The rule used to be that you should buy "sin stocks" to hedge an economic downturn--the last thing to go when you're having hard times is the alcohol budget. (Though to be sure, I've noticed a decided shift away from mixed drinks towards PBR in the greater DC area). The casino business, however, is not feeling so hot:
MGM reported net income of $113.1 million, or 40 cents a share, down from $360.2 million, or $1.22 a share. The latest results include $19 million in insurance recoveries from the January Monte Carlo fire, while prior-year results included a gain of $264 million on property sales.
Net revenue slipped 2% to $1.9 billion.
The mean estimates of analysts polled by Thomson Reuters were for earnings of 42 cents a share on $1.89 billion in revenue.
Casino revenue decreased 4%, largely due to a 7% drop in table-games volume at the company's Las Vegas Strip resorts, while slots revenue dipped 2%, including a 10% drop on the Strip.
Revenue from the company's hotel rooms fell 6%. Revenue per available room at Strip properties -- which include Bellagio, MGM Grand and Mandalay Bay -- declined 5% as the average daily room rate slipped 4% and the occupancy rate declined to 97% from 98%. Food and beverage revenue rose 2%.
The casino industry is facing what insiders and analysts call its biggest challenge in years. Rising gasoline prices, the housing crisis and other economic troubles are prompting consumers to gamble less and to spend less at the luxury boutiques and restaurants where casinos draw most of their profits.