|By Margarita Bauza, Detroit Free
PressMcClatchy-Tribune Regional News
May 7, 2008 - MGM Mirage, owner of MGM Grand Detroit, said first-quarter profit fell, weighed down by expenses of opening new casinos such as the one in Detroit and lost revenue as U.S. gamblers stayed away because of the slowing economy.
Net income dropped to $118.3 million, or 40 cents a share, from $168.2 million, or 57 cents, the Las Vegas-based company said Tuesday. Revenue fell to $1.88 billion.
The company said operating income fell 23% for the quarter to $341 million as a result of decreased revenues, and the increased costs of operating the larger MGM Grand Detroit.
MGM Mirage officials also said the company's profit was hurt by a Jan. 25 fire at the Monte Carlo Casino in Las Vegas, which was closed through mid-February.
MGM Grand Detroit revenues were $144 million in the first quarter, up from $116 million in the same period in 2007. At the same time, the property's earnings stayed the same -- $34 million -- bogged down by higher operating costs.
The company said it has high hopes for Detroit, despite weaker-than-expected results from the permanent casino and hotel that opened in October.
Detroit has earned rave reviews and is "an investment that will provide excellent long-term results," MGM Mirage CEO Terry Lanni said during a Tuesday call with analysts.
MGM Mirage laid off 100 employees in March and April in Detroit, where it now employs about 3,000 people.
"When we open up a property, we open it up with overstaffing and spending considerably on operations as we position ourselves," said MGM Mirage CFO Daniel D'Arrigo.
"We went from an interim facility with limited food and beverage, no convention operations to a full-scale operation. We've spent a lot of money on making the right impression. The market share has grown substantially.
"We're working to improve efficiencies," he added. "The economy is tough in the Midwest. We take that into account."
Executives said they expect the casino will continue to draw business this year.
"They're expected to ramp up and I have no reason to doubt that," said Larry Klatzkin, managing director of Jefferies &. Co., which covers the gaming industry.
Company-wide, casino revenues for MGM Mirage decreased 3% mainly because of a decrease in table games volume of 4%. Slots revenue decreased 1% compared with the prior year. Slots revenue at MGM Grand Detroit increased 9% as a result of increased capacity in the permanent casino.
Contact MARGARITA BAUZA at 313-222-6823 or firstname.lastname@example.org.
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