Beaten again by Macau, Wynn Resorts profits drop 72 percent in second quarter

The watery entrance of Wynn Macau.

Wynn Resorts, the company behind the Wynn and Encore on the Strip as well as property in Macau, reported its second-quarter earnings today.

Company: Wynn Resorts Ltd. (NASDAQ: WYNN)

Revenue: $1.04 billion, down 26 percent from the second quarter of 2014.

Earnings: $56.5 million, down 72 percent from the same time last year.

Earnings per share: 56 cents, compared with $2 last year.

What it means: The company’s revenue drop came in large part from the continuing market struggles in Macau, which was responsible for nearly 60 percent of the company’s revenue this quarter. China’s crackdown on corruption has led to less high-end gambling and contributed to more than a year of monthly gaming revenue declines there.

Revenue from Wynn’s Macau operations was $617 million, down 35.8 percent compared with the second quarter of 2014. CEO Steve Wynn said on a conference call that Macau “continues to be more of a question than a certainty as we head through 2015” and toward the opening of its new $4.1 billion Macau resort, Wynn Palace.

That resort is on track to open in March, Wynn said. Lest anyone question whether the big project can succeed in such a struggling market, Wynn emphasized that the Palace was not designed under the assumption that Macau would boom at the same rate forever.

“We designed the hotel, as I say, in anticipation of just such an environment — perhaps not quite as critical as the one we’re facing — but we said we had to be clearly, clearly a superior choice competitively,” Wynn said on the conference call.

The company’s performance in Las Vegas was also not as strong as it was last year, with net revenue declining 6.2 percent to $423.5 million. Wynn said his Las Vegas operations were experiencing “a comfortable business,” but he wasn’t exactly over the moon about it.

“It’s not an aggressive growth by any means, but we are enjoying noncasino revenue that is acceptable,” he said.

Noncasino revenue in Las Vegas rose 5.3 percent year over year, before considering promotional allowances, the company said. Meanwhile, gaming revenue dropped 26.2 percent from 2014.

Wynn said on the conference call that his company was the “operator of choice for the international baccarat business” and therefore particularly harmed due to changes in that market. Without some Asian players this year — presumably related to the struggles in Macau — baccarat did not perform as well in his Las Vegas casinos, he said.

Asked later whether he remained skeptical about the economic situation in Las Vegas, Wynn said casinos often fluctuate but “our base business tends to be pretty steady.” Wynn revealed that he’d recently made improvements to the casino floor, such as putting specialty games in a more prime location, that have boded well for his Las Vegas gaming operations.

Wynn Resorts also plans to construct a casino in Everett, Mass., near Boston. But a group of lawsuits challenging Massachusetts gaming regulators’ decision to let Wynn Resorts build that casino have complicated the future of the project.

“We’re hopeful that in Massachusetts, that at some point in the near future, we’ll be treated with a little softer hand, considering that we’re the largest single private investment in the history of the state,” Wynn said. “We’ve experienced a little bit of buffeting politically, and we’re sort of plowing ahead anyway.”

The company said today that it approved a cash dividend of 50 cents per common share. Its total debt was $8.1 billion at the end of the quarter.

Tags: Business
Gaming

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