Hard Times Selling Sex
February 27, 2007
Performance anxiety has rarely been an issue at Europe's biggest sex-shop company Beate Uhse. But media reports and store closings indicate that the once high-flying sex chain has lost some of its potency with both customers and stock analysts.
While a full report on the company's 2006 performance is not due out until the end of March, internal figures obtained by the online business site manager-magazin.de paint a picture of a very unsexy year for the company.
Of 61 sex shops in Germany, 47 are reported to have done worse in 2006 than in 2005; 19 of those chalked up losses. The chain's operating results was 49 percent below target; the mail order business did even worse.
The Christmas season turned out to be anything but jolly for the company, thanks in part to a defective sprinkler that flooded its primary mail-order warehouse in the Netherlands. The water damage cost the company 15 million euros ($20 million).
Just after the holiday season, the company had to admit it would not be able to match its 2005 sales of 285 million euros.
Mae B. falls flat
The company will close the last of its Mae B. shops as their leases run out. The Beate Uhse offshoot, geared towards the female market and featuring brightly lit stores with sexy lingerie and erotica instead of hardcore pornography, was opened in 2004. The idea was to pull the company out of its porn niche and reach a broader spectrum of customers.
Despite the tasteful decor, massage oils, erotic games and silver and gold vibrators, the concept, which Beate Uhse spokeswoman Assia Tschernookoff now calls an "experiment," didn't fly.
Now the company is trying a new approach, and recently opened a flagship store in Munich that will carry many of the items featured at Mae B. in addition to the inventory found in the more traditional Beate Uhse stores.
The company has experienced several buckets of cold water over the past few years, generally around its ambitious expansion plans. A takeover of the condom manufacturer Condomi failed, as did the purchase of the "Penthouse" publishing house.
An attempt to get into the world's biggest pornography market, the United States, was not successful and Beate Uhse was forced to withdraw after suffering heavy losses.
Fantasy unfulfilled
The company's stock market flotation in 1999 was accompanied with much fanfare and its stock price reached a high of 29 euros. But since then it has a long ride downhill until the price bottomed out at 3.95 euros last November.
Stock analysts are recommending selling Beate Uhse stock, worried by news that the company's biggest stockholder and son of founder Beate Uhse, Ulrich Rotermund, is trying to find a buyer for his 29.5 percent stake.
Analysts have also been concerned about the unclear relationship between Dutch pornography entrepreneur Gerard Cok and his Consipio Holding, which holds a 20.8 percent stake, and the Flensburg, Germany-based company.
According to analyst Matthias Schrade of GSC Research, the company is still overvalued. The firm is now valued at 250 million euros, but he told manager-magazin.de that a more realistic figure is around 150 million euros. But, he added, he currently wouldn't want to pay more than 100 million euros for the firm.