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Planet Hollywood wobbles
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January 14, 1999: 9:38 a.m. ET
Theme restaurant chain to take 4Q charge of $130M-$160M, cut costs
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NEW YORK (CNNfn) - Fiscally troubled Planet Hollywood International Inc., whose stock has fallen more than 80 percent in the past year, said Thursday it is taking a pre-tax charge of $130 million to $160 million in the 1998 fourth quarter due to asset write downs and will take action to significantly lower operating costs.
The theme restaurant chain said that excluding the charge, it expects to report negative cash flow of $10 million-$15 million for the fourth quarter and total sales of roughly $75 million. Comparable-store sales for the quarter declined by approximately 19 percent, the company said.
For all 1998, Planet Hollywood (PHL) expects to report cash flow of $14 million to $19 million, excluding the charge, and total sales of $365 million, with comparable-store sales for the year down roughly 18 percent.
Among the cost-cutting steps, the company said it had reduced its corporate overhead costs by 35 percent and will streamline store-level operations, implement cost-control systems and outsource non-core operations such as manufacturing of merchandise by Fruit of the Loom.
In addition, the company said it will franchise certain Planet Hollywood restaurants outside of the United States, sell non-essential corporate assets and recapitalize the company's balance sheet.
"Our objective is to lower general and administrative expenses to approximately 8 percent of sales, versus a current rate of approximately 17 percent. We believe this is an achievable target, and we have taken the necessary steps to meet this goal," said President and COO William H. Baumhauer.
"We believe that if we implement our business program successfully in 1999, we can resume profitability in the year 2000," Baumhauer said. "In particular, we will be focusing on increasing top-line sales, reducing general and administrative expenses and exiting initiatives that are no longer consistent with our strategy to build shareholder value."
If the strategy proves successful, Baumhauer said, the company anticipates sales of $400 million and cash flow of $25 million-$30 million for 1999, assuming a comparable-store sales decline of 5 percent for 1999 and capital expenditures of $40 million-$45 million.
Planet Hollywood, owned in part by movie stars such as Bruce Willis and Arnold Schwarzenegger, develops restaurants, retail, leisure, entertainment, lodging and gaming outlets that capitalize on the universal appeal of movies, sports, music and other leisure-time activities.
Shares of Planet Hollywood (PHL) closed down 3/16 to 2-5/8 on Wednesday. 
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Planet Hollywood
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