Wynn posts declines in Q1 and delays projects in response to tariffs

Wynn Resorts Reports Declines Amid Economic Uncertainty, Remains Focused on Strategic Growth

Wynn Resorts has emerged as the latest casino operator to address economic challenges, reporting an 8.6% year-on-year decrease in revenue to $1.7 billion in the first quarter of 2024. This decline aligns with broader trends within the gambling industry, as operators contend with evolving consumer behaviors and external economic pressures.

The company’s net income was significantly impacted, halving from $144.2 million last year to $72.7 million this quarter. Similarly, diluted earnings per share dropped from $1.30 in Q1 2024 to $0.69 this year. These figures reflect the ongoing volatility in the gaming sector, where high-end luxury brands are particularly susceptible to shifts in consumer sentiment.

Wynn’s revenue fell by $81.8 million across its various properties: Wynn Macau saw a decline of $51.0 million, followed by Wynn Palace at $11.3 million, Las Vegas operations at $8.6 million, and Encore Boston Harbor at $8.6 million compared to the first quarter of 2024.

Adjusted property EBITDAR for the quarter amounted to $532.9 million, a 17.5% decrease year-on-year. Each property experienced EBITDAR declines: Wynn Macau at $40.7 million, Wynn Palace at $40.5 million, Las Vegas operations at $22.9 million, and Encore Boston Harbor at $5.7 million.

Minimized Operational Impact

Like other Las Vegas operators, Wynn attributed these declines partly to challenging comparisons resulting from hosting the Super Bowl last year. Excluding the Super Bowl weekend from evaluations reveals several year-on-year growths in some areas.

CEO Craig Billings addressed the investor community, emphasizing the company’s confidence in navigating the current economic landscape. He stated, “We expect the direct impact from tariffs on operational expenses to be minimal and manageable, primarily influencing food and beverage costs, for which we are actively exploring alternative sourcing strategies.”

Despite potential shifts in travel patterns, Billings reassured stakeholders: “While we anticipate a decrease in travel, it does not significantly affect our operations. For now, everything remains on solid footing.” However, he acknowledged that capital expenditures (CapEx) are under review.

Restructuring $375 Million in Projects

Wynn announced a reassessment of the timing, scope, and sourcing of CapEx projects in Las Vegas, totaling approximately $375 million. Billings explained that while the company remains agile, committing to specific timelines would be premature given the current uncertainty.

The largest item under reconsideration is a renovation project for the Encore tower, which constitutes a significant portion of the $375 million budget. Billings clarified that these projects are not canceled but rather temporarily paused to adapt to evolving market conditions.

Despite these delays, Wynn successfully repurchased $200 million worth of its shares during the quarter and declared a $0.25 per share cash dividend, set for payment on May 30. As of March 31, Wynn maintained a robust cash position of $2.07 billion against total debt of $10.5 billion.

Progress on Al Marjan Development

Wynn also provided an update on its Al Marjan Island joint venture in the UAE, which Billings has consistently described as the most promising gaming development in the company’s portfolio. Currently, Wynn owns a 40% stake in the project, collaborating with Marjan and RAK Hospitality Holdings.

During Q1, Wynn invested $51.2 million, contributing to construction progress, which has now reached the 47th floor. Cumulatively, Wynn’s total investment in this development has reached $682.9 million. Addressing potential impacts from tariffs, Billings reaffirmed that the project remains on track for a 2027 opening, with materials already procured to mitigate additional costs.

New York Bid Status

The company’s bid for a casino license in New York was also a focal point during the call. Wynn’s $12 billion proposal for Hudson Yards, in collaboration with Related Companies and Oxford Properties Group, remains active amid a shifting competitive landscape following the withdrawal of initial applicants such as Hudson’s Bay Co and Las Vegas Sands.

Billings acknowledged the complexities of entering the New York market: “It’s a lucrative but multifaceted environment with numerous considerations.” He highlighted concerns regarding the potential legalization of iGaming in New York, which could pose challenges for traditional operators.

Wynn has modified its proposal, increasing its housing commitment from 1,500 units to 4,000, addressing one of the primary objections raised by community stakeholders. While hurdles remain before license allocation later this year, Billings assured analysts, “We are actively engaged in the process but will not make rash decisions to secure a license.”

Market Dynamics in Asia

Discussions during the earnings call also touched upon gaming opportunities in Japan and Thailand. Japan’s gaming landscape has diminished to a single project, MGM Osaka, while Thailand’s recent efforts towards a significant casino expansion faced delays for further legislative review.

Billings commented on Thailand’s legislative environment, suggesting there are elements of the proposed bill facing contention, particularly regarding stringent checks on patrons’ wealth and backgrounds. He also noted that, despite Japan’s potential for a new round of licensing opportunities, Wynn will only re-enter if market conditions are favorable. “We have ample development options, and Japan will only be a consideration if the framework aligns with our strategic goals,” he concluded.