Canterbury can't bet on revenue in a recession

Jennifer Simonson, Star Tribune

The start of the $50,000 Claiming Crown Iron Horse race Aug. 2 at Canterbury Park. The Shakopee track just laid off 60 people.

Wagering on horse races is off around the country. The Shakopee track has laid off 10 percent of its workforce.

By STEVE ALEXANDER, Star Tribune

Last update: October 27, 2008 - 11:00 PM

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No matter how bad the economy gets, conventional wisdom says, people keep gambling.

Not this time around.

Canterbury Park, the Shakopee racetrack that features betting on live horse races, simulcast races from other racetracks and 24-hour-a-day card games, has laid off 60 people, or 10 percent of its workforce. About one-third of those jobs are part-time, about the same percentage as the racetrack's workforce.

"These [wagering] kinds of revenues were long considered to be recession-proof, but they are declining around the country," said Randy Sampson, chief executive of parent company Canterbury Park Holding Corp. "I don't have an explanation."

The firm's thinly traded stock closed at $6.50 a share Monday, the first day of trading after the announcement of the layoffs late Friday. It was down 10 cents, or less than 2 percent, on a volume of 1,990 shares, less than half the daily average. About 4 million shares are outstanding.

Racing enthusiasts and card players are spending less per person, Sampson said. In response to a slowdown in betting, Canterbury has run fewer races this year but has not cut back on racing payouts out of concern that doing so could hurt the business further, he said.

The layoffs are expected to save $1 million in payroll expenses in 2009, while a decision to suspend the management bonus plan and contributions to the employee stock ownership plan are expected to save $500,000 in 2008, Sampson said.

Canterbury Park Holding hasn't yet disclosed third-quarter earnings, but they are expected to reflect the economic downturn, Sampson said. The company lost $35,000 on revenue of $13.8 million in the second quarter, ended in June, after earning $499,000 in the first quarter on revenue of $10.2 million.

However, the second-quarter results also reflect the seasonality of the horse track business, he said. Live horse racing in the spring and summer sharply raises expenses, and the increased revenue was not enough to make up for it, he said.

"We do better in the winter than in the summer," he said.

Other factors?

While the economy is the biggest factor in Canterbury's decline, Sampson also suspects other reasons, although he admits he has no hard evidence. Other suspect causes include the competitive impact of a new racetrack, Running Aces Harness Park near Forest Lake, and last year's state smoking ban, which he believes has driven some gamblers to Indian casinos (which aren't governed by Minnesota law) or home gambling on the Internet via Caribbean-based casinos. He also cites bad weather at some other racetracks that interfered with races they simulcast to Canterbury.

Canterbury gets about 55 percent of its revenue from card games, 25 percent from betting on simulcast races at other tracks, 10 percent from betting on live horse races at Canterbury and 10 percent from food and beverage sales, Sampson said.

"I believe there will be a pickup in business when the economy starts to improve, but I'm not in any position to make any guess on when that would be," Sampson said. "We are prepared for it to be a while."

Steve Alexander • 612-673-4553

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