing division is still sluggish, reporting operating income of $1 million compared with $1.9 million a year ago, fourth-quarter ad sales are outpacing a depressed third-quarter haul. Execs said Playboy is ahead of the industry in newsstand sales. Industry sales of publications including Maxim and GQ are down 13%; Playboy reported a 5% increase. Mag was overhauled earlier this year under new editor Jim Kaminsky.

At the entertainment group, operating income actually declined by $600,000 to $6.8 million as gains at its domestic and international pay TV networks were more than offset by lower profits in worldwide homevid and higher litigation expenses. Company hopes to increase DVD sales by adjusting its racy content to appeal to a broader audience.

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