Playboy Enterprises Warns Loss Higher Than in 1999’s 1st Quarter

Playboy Enterprises Inc., one of the largest purveyors of adult entertainment, warned that it expects a larger first-quarter loss compared with a year ago because of higher spending at its online business.

The company didn’t disclose the size of the loss. Excluding its online business, Playboy said it expects to report higher cash flow, or earnings before interest, taxes, depreciation and amortization.

The company’s online unit, Playboy.com Inc., is expected to report a loss of about $5.7 million, compared with a $2-million loss a year ago. Online revenue will rise to about $5.8 million from $2.2 million. Playboy is investing heavily to build up Playboy.com before the unit’s planned sale of stock to the public, scheduled to take place by June 30. At least one investor said he found Playboy’s profit warning a refreshing change.

“This proves that management is becoming more and more shareholder-friendly,” said Robert Routh, an analyst at Ladenburg Thalmann who has a “strong buy” rating on the stock. “It shows they are committed in making [Playboy.com] a real business.”

Playboy shares fell $1 to $15.63 on the New York Stock Exchange.

Playboy wants to use its brand name to become a leading Web site for men 18 to 35 years old. Playboy.com wants to distinguish itself from hard-core sex sites by offering less explicit photographs and video while featuring merchandise, online gaming outside the U.S. and, eventually, interactive TV.