Earnings by Ray Poirier | Quarterly reports from two major Strip players and a locals giant failed to encourage much buying in gaming companies last week.
Losses were reported by Las Vegas Sands Corp. (LVS) and Boyd Gaming Corp. (BYD) while Wynn Resorts Ltd. (WYNN) saw its earnings decline by some 20%.
The problems at LVS stemmed from its gaming operations in Macau. The company was reluctant to follow the path of more successful operators who engaged Asian gambling junket companies to supply them with high-roller players.
One of the problems the casinos face with the junket operators is that the junket operators can dictate just how much of the gambling spoils have to be turned over to them, thus limiting the profit to the casino owners.
However, Sheldon Adelson, chairman, CEO and largest single stockholder in Las Vegas Sands, vowed to do everything necessary to lure back the gamblers the company will need to make their Macau operation successful.
For the quarter that ended on March 31, LVS reported revenues of $1.08 billion, a 72% increase over last year’s $628.2 million but it incurred a loss of $11.2 million or $0.03 per share compared to last year’s profit of $90.9 million or $0.26 per share.
During a conference call, William Weidner, president and COO, admitted that the company "paid a price" for an earlier decision to increase inventory rather than conventioneers in 2008. The company which owns The Venetian Resort & Casino on the Las Vegas Strip and the adjoining $1.9 billion Palazzo resort, opened the latter in January. But tourist traffic fell during the first quarter resulting in a "lower occupancy than we planned," Weidner said.
Wynn Resorts felt effects of weakening economy
Like its Strip neighbor Las Vegas Sands, Wynn Resorts Ltd. (WYNN) also felt the effects of a weakening economy but still managed to earn $46.7 million or $0.41 per share. During the first quarter last year, the company had earnings of $58.4 million or $0.54 per share.
Steve Wynn, chairman and CEO, acknowledge the impact of the slowing economy by saying, "This is about the sixth time I’ve been through slowdowns in Las Vegas in my 40-year career."
However, he said a temporary slowdown will not interfere with the company’s operational plans. "This is not a company that gives a damn about short-term markets," he emphasized.
Wynn said he will open the $2.25 billion Encore in December regardless of the economic conditions. "If the market is soft in December," he said, "I don’t care."
He also advised that despite the actions of competing casino operations who have been reducing operating costs by laying off personnel he would not be a party to worker layoffs. He said the employees at Wynn Resort were the company’s strongest asset.
The first quarter revenues reached $778.7 million, easily topping last year’s $688.1 million. And, at the Las Vegas property, Wynn noted, the gross non-casino revenue was up 3.3% to $201.6 million.
In a speech in California, Wynn said he felt that the country was in a recession and "we’re certainly feeling a slowdown in Las Vegas. We tend to feel it less because we’re sort of a niche operator, but I am noticing it. We’re never immune, we are buffered."
He said he expected his international clientele, mainly from Europe, to help the casinos on the Las Vegas Strip.
Boyd Gaming decided to postpone slot machines
During the first quarter of fiscal 2007, Boyd Gaming Corp. (BYD) reported a pre-tax gain of $285 million on the sale of the Barbary Coast a Las Vegas Strip property. That pushed the quarterly earnings to $2.46 per share.
Things were different in fiscal 2008. The first quarter showed an $84 million impairment charge against the company’s purchase of Dania Jai-Alai in Florida. The company said it had decided to postpone plans to add slot machines to the facility, thus the write-down. As a result, the first quarter ended with a loss of $32.6 million or $0.37 per share.
However, adjusted earnings for the period were $29.6 million or $0.34 per share compared to $44 million or $0.50 per share in the previous year.
The company said it experienced a decline of 5.6% in its locals Las Vegas market and a 13.1% decline in its Midwest and South properties
Business in Atlantic City at its Borgata Hotel Casino & Spa was flat, the company reported.
For the second quarter, the company said it expects earnings from continuing operations to be between $0.28 and $0.33 per share.