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Planet Hollywood Expects 1997 Fourth Quarter Results To Fall Short Of Analyst Estimates
PR Newswire - January 21, 1998 16:08
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-- CEO Robert Earl Outlines Steps to Improve Long-Term Performance --
-- Company Will Record Fourth Quarter Charge of Approximately $45 Million --
ORLANDO, Fla., Jan. 21 /PRNewswire/ -- Robert Earl, President and Chief
Executive Officer of Planet Hollywood International, Inc. (NYSE: PHL), today
said he expects revenues and profits for the fourth quarter of 1997 to fall
significantly short of analysts' estimates. At the same time, Mr. Earl
outlined a series of actions the Company will initiate immediately to improve
its long-term performance. While the short-term impact of these measures is
expected to yield relatively flat revenues and modestly lower earnings in
1998, the Company is confident that it will resume its growth in 1999, as
strategic joint ventures and other initiatives begin to contribute
meaningfully to the Company's performance. In order to fund these joint
ventures, the Company plans to raise capital in 1998 through a long-term
financing, subject to market conditions. Mr. Earl further noted that as the
Company executes its plans, it will have the benefit of its strong cash flow
and sound balance sheet.
Fourth Quarter
For the fourth quarter ended December 28, 1997, the Company expects to
report total revenues of approximately $102 million, compared to total
revenues of $99.1 million in the fourth quarter last year. Comparable
restaurant sales declined approximately 13% in the quarter. Fourth quarter
net income, before an after-tax charge of approximately $45 million, or $0.41
per share, is expected to be approximately $1 million, or $0.01 per share,
compared to net income in the 1996 fourth quarter of $14.2 million, or $0.13
per share. Including the charge, the Company is expected to report a net loss
of $44 million, or $0.40 per share. There were 78 Planet Hollywood and nine
Official All-Star Cafe units at the end of 1997, compared to 53 Planet
Hollywood and five Official All-Star Cafe units at the end of last year.
For the fourth quarter of 1997, current analysts' estimates for total
revenues are in the range of $131 million to $154 million; current estimates
for net income are between $23 million and $25 million, or $0.21 to $0.22 per
share. Planet Hollywood will announce its financial results for the fourth
quarter and full year 1997 in mid-February 1998.
"We are very disappointed with the fourth quarter results, but, at the
same time, recognize Planet Hollywood and its consumer brands have tremendous
growth prospects. We are 100% focused on fixing the problems at hand and
maximizing the Company's long-term potential," said Mr. Earl.
Mr. Earl said, "1997 fourth quarter results were primarily impacted by a
further increase in competition in the theme-dining sector which contributed
to lower-than-anticipated sales of food and merchandise at both Planet
Hollywood and Official All-Star Cafe units; increased staffing and
infrastructure-related costs at both the corporate and unit levels associated
with the Company's rapid expansion in 1997, particularly outside of the U.S.;
and a shift in several franchised restaurant openings from the fourth quarter
of 1997 to the first half of 1998. In addition, unlike in the 1997 third
quarter, the Company did not complete any direct merchandise sales to
international retailers, although such sales remain a key part of the
Company's strategy going forward."
Mr. Earl added, "In a relatively short period of time, we have established
Planet Hollywood as the market leader in theme dining and as a premier
developer of successful consumer brands. Sustaining and enhancing world-class
brands requires not only a consistent effort aimed at delivering distinctive,
high-quality products and services, but periodic adjustments to ensure that
those great products and services are always relevant and exciting to
customers. This is particularly important at a time of heightened
competition. We have seen a number of new entrants into the industry who have
sought to emulate our success, and while these concepts may have affected our
near-term results, we are, we believe, best-positioned for the long term as
the market leader with several key brands that exhibit distinguishing
characteristics and a proven track record.
"Accordingly, in 1998, we intend to scale back our unit expansion plans in
order to focus on creating renewed excitement in our Planet Hollywood brand
and take steps to refine our Official All-Star Cafe concept. Even as we make
such adjustments, we will continue to move forward with the introduction in
Spring 1998 of our exciting third major brand, which will be tied to the world
of music, as well as a range of strategic joint ventures that we believe will
begin to have a meaningful bottom-line impact beginning in mid-1999. These
include: 1) our joint venture with AMC to develop movie theater complexes
under the name Planet Movies by AMC; 2) our joint venture with Aladdin Gaming
to develop a music-themed Hotel and Casino in Las Vegas; 3) our Vornado/Hotel
Properties joint venture to develop a sports-themed hotel under the Official
All-Star brand name in New York City; and 4) our partnership with Dreyer's Ice
Cream to develop premium ice creams in conjunction with a chain of Cool Planet
ice cream and dessert cafes."
Mr. Earl said that, for the full-year 2000, these joint ventures alone are
expected to contribute $65 million to $75 million in EBITDA and $23 million to
$28 million in net income, or $0.21 to $0.26 per share.
Actions to Improve Performance
Mr. Earl said Planet Hollywood plans to undertake a series of eight
initiatives including:
1. Introducing new marketing initiatives in the Planet Hollywood
restaurant business. One of the Company's key priorities in the near term is
to inject new excitement into the Planet Hollywood restaurant business, in
order to stimulate greater customer traffic. Planet Hollywood plans to
increase the frequency of celebrity events and promotions and broaden the
number of celebrities associated with Planet Hollywood, with an emphasis on
new, up-and-coming stars. In connection with these plans, Brian Woods,
currently President of the Planet Hollywood brand, will relocate to Hollywood,
California, where he will be responsible for further cultivating relationships
with celebrities and other members of the film industry.
In addition, in certain markets the Company is taking steps to broaden the
appeal of its restaurants through menu revisions, the acceptance of
reservations and greater promotion of group sales, in order to attract local
residents and build upon the Company's current customer base that primarily
includes tourists. The Company will test new marketing strategies in six
already designated cities, before rolling out chain-wide.
2. Enhance the mix of merchandise sold in Planet Hollywood and Official
All-Star Cafe units. On the merchandise side, the Company is developing
programs to continually update and refresh its merchandise mix. For example,
the Company has begun to introduce special seasonal product lines two times
per year, as a complement to the base souvenir merchandise business. Even as
new items are added, the Company intends to reduce the total assortment of
products sold in its units. Outside of its restaurants, the Company will
continue to pursue merchandise sales through other distribution channels,
including its own standalone retail stores and other global retail
distribution channels. The Company expects retail sales to be a key driver of
future growth.
3. Focusing on three key brand concepts: Planet Hollywood, Official All-
Star Cafe and Music. The Company believes that its Planet Hollywood, Official
All-Star Cafe and Music concepts offer the greatest potential for long-term
growth and, consequently, will temporarily shelve plans regarding expansion of
the Marvel Mania and Chefs of the World concepts. There is currently one
Marvel Mania unit in operation in Universal Studios, California. The Company
has decided not to be involved in the further expansion of Marvel Mania and
will not pursue further development of Chefs of the World at this time.
4. Scaling back opening of additional company-owned Planet Hollywood and
Official All-Star Cafe units in 1998. As it revitalizes its existing unit
base, the Company will scale back expansion of company-owned Planet Hollywood
and Official All-Star Cafe restaurants. In 1998, the Company now plans to
open three new Planet Hollywood locations, compared to 12 opened in 1997, and
two new Official All-Star Cafe locations, compared to four opened in 1997.
Previously, the Company had anticipated opening nine Planet Hollywood and six
Official All-Star Cafe units in 1998. In addition, the Company expects
franchisees to open approximately 10 Planet Hollywood units and one Official
All-Star Cafe unit during 1998, further contributing to the growth of these
brands. The Company also noted that it has already established a presence for
its Planet Hollywood brand in all major and many secondary markets, and, given
increased rental, labor and other costs due to greater competition, believes
it is prudent to delay expansion of free-standing units in certain markets.
However, the Company has created the opportunity to mitigate some competitive
forces through our participation in the AMC joint venture and lodging
opportunities.
5. Re-aligning and streamlining management structure. In October 1997,
Planet Hollywood created a new divisional structure to support the further
diversification of its business. The Company's five divisions include: food
and beverage; gaming and lodging; retail and merchandise; theaters and
entertainment; and consumer products. Planet Hollywood is realigning
management responsibilities to ensure the strongest team for each division and
will consider augmenting its in-house team through the recruitment of
individuals outside of the Company with special expertise. Executives will be
held strictly accountable for their results and their compensation will be
tied to meeting performance targets.
At the same time, Planet Hollywood will eliminate certain management
layers to streamline its organization and increase operating efficiencies.
These actions will result in the elimination of a total of approximately 40
positions company-wide, including a 10% reduction at corporate headquarters.
6. Appointing an executive to oversee franchising. In connection with
the realignment, the Company will appoint an executive to oversee all of its
franchising activities, including the development of new international
franchises. Aside from the Planet Hollywood brand, the Company expects its
Official All-Star Cafe, Music and Cool Planet brands all will have substantial
franchising potential and, as a result, franchising will continue to play a
key role in future growth.
7. Hiring a senior operations executive. With Mr. Woods' relocation to
Hollywood to focus on relationship-building, Mr. Earl will re-assume operating
responsibility for the Planet Hollywood brand in the near term. The Company
has commenced a search for and expects to hire a senior executive with strong
operating experience to oversee all of its operations, which, in turn, will
enable Mr. Earl to devote greater attention to strategic activities and the
creative and marketing aspects of the business.
8. Reducing operating costs. Planet Hollywood has conducted a thorough
review of its operating and expense structure and has identified several areas
for cost reduction, including, among other things, the staff reductions,
enhanced purchasing efficiencies and streamlined operating procedures. Such
steps are estimated to yield approximately $5 million in annual cost savings.
1997 Fourth Quarter Charge
Planet Hollywood will record an after-tax charge of up to $45 million, or
$0.41 per share, in the fourth quarter of 1997. The charge is primarily
related to the writedown of underperforming assets, the elimination of certain
development and franchising costs associated with the Company's previous unit
expansion strategy, and the re-alignment of the organization.
1997 Full-Year Results
For the twelve months ended December 28, 1997, the Company expects to
report total revenues of approximately $475 million, compared to total
revenues of $373.3 million in 1996. Comparable restaurant sales declined 11%
for the year. EBITDA for 1997 is expected to exceed $120 million, compared to
$107 last year. Net income, before the charge, is expected to be
approximately $53 million, or $0.48 per share, compared to net income before
an extraordinary charge, of $48 million, or $0.47 per share, in 1996.
Including charges, net income for 1997 is expected to be $8 million, or $0.07
per share, compared with net income in 1996 of $38 million, or $0.37 per
share. For 1997, current analysts' estimates for total revenues are in the
range of $505 million to $530 million; current estimates for net income are
between $75 million and $78 million, or $0.68 to $0.70 per share.
Future Outlook
In light of its revised plans, Planet Hollywood now expects total revenues
for 1998 to be between $480 million and $500 million, compared to expected net
revenues of approximately $475 million in 1997. EBITDA for 1998 is expected
to approximate $130 million, compared to a projected $120 million in 1997.
Net income for 1998 is expected to be in the range of $47 million to $50
million, or $0.43 to $0.45 per share, compared to expected net income, before
the charge, of approximately $53 million, or $0.48 per share, in 1997.
Planet Hollywood is a creator and worldwide developer of consumer brands
that capitalize on the universal appeal of movies, sports, music and other
leisure-time activities. The Company's worldwide operations offer products
and services in the retail, leisure, entertainment, lodging and gaming
sectors. The Company is organized under five operating divisions, Consumer
Products; Food & Beverage; Lodging & Gaming; Retail & Merchandise; and,
Theaters & Entertainment. Planet Hollywood International, Inc.'s Class A
common stock is listed under the symbol "PHL" on the New York Stock Exchange.
Certain statements contained herein are forward-looking statements that
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties which may cause the Company and its partners
actual results in future periods to differ materially from what is currently
anticipated. Those risks include, among others, risks associated with the
timing of and costs associated with property improvements, financing
commitments and general competitive factors and a change in retailer or
consumer acceptance of the Company's and its partners' products and services.
SOURCE Planet Hollywood International, Inc.
/CONTACT: Robert Weiner, Director of Investor Relations, Planet
Hollywood, 407-363-7827, ext. 2220 or 407-370-6759; or Wendi Kopsick
Kekst and Company, 212-521-4867/
/Company News On-Call: prnewswire.com or fax,
800-758-5804, extension 116808/
(PHL) |
