Hard Rock International Releases 2006 Earnings
Strong 2006 Results Mark Third Consecutive Year of Double-Digit Operating Profit Growth
MARCH 5, 2007. Hard Rock International today announced its earnings for 2006 as part of a report issued by its current parent company, The Rank Group Plc (RNK.L).
Hard Rock's total revenues for the year, which consisted of 53 weeks in company-owned cafe results, were $501.9 million, an increase of 10.9 percent compared to $452.6 million in 2005 (52 weeks). Operating profit increased 18.7 percent to $74.8 million in 2006 compared to $63.0 million in 2005. Hard Rock saw continued growth and improvement in all four business divisions comprising company-owned cafes, franchise cafes, hotels and casinos.
"Hard Rock International had an outstanding year in 2006, with growth in all divisions. This year's performance marks the third consecutive year of growth, and we now look forward to a promising future," said Hamish Dodds, president and CEO of Hard Rock International. "In 2006, we celebrated great success with a strong performance at our New York flagship location in the heart of Times Square. As we move into 2007, we have several exciting initiatives that will help drive our brand and business prospects including projects with international rockers The Edge, Shakira and Aerosmith. We also have two high-profile openings scheduled this year with the opening of Hard Rock Hotel and Casino Biloxi and Hard Rock Hotel San Diego."
Company-Owned Cafe Performance
In the company-owned cafes, full year like-for-like sales on a 52-week basis were up 6.5 percent, driven by improved performances in both food and beverage and merchandise, as well as strong performances in Europe and North America, up 8.8 percent and 5.8 percent, respectively.
Profits from company-owned cafes for the full year 2006 increased 11.1 percent compared to full year in 2005. Hard Rock continued to focus on improved product offering, with premium ingredients, such as Certified Angus Beef burgers. In spring of 2006, Hard Rock Cafe also installed hardwood smokers in each company-owned cafe.
In merchandise, the company developed a targeted range of Hard Rock apparel and branded goods and continued to expand the product offerings to incorporate more fashion- and artist-inspired, branded logo apparel. In addition, Rock Shop offerings included a number of philanthropic items including a Breast Cancer Pin, supported by the Go-Go's, and a new Signature Series T-shirt designed by Ozzy Osbourne, as well as continued sales of Signature Series T-shirts featuring designs from Bruce Springsteen and Eric Clapton. For the second consecutive year, on a 52-week to 52-week basis, the company has generated positive like-for-like merchandise sales with a growth of 5.6 percent.
Hard Rock also announced the move of Hard Rock Cafe Boston to a more strategic location in the highly trafficked Fanueil Hall area of Boston. The new location is slated to open in the summer of 2007.
Closures in the system in 2006 included the company-owned cafes in Austin and Los Angeles, and the Bristol Bar. Hard Rock will evaluate selectively closing additional under-performing locations during the balance of 2007.
Franchise Cafe Performance
Franchise royalties and fees earned on a calendar-year basis increased to $14.7 million in 2006 compared to $11.4 million in 2005. Success in the franchise units can be partially attributed to the cafes' adoption of new standards and improvements in the menu and expansion of Rock Shops, both in the physical design of the merchandise stores and the selection of merchandise offered to guests.
Five new franchise cafes opened in 2006 in Santo Domingo, Mumbai, Narita, Ocho Rios and Margarita. In February 2007, Hard Rock Cafe Warsaw opened to become Poland's first-ever Hard Rock location. Additional cafe growth is planned on the franchise side throughout the year, with projects in various stages of development.
Hotel and Casino Performance
Hotel and Casino income, earned on a calendar year basis, increased 23.3 percent from last year, with significant fees contributed by the two Hard Rock Hotel and Casinos operated by the Seminole Tribe of Florida which helped drive an improvement in operating profit for Hard Rock's hotel and casino division. The Hard Rock Hotel and Casino brand continues to emerge as one of the world's premiere hospitality and gaming brands.
In 2007, Hard Rock will complete the reconstruction of the 318-room Hard Rock Hotel and Casino in Biloxi, Mississippi and open in the summer months. This property was in the middle of its opening program in September 2005 when it sustained major damage from Hurricane Katrina. In addition, the first Hard Rock Hotel in San Diego, California, featuring 417 rooms, is also scheduled to open in late 2007.
Hard Rock also recently announced the development of Hard Rock Hotel and Casino Macau in the City of Dreams Casino Entertainment and Resorts Complex on the Cotai Strip. The Hard Rock development will feature a state-of-the-art Hard Rock Casino, a 370-room Hard Rock Hotel with guest rooms and suites, a Hard Rock Cafe with designated live music area, a Rock Shop, VIP roof-top nightclub, stylish casual dining restaurant, stimulating health and fitness center, a variety of uniquely designed meeting spaces and an expansive pool and entertainment deck. This premier entertainment destination is set to open in late 2008, and paves the way for many more exciting leisure developments in Asia.
Other developments in progress include condo-hotel properties at the Copper Mountain Resort in Colorado, with 323 rooms, and Palm Springs, California, with 450 rooms. Construction on both these properties is expected to begin in 2007.
These new properties bring Hard Rock's global estate of hotels in operation or development to a total of 11.
On December 7, 2006, the Seminole Tribe of Florida announced it had contracted to acquire Hard Rock International from the Rank Group Plc. The sale is expected to close on March 5, 2007. Both Seminole Tribe Chairman Mitchell Cypress and Seminole Gaming Chief Executive Officer James Allen stressed the Tribe's plans to work with current Hard Rock International management to build on the existing growth plans and strategies for the company, which will continue to be headquartered in Orlando, Fla.
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