MGM CEO Jim Murren to step down, firm sees "volatility" due to coronavirus and baccarat weakness

MGM Resorts scrapped its earnings guidance for 2020 on account of fallout from the coronavirus outbreak and also announced that Chief Executive Officer Jim Murren will step down before his contract expires next year, after more than a decade leading the hotel and casino group, but no reasons were given.

Murren also plans to resign from his position as chairman, the company revealed on Wednesday afternoon, and will continue to serve in both roles until a successor is appointed. "Jim has led the company through growth, transforming it into a global entertainment company with a worldwide footprint and creating value for MGM Resorts shareholders,” board member Roland Hernandez said in a statement.

The company statement pointed to Murren's “early and strong” support for “diversity, inclusion, and sustainability in Las Vegas,” as well as the opening of two company properties in Macau and efforts to obtain a casino license in Osaka, Japan.

The leadership change comes at an uncertain period for the hospitality industry. In the past couple of weeks, the sector has begun grappling with the spread, from China, of coronavirus, which has dented tourism in Asia and around the world. Casinos in Macau have been closed since the government imposed a two-week shutdown on February 4 to limit the spread of the disease.

In its fourth-quarter earnings report published on Wednesday, MGM scrapped its 2020 guidance, citing “increased volatility in our business due to coronavirus as well as the market-wide weakness in Far East baccarat in Las Vegas”. Wynn Resorts said last week its baccarat volumes fell 30 per cent year-over-year in 2019.

On an earnings call with analysts, Murren said MGM remains confident the coronavirus outbreak will not have a long-term impact on its business. With casinos in Macau temporarily closed, MGM is incurring about $1.5 million of operating expenses per day across both of its properties in the city.

MGM reported fourth-quarter net income of $2 billion, which included a $2.7 billion gain related to the sale of Bellagio real estate, versus a loss of $23 million in the same period a year earlier. Revenue rose 4 percent to $3.2 billion, matching analysts’ forecast. Adjusted earnings swung to a profit of 8 cents a share from a prior-year loss of 3 cents. Analysts were looking for adjusted earnings of 26 cents a share.

Consolidated net revenues increased 10%  to $12.9 billion in full-year 2019, compared to $11.8 billion in 2018, with net income attributable to MGM Resorts of $2 billion in 2019, including the $2.7 billion gain mentioned above, from $467 million in the prior year.

Publicly traded MGM Resorts has some 80,000 employees at 29 casinos and hotels. Company stock closed Wednesday at $33.66, up 95 cents. Share prices fell in after-hours trading following Murren's announcement. The company is the largest employer in Nevada, with several Las Vegas Strip properties.

MGM said its board has formed an independent committee to run a search process for a new CEO. The committee is working with a search firm to identify candidates. “We have a solid leadership team in place, and I am confident that they will work with my successor to continue the company’s trajectory of growth and expansion,” Murren said in the statement.

Murren first joined MGM in 1998 and became its chairman and chief executive in 2008. During his tenure at its helm, the company pursued an expansion in Asia with the launch of two new properties in Macau, as it sought to diversify its portfolio beyond Las Vegas.

In early 2019, MGM announced a plan — dubbed “MGM 2020” — to cut costs and boost annualized adjusted Ebitda by $300m by the end of 2021. MGM said in October it struck two deals, valued at about $5 billion, to divest real estate assets in the US casino hub of Las Vegas. It agreed to sell Circus Circus to an affiliate of Treasure Island tycoon Phil Ruffin, while Blackstone led a deal to buy the real estate of the Bellagio and lease it back to MGM. Last month, a joint venture including Blackstone agreed to acquire the real estate assets of the MGM Grand and Mandalay Bay resorts on the Las Vegas Strip.

Under Murren, MGM also played a role in bringing professional sports to Las Vegas. The company co-owns T-Mobile Arena, the venue built in 2016 that became home to the National Hockey League’s Golden Knights, and is the owner of the Las Vegas Aces, a Women’s National Basketball Association franchise. Last month, the company reached a deal with the National Football League’s Raiders, who have relocated to Las Vegas from Oakland, to make MGM the team’s gaming sponsor.