MGM Mirage loss wider than expected, stock drops
LOS ANGELES (Reuters) - MGM Mirage (MGM.N), posted a wider-than-expected fourth-quarter loss on Thursday as it slashed hotel room rates to attract gamblers, sending its shares spinning as much as 8.6 percent lower.
MGM, which opened the $8.5 billion CityCenter project on the Las Vegas Strip in December, posted a loss of 21 cents a share before one-time items, much worse than analysts' average forecast of a loss of 13 cents, according to Thomson Reuters I/B/E/S.
The company's Las Vegas revenue per available room or revPAR -- a combination of occupancy and rate -- fell 16 percent in the fourth quarter. The number has dropped 38 percent over the past two years, according to Goldman Sachs.
A room at the MGM Grand can now be had for $55 a night, including free Internet, gym access, nightclub entry and local phone calls.
Shares of rival Las Vegas Sands Corp (LVS.N), which operates the Venetian and Palazzo resorts on the Strip, dived more than 8 percent, while shares of Wynn Resorts Ltd (WYNN.O), led by casino mogul Steve Wynn, fell nearly 4 percent on worries that CityCenter's 6,000 rooms will further depress rates.
"We have continued concerns -- not so much on occupancy rates but more so on (hotel room) pricing," said Sterne, Agee & Leach analyst David Bain. "We don't see any change in pricing in the near term."
But MGM Chief Executive Jim Murren, speaking on a conference call with analysts and investors, said he expects Las Vegas room rates will turn higher no later than the third quarter of this year.
"There has been aggressive price discounting amongst many of our competitors as they are attempting to buy business," he said. "We haven't been doing that and we won't be doing that."
But Bain said he believes that companies such as MGM "are buying (market) share."
MGM, which is seeking to amend a $5.5 billion credit facility, reported a quarterly net loss of $433.9 million, or 98 cents per share, compared with a year-earlier net loss of $1.15 billion, or $4.15 per share.
The latest quarterly results included a pretax noncash impairment charge of 73 cents a share tied to undeveloped land holdings in Atlantic City, New Jersey.
The company said its casino revenue fell 7 percent.
Overall revenue, adjusted for promotional allowances, fell 11 percent to $1.45 billion, roughly in line with analysts' forecasts.
Analysts said profit margins at MGM were worse than expected as the company exhausted cost-cutting measures.
"MGM is sacrificing margins in order to keep their properties filled," Stifel Nicolaus analyst Steven Wieczynski said in a research note.
Executives at Las Vegas Sands, which reported late on Wednesday quarterly results that disappointed some investors, said on a conference call that Strip revPAR will likely drop again this year as operators compete for group business.
MGM's holdings also include gambling resorts in Mississippi and Michigan, and joint ventures in New Jersey and China's Macau. CityCenter is a 50-50 joint venture with Dubai World DBWLD.UL.
MGM said earlier this month it planned to sell its 50 percent stake in the Borgata resort in Atlantic City after New Jersey regulators raised questions about the suitability of Pansy Ho, MGM's joint venture partner in Macau, where the company plans to conduct an initial public offering later this year.
Shares of MGM were down 88 cents or 7.6 percent to $10.75 in afternoon trading on the New York Stock Exchange. Earlier they traded as low as $10.63. Shares of Las Vegas Sands were down $1.43 or 8.2 percent to $16.03, while Wynn was down $2.35 or 3.7 percent at $62.06.
(Reporting by Deena Beasley; Additional reporting by Karen Jacobs in Atlanta; editing by John Wallace and Gerald E. McCormick)
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