Light & Wonder Bit by Tariff Bug, Shares Slide
Shares of Light & Wonder (NASDAQ: LNW) dropped sharply on Thursday after the slot machine producer cautioned it is experiencing the impacts of US tariffs.
During midday trading, the stock fell by 12.70% on higher-than-normal volume after the company informed investors that US trade tariffs could lead to increased expenses due to its importation of components from China and various Asian nations that the Trump Administration considers to engage in unfair trade practices.
"While we expect recent tariffs and trade policies to create incremental cost pressures in the near term, our realized and ongoing operational efficiency initiatives coupled with other measures are expected to mitigate these effects,” according to a statement.
Light & Wonder reaffirmed its forecast for 2025 adjusted earnings before interest, taxes, depreciation, and amortization at $1.4 billion, noting to investors that this guidance excludes any potential benefits from the charitable gaming assets it is acquiring from Grover Gaming, Inc. and G2 Gaming, Inc. for $850 million.
Light & Wonder Exposed to Tariff Pressures
Since “Liberation Day” — President Trump’s strategy to impose tariffs on various US trading partners — impacts have varied throughout the gaming sector. Land-based casino operators are increasingly worried that a prolonged trade conflict might lead to a recession, which would lower consumer spending. Sportsbook operators might encounter a comparable situation.
For Light & Wonder and gaming vendors, the tariff situation differs as their weaknesses stem from reliance on global supply chains. In the gaming device/slot machine sector, the assembly of devices differs from one manufacturer to another, but the majority of machines are constructed and prepared for operation in the US. Nevertheless, these companies continue to depend significantly on certain Asian nations — many of which are targets for tariffs — for obtaining parts.
Light & Wonder stated it is managing a dynamic scenario by seeking to diversify its supply chain, negotiate costs with suppliers, and manage expenses, among other initiatives.
“On the topic of our supply chain and the uncertainty of where tariffs will land, it’s important to note that we are a global company that operates in numerous product lines and business models, which are impacted to varying degrees by changing policies,” said CFO Oliver Chow on a conference call with analysts. “For the applicable parts of our business, we are largely in line with the industry in terms of the magnitude of impact.”
Light & Wonder Has Additional Options to Utilize
On Thursday, the White House revealed a new trade agreement with the UK, showing that Trump is prepared to collaborate with trading allies to settle issues. There is speculation that certain Southeast Asian nations, possibly among those providing components to slot manufacturers, are seeking discussions with the White House too.
Nevertheless, China casts a significant shadow.
The US and China — the two biggest economies globally — have not yet reached an agreement on a trade deal, and it is thought that both parties have not engaged in discussions regarding this. Light & Wonder possesses additional mitigation options available if the US/China situation deteriorates.
“We have been executing the longer-term plans to enhance our supply chain and operational efficiency. This ranges from onshoring of production, relocation of sourcing, and utilization of agreements such as the USMCA,” added Chow on the call.
