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LAS VEGAS (AP) — Casino giant MGM Resorts International has a cost-cutting and revenue-boosting plan it says will earn it an extra $300 million annually before taxes and other costs by 2017, with most centering on the Las Vegas Strip.
The plan involves, in part, buying food direct from farmers and ranchers, winnowing the several different types of towels and linens in its multiple resorts, pricing its shows and meals based on demand and getting advice from other industries on streamlining labor costs.
MGM Resorts CEO Jim Murren said during a Tuesday conference call to discuss MGM's better-than-anticipated second-quarter results that the profit growth plan it's been working on for nearly a year is aimed at redesigning the entire company, describing it as a "seminal internal transformation."
In the case of the towels, for example, those found in the Bellagio were different than the ones in Aria or in the MGM Grand suites, despite all being luxury hotel brands.
"There's no reason for that," Murren said. Having one towel type for each of its three levels of hotels will cut inventory and laundry costs, he said.
As for employees, he said there's no expectation the full-time workforce of 46,000 people that's already down 16 percent since 2007 will be cut any further.
"It's not sustainable. It's not the right thing to do for company morale," he said.
Instead, the company is drilling into employee roles and shifting people into 1,000 open internal positions where they're more needed. Rather than having front desk trainers at each of the company's properties, there might be a single training program, he said.
Murren said the extra earnings will be used to pay down the company's debt. The company had $12.5 billion in long-term debt as of June 30.
MGM Resorts owns nine casino-resorts on the Las Vegas Strip and a 51 percent stake in the CityCenter complex of luxury hotels, casinos and shopping as well as regional properties including two under development in Maryland and Massachusetts.
As expected, its affiliated MGM Macau casino-resort business in China suffered with revenue dropping 33 percent, as a once feverish gambling atmosphere there has slowed with a government corruption crackdown.
MGM Resort's profit dropped 11.4 percent compared to the same three months a year ago.
The casino operator earned $97.5 million, or 17 cents per share, for the three months ended June 30. That compares with $110 million, or 22 cents per share, a year ago. The reason was a much smaller income tax benefit this year, $3.8 million, versus $51.9 million a year earlier.
Still, it beat Wall Street expectations easily, and shares took off Tuesday.
Analysts predicted earnings of 11 cents per share, according to a Factset survey.
Revenue, minus promotional allowances, fell to $2.39 billion from $2.58 billion. But this managed to top the $2.37 billion Wall Street forecast.
MGM Resort's shares closed Tuesday up $1.90, or almost 10 percent, at $21.75.
Murren swatted down rumors that The Mirage casino-resort was for sale.
Leading up to the call, analysts speculated that the company was thinking of selling its volcano-flanked property that casino mogul Steve Wynn debuted in 1989.
Murren said he's obligated to meet with interested buyers, and has, but nothing has turned into anything resembling a deal.
"We have not been engaged in any formal discussions on the disposition of The Mirage, at all," he said after Tuesday's call.
The company has been researching possible structural changes that could make it more valuable to Wall Street investors than it's been perceived, including a real estate investment trust structure with one company owning the real estate assets and another operating company leasing them.
Murren said the company's direction would be clearer by the end of the year.
Until then, Murren said it isn't as easy as deciding to buy or sell a property. They need to be looked at in terms of how they'd fit in a new corporate structure, he said.
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