Until recently, Las Vegas was one of the fastest growing cities in the US, and Starbucks (SBUX) one of the fastest growing food chains. Now their decline coincides as well.
Las Vegas had no Starbucks shops before 1995. It now has more than 150. It also now has the highest number of SBUX store closings with 16, about 10% of its total. By contrast, Los Angeles is losing only 2 of roughly 56 Starbucks and New York will lose 10 of over 200 cafes.
As Starbucks battens down the hatches, Vegas is suffering, too (Bloomberg):
- Las Vegas hotel occupancy fell 2 per cent in the five months through May from a year ago.
- In Clark County, where Las Vegas is located, gambling revenue dropped 16 per cent in May, its fifth straight monthly decline, and was down 6.4 per cent for the year said July 10.
- Las Vegas home prices peaked in August 2006 and have fallen 29 per cent since, according to the S&P/Case-Shiller Home Price Index.
- Nevada unemployment, lower than the nation’s for 60 straight months starting in April 2002, has been higher than the rest of the country’s since May 2007. The state’s jobless rate was 6.4 per cent in June, compared with 5.5 per cent in the U.S.
So the latte indicator has spoken, and its not good. What does this mean for the battered casino stocks? MGM Mirage (MGM) has already dropped 65% this year, Las Vegas Sands (LVS) has tumbled 57% and Wynn Resorts (WYNN) is off 12%. So maybe the delayed indicator of a Starbucks pullback is a sign of the bottom, not of things to come.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.