Gaming companies decline as MGM Mirage fires more than 400 middle managers
biz.yahoo.com
NEW YORK (AP) -- Gaming companies' stocks slid Tuesday after MGM Mirage, the biggest casino operator on the Las Vegas Strip, fired more than 400 middle managers amid ongoing signs of weakness.
Shares of Las Vegas-based MGM dropped $1.42, or 2.7 percent, to $50.42 in afternoon trading. The stock hit a new 52-week low of $50.01 earlier in the session.
On Monday the gaming company informed more than 400 workers that their jobs would be terminated immediately. The move is expected to save $75 million annually.
Spokesman Alan Feldman said the decision came after the company saw weakness since August at its properties, which include Bellagio, MGM Grand, Mirage and Mandalay Bay.
The gaming sector, along with many other groups, has been squeezed of late as consumers curb spending due to the ongoing housing downturn, rising gas costs, diminishing credit and fears of a recession. Investors are coming to grips with the reality that casino operators, once thought resilient to economic downturns, are starting to feel pressure from current conditions.
Dennis Forst, a managing director with KeyBanc Capital Markets, said in a phone interview that other gaming operators, such as Harrah's Entertainment, Wynn Resorts Ltd. and Boyd Gaming Corp. are "probably all in the same boat" as MGM Mirage as the economic slowdown continues to take its toll.
Forst noted that the companies are starting to see less spending across many segments, including gaming, food and retail.
Forst has also noticed a drop in occupancy and room rates, predicting that Las Vegas will likely see a decline in first-quarter growth in revenue per available room.
Revenue per available room, also know as revpar, is a key gauge of a lodging company's performance. Many gaming operators also provide hotel rooms.
MGM's cutbacks were at the middle-level corporate and property management areas in all departments, from marketing to accounting. They affected employees in Michigan and Mississippi, though the majority were in Las Vegas.
"What's going on in Las Vegas is probably not just occurring in Las Vegas," Forst said.
Elsewhere in the sector, Las Vegas Sands Corp. fell $3.51, or 4.8 percent, to $70.50. The stock hit a new low of $69.16 earlier.
Wynn Resorts' stock shed 77 cents to $99.92, while shares of Boyd Gaming declined 54 cents, or 3 percent, to $17.39. The stock reached a fresh low of $17.32 earlier.
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