Hillsborough’s PHE turned a once-taboo shopping experience into a $300 million adult retail empire.
The first toy David Groves ever saw was the Caress Vibrator. “Eight inches, hard plastic, white and running on one C-cell battery,” he recalls. “They’d vibrate a little bit, but the quality in those days wasn’t great.” Later came more powerful models like the Prelude 2, still primitive with a 6-foot power cord.
Groves started in Adam & Eve’s mailroom in 1980, back when sex toys buzzed loudly, plugged into the wall and were much more controversial, with weekly U.S. church attendance at least 30% greater than today.
He worked his way up to vice president in 1998 and president in 2014, retiring last year. In his 44-year tenure, Groves watched that clunky white tube evolve into app-enabled, multi-textured gadgets that can warm up, cool down and sync with your partner’s phone. Some new models don’t resemble sex toys at all, says Groves. “They look perfectly at home on your bedside table.”
That transformation didn’t come out of Vegas or Los Angeles. It came out of Hillsborough, North Carolina, growing from a mail-order contraceptive startup into America’s most successful adult retail player. Its parent company, PHE Inc., lives in a low-key office park, where an 86,000-square-foot warehouse holds more than 8,500 sex toys and accessories. Its 250 corporate staff members make PHE one of Orange County’s leading private employers. Another 55 work in North Carolina’s 16 storefronts, a franchise network that began 20 years ago in Raleigh. The state is now its 12th-highest revenue generator.
In five decades, the employee-owned company added just over 100 stores in about two dozen states, a few in Canada, and an Australian subsidiary. PHE declined to share exact annual revenue, but a spokesperson validated third-party estimates of roughly $300 million. That’s nearly triple the $113 million reported by Business North Carolina in 2009. Not bad for a brand selling products most people wouldn’t openly recommend but still pass along in whispers to close friends.
Through February, Adameve.com brought in 71% of total sales, with the balance from physical stores. Officials say that’s a solid mix despite constant rumblings about brick-and-mortar’s supposed extinction. The website draws 60 million annual visitors and markets more than 2,200 products, shipping around 2.5 million packages annually.
The top product is the Satisfyer Pro 2, a women’s toy made by New York-based Satisfyer and sold by Adam & Eve. Last year, Satisfyer President Jeff Garlow said the partnership anticipated “exponential growth” and nine-digit sales.
Men’s bestsellers like Adam’s Gawk Gawk 3.0 and Eve’s Realistic Torso are no slouches either, but women’s toys have consistently been the highest performers. “The Rose toys and the air pulse/suction toys have been huge for us,” spokesperson Katy Zvolerin says.
Adam & Eve stores carry lingerie, lubricants and toys targeting couples and solo shoppers alike. The store frontage walks a fine line: provocative enough to entice, yet polished to appear in suburban shopping centers. Inside, you’ll encounter scantily clad mannequins, anatomy-inspired candies, scented oils, erotic jewelry, risqué board games and intriguing brands like Bedroom Adventure Gear, makers of wedge-shaped sex chairs, and Sportsheets, with bed restraints and blindfolds.
The chain’s name is a conversation starter, conceived in an early discussion between PHE founder Phil Harvey and his original business partner, Tim Black. “The theory was that it was always a company for both men and women — and couples,” Zvolerin says.
The PHE umbrella also includes a DVD marketplace, a gay sex toy website and a film arm, Adam & Eve Pictures, which produced cheeky parodies like “Pulp Friction” and “Carolina Jones and the Broken Covenant.” Its adult movies, which now make up a small percentage of sales, were produced in Los Angeles. Despite competition from Amazon, CVS and Walmart, Adam & Eve holds its own by offering regular can’t-beat deals, free mystery gifts, discounted accessory kits and discreet packaging shielded from nosy neighbors and roommates. It also has its own line of vibrators and dildos.
“We focus on offering curated, high-quality products, educating our customers, and providing a sense of trust and discretion they can’t get elsewhere,” says Lewis Broadnax, who succeeded Groves as president last fall.
A Durham-based Duke University alumnus with past roles at Lenovo, Reynolds American and the Sazerac liquor company, Broadnax sees PHE as both a retailer and a cultural touchstone driving the sex-positivity movement worldwide.
“By 2035, we envision Adam & Eve as the go-to global brand for sexual wellness and intimacy products,” he says. “We created the direct-to-consumer space for our category in the U.S. and want to continue that heritage on a global scale.”
Broadnax hints at a major expansion in Europe, Asia-Pacific, and South America, though specific markets will depend on consumer interest and demand. Australia is a strong foothold after the 2019 acquisition of retailer Excite Group. PHE intends to leverage its 35-employee Wild Secrets subsidiary as a jumping-off point on that side of the globe.
PRIVACY AND DISCRETION
In 1969, at the peak of the Sexual Revolution, UNC Chapel Hill grad student Harvey had a bold idea for his master’s thesis: A nonprofit that mailed condoms to catalog customers to fund family planning programs in the developing world. At the time, mailing contraceptives was illegal in many states, but Harvey and classmate Black believed privacy would drive more Americans to use them.
That bet launched a shop-by-mail catalog business in 1970, followed by the first store in Chapel Hill in 1971. The Daily Tar Heel called it a first-of-its-kind “love boutique” selling condoms, oils, books, and other intimate products, with trained staff on site to answer questions. Harvey, then 33, told the paper, “We want to bring sex — and the responsibility that goes with it — into the light of everyday society where it belongs.”
By the mid-1980s, Adam & Eve was riding the VHS wave, expanding into adult videos just as the VCR became mainstream in American living rooms. “For the first time, people didn’t have to go to adult bookstores or sleazy theaters to get creative materials,” says Groves. “They could buy things through the mail privately and discreetly, and watch whatever they wanted in the privacy of their homes.”
Adam & Eve began selling videos in 1981 and producing its own films by 1993. But success also brought scrutiny. The Reagan administration’s Meese Commission and Moral Majority figures like Jerry Falwell targeted adult businesses nationwide. PHE spent more than $3 million on legal fees, while many of its competitors folded under threats of jail or forfeiture because they couldn’t afford to fight. PHE’s lawsuit against the U.S. Department of Justice reached the Supreme Court, arguing the government violated the First Amendment and right to marital privacy.
“The hero in all this was our founder, Phil Harvey, who strongly opposed the government telling people what they could read, watch and do in the privacy of their homes,” Groves says. “Almost single-handedly, he kept us fighting back against the government.” In 1992, the company settled a lawsuit against the Justice Department, helping cement First Amendment protections still relevant today. Harvey died at age 83 in 2021.
Even as it grew, the company held fast to its original mission of selling pleasure products to fund global family planning and reduce the spread of sexually transmitted diseases. Harvey’s nonprofit, Washington, D.C.-based DKT International, now operates in more than 30 countries. PHE still donates 20% of its profits to more than 100 charities, including the American Heart Association, Habitat for Humanity, Duke Hospice and Meals on Wheels.
DKT had net assets of $240 million as of 2023, according to its last tax filing. By providing condoms and other products and services, it helped prevent 16.8 million unwanted pregnancies and 33,000 maternal deaths, the filing notes.
That philanthropic model might seem surprising coming from a small-town North Carolina company. But closer inspection suggests state residents have long had a quiet, steady appetite for adult entertainment.
Raleigh was home to several adult bookstores in the 1980s. Some served as “cruising spots” for the city’s gay community, such as Bachelor’s Books & Movies. Video-porn viewing booths popped up statewide in the ‘90s, including Greensboro’s Gents and I-40 Video & News, a pair of 24-hour stores allegedly frequented by 2024 gubernatorial candidate Mark Robinson in the early 2000s.
Strip clubs like Charlotte’s Paper Doll Lounge and Raleigh’s Capital Cabaret thrived in the state’s metros. Fayetteville’s military population made a natural hub for clubs like Secrets Cabaret, though local zoning regulations often tried to rein them in. The three facilities remain open today.
The industry matured by the 21st century, with Charlotte’s AEBN launching one of the first adult video streaming services. Adam & Eve started its e-commerce site in 1999, realizing its 250-product catalog couldn’t keep pace with online competitors stocking thousands of SKUs. Groves says it took a few years to master digital marketing, but by the early 2000s, the site was steadily growing and optimized for search engines, email campaigns and customer service.
Then, the DVD market cratered in the 2010s with the rise of free websites like Pornhub, a Canadian-based outlet owned by a private-equity firm. That caused most adult video stores to shut down or pivot to lingerie, high-end toys, and wellness products with stronger profit margins. That was Adam & Eve’s strategy, building a solid web presence while retaining its franchise stores.
Adam & Eve’s branding has shifted toward women and couples, favoring app-integrated products with aesthetic appeal and functionality. Sex toys remain a solid market, valued by Grand View Research at $10 billion, with 8% compound annual growth projections through 2030.
BUSINESS OF THE YEAR
Tom Stevens was living downtown in the early 1990s when he read about the controversy of PHE moving its headquarters there. Even then, he says it was obvious most of the stir was coming from out-of-towners.
The company re-entered Stevens’ orbit a decade later after he was elected mayor. The first correspondence he received was from a Missouri resident. “He said, ‘You may not know this, but there’s a porn company in your community, and I can help you shut them down,’” Stevens recalls. That same month in 2005, the local chamber named PHE Business of the Year.
“I thought that was an interesting contrast,” Stevens chuckles. When the Missourian followed up later, “I told the guy, ‘Mmm, Thanks for your interest, but this is the Business of the Year, so… please don’t call me.’”
Stevens, who left office in 2019 to become a full-time artist painting nudes and landscapes, has always known PHE to be a “great corporate citizen” that is never loud and showy but always involved. He only received laughter and curiosity when PHE would donate or sponsor baskets of adult products for local charity auctions.
“Everyone would nudge each other and go, ‘Who’s going to be the first to bid on the PHE basket?’ I mean, how great is that?”
Scott Czechlewski, CEO of the Hillsborough/Orange County Chamber of Commerce, praises PHE’s jobs, contributions to local charities, and yes, for providing “some of the most unique and well-received giveaways at our events.” PHE employees have served on the chamber board for years.
The company anchors a cluster of mail-order and logistics firms in Hillsborough, such as Soccer.com, Eurosport, and Redeye Distribution, which helped stabilize the economy after the textile mills shuttered in the late ‘90s.
Hillsborough maintains a healthy 40% share of commercial businesses in its tax base. “From the old trading paths to the Civil War to now, we’ve always been a nexus for traders to pass through, cross the river, and travel to the state’s population centers,” says Stevens. “You’ve got I-40 and I-85 intersecting, U.S. 70, good schools, a beautiful town and now you’ve got a logistics and mail-order hub. It makes sense.”
RED TAPE, EMPLOYEE OWNERSHIP
While Adam & Eve stores are familiar fixtures in suburban strip malls, they still face scrutiny. Zoning boards in some cities restrict adult retailers near schools or churches. Broadnax says PHE helps franchisees navigate local laws and to ensure compliance doesn’t derail openings or operations. Online, regulatory hurdles are just as thorny. The company keeps tabs on e-commerce legislation and other regulations regarding accessibility, age-gating and shipping restrictions.
“Regulatory compliance is always a moving target in our industry,” Broadnax says. “Right now, age-verification laws and content restrictions are at the forefront of our concerns. The biggest pressures we face revolve around navigating the patchwork of state-specific laws regarding age verification and product labeling.”
PHE is a co-plaintiff in multiple Free Speech Coalition lawsuits challenging age-verification laws in Tennessee, Florida and Montana, arguing that vague language intended to protect minors also sweeps up e-commerce businesses like Adam & Eve. Much hinges on the upcoming Supreme Court ruling in Free Speech Coalition vs. Paxton, a Texas case that is expected to be decided this year.
“These lawsuits are critical for ensuring that regulations strike a balance between protecting minors and respecting the rights of businesses and individuals,” Broadnax says. “The Paxton decision could set a precedent for how these laws are drafted and enforced going forward, and we’re hopeful for a favorable outcome.”
Inflation and tariffs add more pressure. In March, Broadnax said the company was managing through an additional 10% tariff on goods from China. That doubles the previous tariff. The company remains “committed to affordability,” he says, pointing to discount bundles and gifts to retain customers.
PHE’s latest growth spurt happened during the pandemic, when lonely and bored shoppers boosted sales. That activity has cooled, but physical retail has held steady. David Keegan, head of franchising, says five-year sales trends show stores are maintaining pre-COVID results.
Broadnax is bullish on expansion, developing product partnerships and watching where demand grows before selecting international sites. There aren’t any plans to add new sites in North Carolina now, but PHE sees several untapped areas of the state, including a potential debut in Asheville, which would mark its first shop in western North Carolina.
Broadnax plans to spruce up Adam & Eve’s portfolio, especially categories combining sexual, physical and mental wellness, including a growing lineup of peri-menopause and menopause products.
“We’re investing heavily in e-commerce tools, streamlining logistics, and expanding our product offerings,” he says. “We are also looking at new ways to leverage our 100-plus retail stores to provide our customers with a more seamless brand experience.”
Through its history, Adam & Eve has remained a tight-knit operation that is owned by about 80 shareholders. It’s a model neither Groves nor Harvey ever considered changing. “People who have a stake in the game are better employees, more creative and more productive, and it helps us keep up with the changing business climate and industry trends,” Groves says.
Going public was never a serious consideration, either. “When I asked Phil about this back in the old days, he said, ‘We’re having too much fun running the company, so why would we want to change that?’ Bureaucracy and being beholden to outside shareholders, it’s just not something that appealed to anybody here. I suppose it’s possible that some venture capitalists out there would make us gazillionaires, but that’s not who we are.” ■
