888 Holdings could quit the US consumer sports betting market after launching a review of the business in response to weak profitability and significant competition.
The William Hill owner has begun a strategic review of its US business-to-consumer operations with a view to possibly selling them, a ‘controlled exit’ from the sector or ‘other possible strategic transactions’.
It entered the US just three years ago, joining a host of other British firms hoping to capitalise on the increasing legalisation of sports gambling across the country.
Possible departure: 888 Holdings could quit the American consumer sports betting market owing to weak profitability and significant competition
At the time, the Gibraltar-headquartered bookmaker struck a deal with Authentic Brands Group to exclusively use the Sports Illustrated brand, known for its eponymous magazine, in betting and casino games.
888 is active in four US states: SI Sportsbook operates across Michigan, Colorado, and Virginia; its SI Casino business is in Michigan, and its 888casino brand is in New Jersey.
However, the company said the US division’s gross profit margins are quite low due to the enormous operating costs involved, as well as ‘intense competition from well-capitalised incumbent participants’.
After concluding that this set-up will not sufficiently ‘optimise returns,’ it has decided to launch a review of the operations and end the partnership with Authentic Brands.
Per Widerström, chief executive of 888, said: ‘Since commencing my role as CEO, I have been focused on ensuring the group is set up to deliver strong value creation in the coming years.
‘In the US, the intensity of competition and requirement for scale means huge investment is required to reach profitability.’
He added that despite high demand for SI-branded services, ‘achieving sufficient scale in the US market to generate positive returns within an accelerated timeframe is unlikely’.
888, which also runs digital gambling firm Mr Green, has agreed to pay Authentic Brands $50million (£39.4million) in termination fees.
The group predicts the tie-up’s dissolution will save it around $6million to $7million (£4.7million to £5.5million) per annum in operating costs both this year and the next.
888 has not implemented a timeline for completing the review, but has told investors that all current B2B arrangements in the US will remain unaffected.
David Brohan, a gaming and leisure analyst at Goodbody, believes 888’s move is ‘not overly surprising given the challenges that sub-scale businesses have had in the US with FoxBet, Wynn Bet and Kindred all shutting down their US operations’.
888 Holdings shares were 2.4 per cent higher at 84.9p on late Wednesday morning, although they have plunged by about 83 per cent since their summer 2021 peak.
