Company Light & Wonder Experiences Setback Due to Tariff Issues, Stock Drops
Title: Bear Market Strikes for Slot Machine Manufacturer Amidst Tariff Concerns
Posted on: May 8, 2025, 12:44h.
Last updated on: May 8, 2025, 12:44h.
Author: Todd Shriber, etfgodfather
Categories: Financial, Gaming Business, Mergers and Acquisitions
Insight: Understanding how the tariff impacts on Light & Wonder can be aided by recognizing the company's attempts to mitigate costs through supply chain diversification, optimizing regional trade agreements, enhancing operational efficiency, and maintaining financial forecasts.
Investors took a bearish stance on Light & Wonder (NASDAQ: LNW) shares Thursday, with a 12.70% plunge following the company's warning that US tariffs could cause increased costs due to reliance on foreign sourcing. High trading volume marked the day's trading as investors expressed concern.
Light & Wonder, a slot machine manufacturer that imports essential components from China and various other Asian countries targeted by the Trump Administration for perceived unfair trade practices, voiced its anticipation of "incremental cost pressures" due to recent tariffs and trade policies.
Keeping a positive outlook, the company continues to project a 2025 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.4 billion. Notably, this forecast does not include potential benefits stemming from charitable gaming assets obtained from Grover Gaming, Inc., and G2 Gaming, Inc., for an $850 million sum.
Navigating Tariff Challenges
The gaming industry has been witnessing varied impacts from "Liberation Day," President Trump's tariff initiative. For land-based casino operators, there's a growing apprehension that an extended trade war could spark a recession and reduce consumer spending. Sportsbook operators face a similar predicament.
Light & Wonder and gaming suppliers encounter unique tariff scenarios due to exposure to global supply chains. In the slot machine industry, assembly methods vary between companies, although the majority of machines are prepared for use in the US. Despite this, firms remain heavily reliant on some Asian countries – several of which are tariff targets – for acquiring components.
Attempting to steer clear of the turmoil, Light & Wonder focuses on diversifying its supply chain, negotiating prices with suppliers, and controlling costs.
as CFO Oliver Chow remarked on a conference call with analysts, "Regarding our supply chain and the uncertainty surrounding where tariffs will land, it's crucial to note that we are a global company spanning numerous product lines and business models, each impacted differently by changing policies. For the relevant sections of our business, we align with the industry in terms of the magnitude of impact."
Leveraging Other Opportunities
The White House recently announced a new trade agreement with the UK, hinting at the possibility that Trump may seek to amicably address trade concerns with trading partners. Some Southeast Asian countries are rumored to be courting the White House in search of dialogues, including those that supply parts for slot makers.
However, the U.S. and China – the world's two largest economies – are yet to find common ground on a trade deal. Light & Wonder has alternative strategies to counter the potential worsening U.S./China relationship.
"We have been executing long-term plans to optimize our supply chain and operational efficiency," Chow continued. "This ranges from onshoring production, relocating sourcing, and capitalizing on agreements such as the USMCA."
The fluid tariff situation remains ongoing; however, Light & Wonder maintains a positive outlook, armed with a range of mitigation strategies.
- The bear market for Light & Wonder, a slot machine manufacturer, was influenced by concerns over increasing costs due to US tariffs and reliance on foreign sourcing, particularly from China and other Asian countries targeted by trade policies.
- The gaming industry, including land-based casino operators and sportsbook operators, are experiencing various impacts from the tariff initative introduced by President Trump, with fears of a potential recession and reduced consumer spending.
- In Navigating Tariff Challenges, Light & Wonder aims to mitigate costs through supply chain diversification, optimizing regional trade agreements like the USMCA, and enhancing operational efficiency, while maintaining financial forecasts.
- With the ever-changing tariff situation, Light & Wonder is seeking opportunities such as new trade agreements with countries like the UK and potential dialogues with Southeast Asian nations that supply parts for slot makers, in addition to long-term plans for onshoring production and capitalizing on existing agreements.
