Wynn Resorts Profit Falls Sharply

Wynn Resorts Ltd.'s second-quarter profit fell sharply as gambling revenue in China's semiautonomous territory of Macau continued a downward spiral that started last year.

Gambling revenue in China's only legal gambling spot fell 2.6% last year to $351.5 billion, the first annual decline since 2002, when China opened the former Portuguese colony to foreign casino operators. Macau has emerged as the world's gambling capital by revenue, attracting some of the sector's biggest names and gamblers.

For the first six months of the year, gambling revenue was down 37% from a year earlier period, according to figures from Macau's Gaming Inspection and Coordination Bureau, as Chinese President Xi Jinping's anticorruption clampdown scared off many of the mainland's high rollers.

In addition, the Chinese government—which rules Macau by the same "one country, two systems" arrangement as Hong Kong—tightened its grip on the territory, toughening visa rules for mainland Chinese visitors and increasing oversight of the debit cards many gamblers use. Macau authorities have since eased some of the visa restrictions for mainland visitors, signaling a policy shift that may help the sector rebound.

Wynn, which last quarter swung to a loss, dragged down by its Macau operations, and slashed its dividend to 50 cents from $1.50 a share, has remained bullish on the Macau market, forging ahead with its planned Wynn Palace in Cotai, a strip of reclaimed swampland that is become prime ground for the megadevelopments. Wynn's $4 billion hotel is now expected to open by March.

"It took us two years to plan it. It's taken four years to build it, a big, long project conceived by people with experience, and I think will be a powerful addition to the Macau market, whatever size that Macau market may be at the moment," Chief Executive Stephen Alan Wynn said in a conference call with analysts last quarter.

"We've never had a failure in this industry. We've never hit a real bump. We don't do layoffs," Mr. Wynn said in the call in April.

In addition to its majority stake in Wynn Macau, Las Vegas-based Wynn owns a resort in Las Vegas and is developing one in Everett, Mass., north of Boston.

For the quarter ended June 30, Wynn reported revenue from its Macau operations fell 35.8% to $617 million. VIP table games turnover, or the sum of all losing rolling chip wagers in the segment, dropped 41.1%, with Wynn's win as a percentage of turnover declining to 2.92% from 2.93%, still well within the company's projected range of 2.7% to 3%.

Average daily rates fell 3.9% to $321, while occupancy fell to 96.4%, compared with 97.5% in the previous quarter and 98.4% a year earlier.

Revenue per available room, a closely watched industry metric, fell 5.8% to $310.

Meanwhile, revenue from its Las Vegas operations fell 6.2% to $423.5 million. Room revenues edged up 0.9% as average daily rates rose 2.1% to $289 and revenue per available room improved 1.6% to $255. Occupancy was unchanged from the year-ago period at 88.4%.

Overall, Wynn reported a profit of $56.5 million, or 56 cents a share, down from $203.9 million, or $2 a share, a year earlier.

Excluding preopening costs and other items, profit fell to 74 cents a share from $2.11 a share a year earlier.

Net revenue fell 26% to $1.04 billion.

Analysts surveyed by Thomson Reuters expected 96 cents a share on $1.07 billion in revenue.

Total debt outstanding at the end of the quarter was $8.1 billion, Wynn said.

The results echo those of Las Vegas Sands Corp., the world's largest casino company by revenue, which last week reported a 30% drop in second-quarter profit, largely from the Macau downturn.

Shares, down 35% this year, edged up to $96.08 in late trading.

Write to Maria Armental at [e-mail]

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