• The call plus


    The Call @ Hedgeye Plus

    Our favorite, high-conviction stock ideas and CEO Keith McCullough’s Macro overlay. Exclusively on Hedgeye TV.


I’m all for cutting costs. Higher margins are generally a good thing, but not always. I believe BYD’s decision to cut half of its matching 401k contributions is short sighted. Hopefully, it doesn’t speak to a larger strategy of sacrificing long-term opportunities to gain market share only to boost near-term EPS and cash flow. Let the guys without liquidity worry about that.

We’ve been vocal about the market share opportunities available to casino operators on the right side of the liquidity trade: BYD, PENN, and WYNN. Of the three, BYD seems to be in the best spot. As we wrote about in our 12/4/08 post, “IT’S THERE FOR THE TAKING”, BYD’s main competitor, Station Casinos, completely eliminated 401k matching contributions recently to ALL employees. Unhappy employees provide bad service. Since Station is close to bankruptcy, BYD also has other opportunities to offer a better product and steal market share, including a fresher slot floor.

BYD’s actions may seem inconsequential. After all, they are leaving the union alone and only cutting non-union matching 401k contributions by half. My argument is that it seems so unnecessary. Yes business is bad but BYD doesn’t need the EPS or the cash right now like ¾ of the industry and virtually all of its competition. I just hope BYD still capitalizes on the other opportunities to steal share including offering better maintained facilities and service, newer slots, and more marketing and promotions. That would put the focus on the long-term, where it belongs.