PLBY | Honey & Bunny

We were expecting an M&A deal to be announced by PLBY in the wake of its recent equity offering, and overall, we like what the company bought. PLBY is buying Australian luxury lingerie and bedroom accessories brand/retailer Honey Birdette.  The price tag is reasonably high at $333mm, using cash and stock.  That's about 4.5x revenue but only 12x EBITDA for the fiscal year ending this week.  We like what this company brings to the PLBY sexual wellness portfolio.  It’s an upscale brand, higher end than the prior Yandy and Playboy/Yandy products, giving Playboy lingerie products at all price levels (perhaps there is an even higher priced offering to come with the Big Bunny sub-brand). The company is expected to deliver $73mm in sales and $28mm in EBITDA this year, growing 40% and 95% respectively.  The private equity firm owner noted it has seen 105% annualized return on investment from the company’s dividends. It has international exposure with 60 stores in Australia and a couple stores in the UK and US (with new flagships coming in Dallas, Miami and New York), but it also has more than half of its sales online, so it provides an infrastructure and a platform to market Playboy sexual wellness products globally. You can already see the ”Honey Bunny” collaboration name being one to come. Playboy can leverage its brand awareness and fashion momentum to sell Honey Birdette product in several global markets. This is another means of tapping into the Playboy brand reach and relevance in sexual wellness, and getting 100% of retail sales onto the P&L.  In addition, Honey Birdette has some brand similarities as it relates to freedom of expression and brand perception.  Honey Birdette advertising gets criticism for being “pornographic” while the brand deems this reaction as censorship of women’s free expression and the female body.  Honey Birdette is female founded, with a majority of female employees.  However it has also gotten some pushback from employees about sexist selling practices for the sales people called “honeys”.  So, much like Playboy, the brand is no stranger to controversy and debate, and as long as PLBY takes the message and policies in the right direction, that controversy can be a revenue driver.  We expected an acquisition to be announced in the sexual wellness space, and this one gives PLBY a lot of options and assets for growth. PLBY remains near the top of our Best Idea Long list, and we think it's one of the few multi-baggers over a TAIL duration in retail. More to come after the company's 9am conference call.