Playboy to buy lingerie company Honey Birdette for $333 million

Playboy CEO Ben Kohn joins Yahoo Finance to discuss how the company’s $330 million acquisition of luxury lingerie and lifestyle brand Honey Birdette is just one way the company plans to move its business forward in the industry.

Video transcript

[MUSIC PLAYING]

BRIAN SOZZI: As if it wasn't all in already on this view, Playboy is reiterating today one age-old mantra in business-- sex sells. The sexual lifestyle company is buying high-end lingerie and pleasure products maker Honey Birdette. The purchase price is $330 million in cash and stock, giving Playboy a strong foothold in the lingerie and sex toy markets. Joining us now for a first on Yahoo Finance interview is Playboy CEO Ben Kohn. Ben, good to speak with you again here. This is a big purchase price for this brand. Why did you pull the trigger on the deal?

BEN KOHN: Good morning, Brian. Nice to see you again. Look, this is an unbelievable brand. This is a brand that has achieved 40% revenue growth. You have EBITDA of $28 million. These are both on trailing numbers before synergies. We believe that this brand has the potential to be absolutely huge on a global basis.

The US and the UK represent roughly 24% and 10% of the revenue historically. We think there's huge growth potential there. But more importantly, on a synergistic basis, this brings us a team that has unbelievable design and sourcing capabilities, as we look to launch Playboy lingerie and swimwear. And so this gives us the ability to accelerate our growth path organically as well.

MYLES UDLAND: Ben, it's Myles here. You know, we talked when you guys went public. And when I look at the stock chart, I mean, the stock was trading in kind of the mid teens for a long time. And now we're at $42 a share. What's the business-- you know, what's the business story that you guys have been telling over the last couple of quarters that seems to have the market so enthused about the transformation that you guys have undergone with the brand and, really, with the group at large and changing it from maybe the way some investors would have just thought of Playboy as?

BEN KOHN: Yeah, I think, look, this is why we wanted to go public, which was to tell today's version of what Playboy is. This is one of the largest brands in the world. And that's what we've been reiterating to investors, which is this is a brand that drives over $3 billion spent today. We don't have to create the spend. We will continue to grow that spend. But that spend already exists. We are reengineering the business model.

And again, this is one of the largest brands in the world. And so where else can you, even at today's valuation, buy a brand that you can't replicate today, right? You could spend billions and billions trying, but to generate $3 billion of spend in over 180 countries and the ability to actually accelerate that even further, I believe that's why the stock has done what it's done. And I'm really excited by our future. There is so much going on.

We're staying extremely focused on sexual wellness and continuing to build out our D to C strategy. This deal helps us on both fronts. It also gives us a footprint in the APAC region to actually launch our own D to C efforts moving forward for Playboy. And then vice versa in the United States with Honey Birdette. We think we can bring a lot to the table to already a great management team, as we look to grow commerce and retail in the United States and Europe.

BRIAN SOZZI: Ben, I'm on the Honey Birdette site now. And just looking at the lingerie section, I mean, the prices, at least to me, look double than what we would see at a Victoria's Secret. I'm on the Pleasure Parlor section. It looks like premium prices there. What are the margins on this business?

BEN KOHN: Look, the margins are unbelievable. We haven't talked about it, but when you get into toys and high-end lingerie, you have an unbelievable margin. And what's so exciting about this company is their growth that we talked about before, that 40%, that's all organic. And so these guys don't do performance marketing historically. And when you have margins like they have, the ability to actually accelerate that growth through performance marketing, should you want to do that in a very profitable way, you have a lot of margin to be able to do that moving forward.

So it's a great brand. They have a very loyal audience. 40% of their customers are repeat customers. You have an AOV of over $170. Now that's on a global basis. And when you actually look at the growth markets in the US, the UK, and the rest of Europe, that AOV is actually higher. And then you have an LTV or lifetime value of that customer-- again, this is on a global blended basis versus the US and the UK-- of $760. And that's all organic, you know, no performance marketing to date against that.

MYLES UDLAND: You know, Ben, you talked a little bit in the last quarter about some supply chain issues that you guys had been facing. And there was a time on this program when it seemed like the only thing executives were discussing was a shortage of what they needed. A little bit of time has passed. We're now wrapping up the first half of this year. What's the global supply chain, at least for your brands, look like, as we sit here today, squaring up the second half of the year?

BEN KOHN: Yeah, I would say, look, the issue still exists. It's getting better. And we saw that Yandy and Lovers, where, late in the second quarter, we started to see restocking coming into play. We had baked that into our numbers already. But for most of the first quarter and most of the second quarter, we had the inventory issues. The ports are starting to clear. And I hope that will continue to be better as we move into the fall.

BRIAN SOZZI: Ben, last one for me here. Has there been a reluctance for sell side analysts to launch coverage on Playboy because it's Playboy? I'm surprised. I mean, the stock has gone through the roof since you debuted in February, like Myles mentioned here. And I'm only seeing a handful of analysts have launched coverage on the company.

BEN KOHN: Yeah, look, I don't want to say there's reluctance. I think if you look at what we've accomplished since we went public in February, we've bought two businesses. We bought Lovers, and we bought Honey Birdette. Now we're signed a deal to buy Honey Birdette. We've delivered, in my opinion, two great quarters. And we see a stock having gone public at 10 that's now, I believe, somewhere around $40 a share.

And so I'm very happy with the performance. Again, I think that things will follow. What we need to stay focused on as a team and what we're talking about every single day is execution, execution, and execution. And if we do that and we do that consistently over time, I hope the Street, both from an investor perspective and then from a coverage perspective, rewards us.

BRIAN SOZZI: All right, well said. And congrats on this deal. Playboy CEO Ben Kohn, always good to see you. Have a great July 4th weekend.

BEN KOHN: Same to you. Thank you for having me.