I hate to do this . . . but we have to talk about it.

By Steve Moran

Here is the Problem or Solution: Brookdale Must Make Working at Brookdale Fun

I hate writing about Brookdale’s financial challenges for two reasons:

  1. I know a lot of Brookdale people and I like them. They are good people with good hearts. I am working on a new project that I hope they will participate in . . . (nope can’t tell you what it is yet, but soon) and I worry this article will blow that chance.

  2. While my degree is in finance, I got that degree a long long time ago and I am not all that interested in the financial details.

But we have to talk about it. Brookdale represents a huge slice of the senior living pie across the country.

The Meat

Their earnings came out after the closing bell last evening (February 8, 2016) and their earnings call was this morning (February 9, 2016) at 10 a.m. Eastern.  

  • Their stock price was already depressed and it took a deeper dive (Closing Prices):

    • February 5 (Friday)  $15.98

    • February 8 (Monday) $15.14

    • February 9 (Tuesday) $12.63

(Disclosure: I own a few shares of Brookdale that are massively underwater.)

  • Because Welltower is all about senior living, their shares also dropped 10%.

  • There was some good news:

    • They did report a 9% increase in cash flow from operations going from $0.53 to $0.58

    • They also reported a slight increase in occupancy from the prior quarter, but it was down significantly from the same quarter a year ago.

  • The big ouch was that analysts were expecting Brookdale to report a $0.19 per share loss and they instead reported a $0.94 per share loss.

  • The sense is that three factors clobbered the stock price:

    • Lower than hoped for occupancy

    • A larger than expected loss

    • Lackluster guidance for 2016

Does it Matter?

It obviously matters a lot to all the folks of Brookdale from line staff to the C suite. It also matters to families and residents. The worst part of the whole thing is that it erodes confidence in leadership, which impacts families, resident, prospects and team morale and that is a huge problem.   

It also has some potential to impact the industry as a whole in these ways:

  • If residents, team members, prospects and family members get nervous or discouraged they will look at moving their employment or residency to other communities. This would be bad for Brookdale, deepening their troubles.  It could be good for competitors . . . except . . .

  • It may erode confidence in the senior living sector and increase the sense that it is just all about the money.

  • It may also make at least some capital providers nervous making it tougher for new development to happen . . . though I think this is unlikely at this point.

Fixing It — Any Easy Answer . . .

I have written about this before and my thinking still holds. But at the end of the day Brookdale needs to figure out how to make it fun and meaningful to work at Brookdale every single day for everyone from the top to the bottom. I am talking about making it a place where team members love coming to work, love interacting with seniors, prospect and families. As I talk to people who are working at Brookdale and with Brookdale that is not happening today across the enterprise.

Don’t get me wrong, this is a tough tough thing to do when a company is already under the gun, but it is possible. In fact, if you are old enough, you will remember when there were really just two rental car companies Hertz and Avis. Avis was always in the number #2 position and they took advantage of that position, with the slogan: “We try harder.”

This is a rallying opportunity for Andy Smith and his leadership team to say, “We are being pounded, we have some big challenges, but we are up to it. We are going to show that stock market, the industry, our residents and ourselves that we are unbelievably good.”   I have talked to a number of people who think it can’t be done because of their size.  It will be really tough to do, but I believe it can be done.  I am hoping it will happen.

I would even offer that the team member television commercials they are running is a terrific foundational platform from which to launch this effort.