Thursday January 14, 7:04 pm Eastern Time
Planet Hollywood to redo eateries, exit businesses
(PVS Orlando, adds president interview and details)
By Michael Connor
MIAMI, Jan 14 (Reuters) - Global restaurateur Planet Hollywood International Inc.(NYSE:PHL - news) said Thursday it would make over its movie-themed eateries that have lost their luster and exit secondary businesses with an eye to stopping financial losses by 2000.
Hit by a downturn among entertainment restaurants with gewgaw shops and costly decorations, Planet Hollywood lost money in the first nine months of 1998, and on Thursday said it would take a year-end charge of $130 million to $160 million.
Sales at company restaurants open a year or more fell 19 percent in the last three months of 1998, the company said, adding it expected to report negative cash flow of $10 million to $15 million for the quarter.
Quarterly revenues will amount to $75 million, down from $102 million during 1997's last quarter.
Planet Hollywood, whose creditors last month forced the company to put its year-old headquarters in Orlando, Fla., up for sale, said it hoped to turn profitable again in 2000.
President William Baumhauer, running the company for the past six months, said in an interview Planet Hollywood would spend $10 million to $12 million refurbishing restaurants and would exit its Official All-Star Cafe line, planned hotels and other ventures.
''We are going to focus on Planet Hollywood virtually to the exclusion of all else,'' he said. "Divestment of the other properties is most likely, but we are looking at franchising, joint ventures or rebranding.
Planet Hollywood outlets in Orlando, Las Vegas, Paris and 27 places around the world will be repainted, refurnished and redecorated with lighter colors and brighter lights, he said. Bars would be upgraded, and the menu and merchandise offerings at the 30 biggest venues changed.
''Pricing is coming down and portion sizes will be smaller, in some cases,'' Baumhauer said.
Changes at 30 other Planet Hollywood restaurants would be more modest, at least at first, he said.
Some analysts, pointing to falling sales at the jungle-themed Rainforest Cafe (Nasdaq:RAIN - news) chain and setbacks for others such as the Fashion Cafe, predict that the over-the-top eateries pioneered by Planet Hollywood Chairman Robert Earl were a dying breed.
Baumhauer said Planet Hollywood was a global brand known to hundreds of millions and could prove highly profitable if the typical customer now eating there twice a year came back just one more time.
''If we can get that number up to three times a year, we'll be back rocking and rolling,'' Baumhauer said.
If the redecorating and business restructuring succeeds, Planet Hollywood estimated its 1999 sales would reach $400 million and earnings before interest, taxes, depreciation and amortization (EBITDA) -- or cash flow -- would climb to $25-$30 million. Those figures assumed a sales decline of 5 percent at restaurants open at least a year, and capital spending of $40-$45 million, the company said.
Excluding the fourth-quarter charges tied mainly to writedowns of assets, Planet Hollywood said it expected EBITDA of $14-$19 million for all of 1998, on sales of about $365 million.
On Thursday, shares of Planet Hollywood, as high as $27.25 in 1997, were up 25 cents at $3 in New York Stock Exchange trading.
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