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Golden Nugget owner reports first-quarter profit

Houston-based Landry’s Restaurants, which owns the Golden Nugget casinos, said Monday it turned a profit in the first quarter on the restaurant operations the company didn’t sell in the past year.

Results from the company’s Golden Nuggets in downtown Las Vegas and Laughlin helped push Landry’s to a net income of $14.6 million, or 87 cents per share, in the quarter ended March 31. A year ago, net income on operations it still owns was $7.4 million, or 37 cents per share.

The Golden Nugget casinos reported revenues of $59.5 million in the quarter, compared with $56 million in the same quarter a year ago. Landry’s restaurant brands, which include Landry’s Seafood House, Chart House, Rainforest Cafe and Saltgrass Steak House, reported revenues of $199.2 million, down 0.5 percent from $200.3 million last year.

The downtown Golden Nugget opened a new 500-room hotel expansion in November and analysts said it appeared the property was picking up a larger share of the market.

“The recent (capital expenditures) spent … in downtown … was the primary driver of growth during the quarter,” Union Gaming Group Principal Bill Lerner told investors.

Lerner said the Golden Nugget saw revenues decline 8 percent in the fourth quarter of 2009 and 14 percent for the year.

He noted that Boyd Gaming Corp., which operates three casinos downtown, said last week that its revenues in that market during the first quarter were off almost 8 percent.

“Through the first two months of 2010, the Nevada Gaming Control Board has reported that downtown Las Vegas gaming revenues have declined 4.1 percent, suggesting that the Golden Nugget is a share-taker in this market,” Lerner said.

Landry’s Chief Financial Officer Rick Liem said the restaurant division’s operating margins suffered from higher marketing and promotional spending during the quarter despite sales starting to improve from a year ago. The company’s casino division, he said, helped offset those declines.

“Results from the gaming operations reflect higher traffic from the new tower offset by continued competitive pressure, particularly on room rates,” Liem said.

KDP Asset Management gaming analyst Barbara Cappaert told investors Landry’s restaurant side will continue to be hurt by higher food costs, particularly seafood. It might be difficult to offset those costs with higher menu prices, she said.

Cappaert also believes the Golden Nugget will have to spend more on promotions because of the new hotel tower and other changes to the downtown casino.

“We want to hear from management its own thoughts on demand and cost pressures,” Cappaert said. “We are not sure that the higher-end dining demand is fully recovered.”

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

 

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