Why Caesars Entertainment is laying off employees
Caesars Entertainment Corporation (CZR) operates 50 casinos under the Caesars, Harrah’s, and Horseshoe brands and employs ~68,000 people worldwide. In Nevada, CZR employs more than 20,000 people.
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The company confirmed recently that it’s laying off less than 1% of its total workforce as a result of ongoing efforts to improve its financial situation. Reportedly, Gary Thompson, Director of Corporate Communications at CZR, said that the layoffs will affect fewer than 680 people across the entire company and its divisions. Layoffs will be spread out evenly among the company’s properties and corporate offices. “We are going through a series of cost-cutting measures and among those are a limited number of layoffs at our properties, enterprise-wide as well as corporate,” said Thompson.
CZR has been burdened with over $20 billion in debt since the leveraged buyout in 2008 by TPG Capital and Apollo Global Management LLC (APO). Caesars Entertainment Operating Company (or CEOC) has $18.4 billion in long-term debt. The company’s been negotiating with some of its creditors and bank lenders to relieve the financial pressure.
In 3Q14, CZR reported a $908 million loss. Companies Las Vegas Sands Corp. (LVS) and Wynn Resorts, Limited (WYNN) reported respective net profits of ~$672 million and $191 million, while MGM Resorts International (or MGM) reported net loss of $20 million for 3Q14.
The Consumer Discretionary Select Sector SPDR Fund (XLY) provides diversified exposure to these companies.
Key takeaways from the 3Q14 earnings call
Gary Loveman, Chairman, CEO and President at CZR said, “We are intensely focused on ensuring operating costs are aligned with the current environment to enhance CEC’s profitability. To that end, we are acting to reduce expenses and enhance EBITDA across the company through a variety of initiatives in operations, marketing and corporate expenses. We expect to produce an incremental $250 million to $300 million of EBITDA in 2015 as a result of these actions. The overwhelming majority of this increase will be driven by cost savings.”