Wynn slumps as high rollers stay away in Macau
- Wynn Resorts shares slumped 5% after missing on revenue and giving weak guidance.
- The casino operator cited weakness in VIP gaming, and specifically baccarat.
- Watch Wynn Resorts trade live.
Wynn Resorts was hit by a sharp slowdown in its VIP segment, with overall table turnover (money in play) plunging 18% from a year ago. The casino operator suggested the weakness was likely to continue going forward.
Revenues for the first quarter came in at $1.65 billion, slightly below the $1.67 billion that analysts surveyed by Bloomberg were expecting. Adjusted earnings per share came in at $1.61, beating the $1.58 that was anticipated.Wynn's Macau operations were particularly hit hard as overall revenue slid 16% and VIP turnover plunged 40%. Wynn's performance was further evidence that an economic slowdown in China may be having an impact, particularly among the high rollers that drive much of the industry's profitability.
The Financial Times reported that January's 5% year-over-year drop represented the first monthly decline for Macau gaming revenue in over two years.
The disappointing results comes alongside a host of indicators showing signs the Chinese economy is losing steam. In March, China cut its official growth target for 2019 to a range between 6% and 6.5%, its lowest since 1990.
In addition, markets have been particularly volatile amid mounting concerns surrounding the ongoing trade dispute between the US and China.
On Friday, President Donald Trump made good on his threat to raise tariffs on $200 billion worth of Chinese goods to 25% from 10%. The president also indicated he would place tariffs on an additional $325 billion of goods should the talks not reach a satisfactory resolution.
Gaming stocks are particularly sensitive to economic weakness in China as much of the high-roller category is driven by Chinese tourism. Wynn reported the primary driver of revenue declines was weakness in baccarat, a well-known choice for high rollers from Asia. Still management indicated it believed the declines were temporary."There's been a lot of discussion about new jurisdictions opening up in Asia and around the world and that may be baccarat's best days are behind it in Las Vegas or that Macau can continue to see some cannibalization. And what I would say to that is I totally disagree," said CEO Matt Maddox on the earnings call.
"We've experienced gaming expansion in the United States for decades. And we're experiencing it now in Asia."
The company is also recovering from the departure of its founder and former CEO Steve Wynn, who resigned in 2018 amid reports of sexual misconduct. In 2018, Wynn fully divested his $2 billion stake in the company.
Wynn Resorts is up 32% year to date.