US casino stocks drop due to inflation affecting customers

This year has been a poor one for casino stocks, and it looks like things are only going to get worse as inflation continues to put pressure on consumer expenditure. Certain authorities believe that this development is already taking place.

According to Goldman Sachs, there are indications that dwellers in the United States are beginning to reduce their expenditure. The industry references a decrease of 0.3 percent in consumer spending in May. Casino owners, who make their living off of gamblers’ spending, might not take kindly to this bit of data.

“Declining consumer spending does represent a threat to earnings for Consumer Discretionary stocks and the Autos industry group in particular,” according to the bank. 

“Used car prices have declined 6% since January, a sign that demand for vehicles overall may be faltering. The consensus expectation of 13% industry sales growth in 2023 appears Pollyannaish.”

One of the least progressive sectors this year is retail expenditure, which includes the industry where casino equities are found. A few prominent gaming stocks, such as MGM Resorts International (NYSE:MGM), Caesars Entertainment (NASDAQ:CZR), Las Vegas Sands (NYSE:LVS), Penn National Gaming, and Wynn Resorts (NASDAQ:WYNN), are included in the S&P 500 Consumer Discretionary Index (NASDAQ:PENN).

The figures for the Consumer Price Index (CPI) for May come in at an astounding 8.6 percent, which is the highest rate in 40 years. Also, with the second-quarter results season coming in July, experts predict that inflation remarks may grow in the casino market.

Several officials in the gambling industry are now flagging evidence of rising inflation being placed on patrons. For instance, Derek Stevens, founder and CEO of Circa, stated that his business has seen the impact of inflation over the past 10 weeks, as customers have reduced their purchases on drinks as well as slots and table games.

Circa, the Golden Gate, the D, and the Downtown Las Vegas Events Center are all properties that are owned by the same privately owned business.
The previous month, the CEO of Hard Rock International, Jim Allen, stated that rising gas prices might stimulate some casino guests to remain at home instead of traveling to the destination. As a result of surging market prices, the industry has been facing increased expenses when it relates to the renovation of establishments.

The Biden government is promoting a national petrol tax break, but legislators across both sides of the divide dismiss it as almost a ploy since rising gasoline prices might be a major burden on gambling companies. 

Since many of their customers travel to these same facilities, they are particularly susceptible to the rising price of petrol. This is because all of these customers do not remain through the night at those arenas. Despite this, Goldman Sachs believes there is potential for equities to make a comeback, despite the fact that families are selling equity stakes in response to increasing interest costs and falling asset prices.