Shares of Wynn Resorts dove 15 percent Thursday after the CEO said casino operator is seeing a “slowdown” at its Macau location, especially from high rollers.
Though CEO Matthew Maddox said results were strong during China’s seven-day Golden Week holiday, attendance since then has been “choppy” during weekdays and “sporadic” on the weekends.
“So what we’ve seen post-Golden Week has been a slowdown. And we’ve seen it, in particular, in the premium end of the business, premium mass, premium slots, and VIP,” Maddox said during the company’s earnings call Wednesday. That likely bodes poorly for the resort giant, which derives the “vast majority” of its pretax earnings from its high-end offerings.
“What we’ve always focused on in our business is the premium end, and we always will because in Macau while that will be the first to retract in these times, it’s also the first to expand as you come out of these slowdowns,” Maddox added.
And while a contraction in Macau might be bad enough for the company’s bottom line, Maddox said later in the call that there seems to be a deceleration in the premium market globally, with softer performance in Singapore and Las Vegas as well.
“WYNN’s messaging was negative, which sent the shares down 10 percent in a heartbeat,” Nomura Instinet analyst Harry Curtis said in a note following Wynn’s earnings.
“Management tried to explain the worse-than-expected trend as a loss of confidence especially among premium players,” Curtis added. “We agree, but believe that some historic perspective should have been provided: that in markets with slowing economies, players keep visiting casinos and their ability to wager may not be impaired, but their spend/bet declines.”
Shares of Wynn were down more than 30 percent in 2018 even before the company’s third-quarter results.
Worries surrounding a decelerating Chinese economy and a move to curb Beijing’s debt-fueled growth have led to a steep decline in the country’s financial markets. Concerns lingered about whether a dip in economic growth could hit the gambling industry.
The Shanghai composite has slumped 22.8 percent during the last year, one of the worst performers of the closely followed global indexes. Some analysts have suggested that any improvement in trade relations between Beijing and Washington could help the Chinese economy and Wynn’s performance in Macau.