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Benjamin Spillman

Profits plunge for Golden Nugget parent

12 May 2008

LAS VEGAS, Nevada -- Profits for Landry's Restaurants, parent company of the Golden Nugget casinos in Las Vegas and Laughlin, fell 93 percent in the first quarter and a company executive said to expect cash flow at the Nevada casinos to be down 5 percent to 8 percent for 2008.

Earnings were $1.5 million, or 10 cents per share, for the three months ended March 31, down from $22.1 million, or $1.01 per share, a year earlier.

Analysts polled by Thomson Financial expected earnings of 36 cents per share.

Increased interest expenses and the loss of some discontinued operations took the blame for the profit decline and weak occupancy, and lower room rates in Las Vegas are why Landry's executives expect the Nevada properties will report lower earnings before interest, taxes and depreciation.

The company is also about to start construction of a $160 million hotel tower at the Golden Nugget in Las Vegas, which Executive Vice President and Chief Financial Officer Rick Liem said will reduce the amount of available cash on hand.

During a conference call he said Landry's, which owns five restaurant chains, hotels, marinas and amusement parks as well as the Golden Nugget properties, would cope with the tough times by reducing costs.

"We are tightening our belts and focusing on our labor and cost controls," Liem said. "We believe the remainder of 2008 will be challenging for us and the rest of the industry."

Revenue for the entire company, based in Houston, rose 3.9 percent to $294.8 million from $283.6 million. During the conference call Liem defended the company's decision to proceed with the hotel tower at the Golden Nugget. He said the tower is a long-term project and shouldn't be stopped due to short-term business cycles.

"Once you start it, you pretty much need to finish it," he said.

The new tower is expected to open in late 2009 or early 2010.

Landry's stock fell 72 cents, or 4.57 percent, Friday to close at $15.02 on the New York Stock Exchange.