Harrah's Swings to Loss
By MATT JARZEMSKY, WSJ.com
Harrah's Entertainment Inc. swung to a second-quarter loss as consumers' reduced appetite for casino visits continued to take a toll on results.
The gambling industry has been hammered by the economic downturn, as consumers trim discretionary travel and entertainment spending. The Las Vegas strip, where Harrah's has a notable presence, has been particularly weak.
But the company selectively increased marketing investments and labor costs during the period, anticipating increased demand, as revenue declines are moderating in nearly all its markets, Harrah's Chairman and Chief Executive Gary Loveman said.
The company swung to a $274 million loss from a year-earlier profit of $2.29 billion, which included a $4.3 billion pretax gain from debt extinguishment.
It posted a $300,000 loss from operations for the second quarter, compared with prior-year earnings of $6.3 million. Revenue slid just 2.2% to $2.22 billion, helped by the company's February acquisition of the Planet Hollywood resort. The purchase was made as Harrah's bought the property's distressed debt at a discount.
The casino is a separate entity from the restaurant chain, which has locations around the world.
Harrah's was taken private in 2008 by private-equity firms TPG Inc. and Apollo Management LP in a leveraged buyout. It lightened its debt load with a cash infusion from the firms and hedge-fund manager Paulson & Co. in June.
