Las Vegas Sun

March 28, 2024

Wynn, Boyd suffer fourth quarter losses

Two Las Vegas gaming giants, one a global player, the other a key company in the locals market, suffered similar fourth-quarter fates when they reported earnings: operating losses and lower net revenue compared with the same period a year ago.

Wynn Resorts Ltd., operator of Wynn Las Vegas and Encore on the Strip, reported a net loss of $159.6 million, $1.49 a share, on revenue of $614.3 million for the quarter ended Dec. 31. That compared with net earnings of $65.5 million, 58 cents a share, on revenue of $711.3 million in the fourth quarter of 2007.

Boyd Gaming, the dominant player in downtown Las Vegas and a major player in the locals market with its Coast Casinos group and Boulder strip’s Sam’s Town, reported a loss of $220.8 million, $2.51 a share, on revenue of $422.6 million. In the fourth quarter of 2007, the company reported earnings of $31 million, 35 cents a share, on revenue of $478.6 million.

Boyd, which made headlines last month by announcing a proposal to buy most of the assets of Station Casinos for $950 million, blamed the fourth-quarter loss on the sour economy and on noncash, pretax impairment charges of $290.2 million to write down the value of underperforming operations. Station rejected the offer March 3.

“Our fourth-quarter results reflect the ongoing recessionary environment,” said Keith Smith, chief executive of Boyd Gaming, in a statement issued in conjunction with the earnings announcement. “With consumer confidence at all-time lows, people continue to scale back on discretionary spending. We will continue to manage our business to ensure we are operating efficiently and competitively during these challenging times.

“The strength of our geographically diversified portfolio, our balance sheet and our experienced management team, have and will continue to serve us well as we navigate our way through this economic downturn,” Smith said.

Each of Boyd’s four divisions shared in the decline in revenue. Net revenue for its Las Vegas locals properties — Sam’s Town, Orleans, Gold Coast and Suncoast — was calculated at $176.8 million compared with $214.4 million in fourth quarter 2007. In downtown Las Vegas, where Boyd operates the California, Fremont and Main Street Station, revenue fell during the same period to $60.8 million from $66.9 million.

Boyd said reduced air capacity between Honolulu and Las Vegas — flights that were restored in February by Hawaiian Airlines — were partially responsible for the decline, but it wasn’t as severe as it could have been thanks to improved results in Boyd’s charter operations.

Similar declines occurred at Boyd’s riverboat properties in the Midwest and South and in its 50 percent share of Borgata in Atlantic City.

Analysts said Boyd’s performance was below expectations. In a note to investors, Las Vegas-based Deutsche Bank analyst Bill Lerner said “these results signal a worsening of the Las Vegas locals trends in the fourth quarter.”

“We think results at Boyd’s Sam’s Town also continue to be negatively impacted by the privately owned (Eastside) Cannery casino, which opened Aug. 28 on the Boulder strip,” Lerner added.

Boyd’s Strip presence also is in limbo with last summer’s shutdown of the construction on Echelon on land formerly occupied by the Stardust.

In its conference call on fourth-quarter earnings, Boyd offered no additional information on its interest in acquiring Station or on the status of Echelon. Smith said the company would continue to do what it said it would on Echelon when construction was discontinued — evaluate the market and come up with a plan of action this year.

That’s a stressful point to Echelon’s neighbor across the street, Encore, whose chief executive, Steve Wynn, has been unhappy with the status of the project. Encore did not significantly affect Wynn earnings since it opened a little more than a week before the end of the quarter.

Wynn cited a decline in casino, food and beverage, retail and entertainment components in Las Vegas for the poor performance.

“Starting in October, we experienced a dramatic deceleration in business from the casino and nongaming departments,” the company said in a release. “The Thanksgiving to Christmas period has traditionally been one of the weakest times of the year in Las Vegas, but the fourth quarter of 2008 was substantially worse than during the prior year as consumers chose to stay at home and significantly reduced their leisure budgets. In addition, the 15.3 percent table games hold was the lowest experienced by our Las Vegas properties since Wynn Las Vegas’ opening in April 2005.”

But Wynn Macau fared better with net revenue at $392.2 million compared with $387.4 million in fourth quarter 2007. In addition, Wynn Macau’s average daily room rate climbed from $256 to $273 since the fourth quarter of 2007.

Wynn management has implemented cost-cutting measures, cutting employee salaries 10 percent to 15 percent, reducing hours for some workers and eliminating bonuses and matched contributions to employee retirement accounts.

Results were below analysts’ expectations.

“While results were below expectations for both geographies, Las Vegas’ weakness was exacerbated by low hold which removed about $21 million to $27 million from cash flow,” Robin Farley, an analyst with UBS Investment Research, New York, said in a note to investors.

“Management was candid about not only the difficult outlook, but also their difficulty in yield managing through an unprecedented environment,” she said.

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