Station parent Red Rock Resorts seeing ‘return to normal’

Executives at Station Casinos’ parent company told analysts they haven’t seen inflation or other macroeconomic pressures affecting demand at its resort-casinos during the firm’s third-quarter earnings call on Thursday.

Red Rock Resorts, which operates Green Valley Ranch Resort, Palace Station, Red Rock Resort and other locals-focused properties, reported flat year-over-year growth in net revenue and cash flow for the quarter ending Sept. 30, a sign that, they say, indicates seasonality is normalizing following the effects of the pandemic.

Red Rock Resorts reported net income of $95.5 million, $0.83 per share, on revenue of $414.4 million in the third quarter. That’s compared with a net income of $117.9 million, or $0.93 per share, on revenue of $414.8 million during the same quarter in 2021. Results from that quarter provided some of the best net revenue, adjusted cash flow and cash-flow margins in the company’s history, executives said at the time. During Thursday’s call, executives pointed to increased demand and stimulus money that was more abundant in that period.

For the company’s Las Vegas operations, net revenue in the third quarter was $411.6 million, down 0.3 percent year over year.

“While the quarter presented a return to normal seasonality, significant economic uncertainty and record inflation, our disciplined approach to running our business coupled with our unparalleled distribution scale resulted in near record high (cash flow and cash flow margin), even as we continue to execute on a long-term growth strategy and continue to return capital to our shareholders,” Chief Financial Officer Stephen Cootey said.

The assurance didn’t stop analysts from looking for details about inflation’s impact. Analysts asked whether the older demographic — often on a fixed income — had changed their visitation or spending patterns.

President Scott Kreeger said the 55-and-older customers were a stable segment of the business that’s fully returned. The company also expects the segment to grow, in part because of incoming residents.

Kreeger said wage inflation appears to be leveling off and the operations team was mitigating costs by scheduling labor according to demand. The company has been able to fully staff its verticals, he said.

Inflation’s biggest hit has been on the food and beverage segment, but the company uses what it calls dynamic pricing and menu engineering to offset the costs.

Analysts were also curious about how the Red Rock Resorts would react to an economic downturn.

“From a leverage perspective, we have a billion-dollar revolver with ample liquidity,” Cootey said. “We’re prepared to weather a storm if one was to come.”

Growth projects taking shape

Station executives also detailed its development pipeline. Earlier this month, it identified six swaths of land in the Las Vegas Valley that it plans to develop within about 10 years. Leadership confirmed it is completing the permit and zoning processes for land holdings in Inspirada, in the southeast, and Skye Canyon, in the northwest.

The $750 million Durango Resort project in the southwest valley is expected to be enclosed by February. Crews topped off the development in early October. Station leaders said they expect to finish on time for the fall 2023 opening and won’t break ground on a new project until Durango is up and running.

“Its early procurement strategy and 70 percent of costs under (a guaranteed maximum price contract) gives us confidence in that sentiment, with further surety from a window view of the development from our Las Vegas office that shows rapid progress,” CBRE analysts John DeCree and Max Marsh wrote in a Thursday note to investors. “With plenty of development sites in the trenches behind it, management reaffirmed that they will not launch any additional development projects until the Durango doors open in Fall 2023, which we can appreciate given the macroeconomic uncertainty.”

Leadership also said a new 21,000-square-foot Wildfire casino, on Fremont Street south of Charleston Boulevard that’s part of its smaller casino brand, is expected to open before the Super Bowl.

Red Rock Resorts shares, traded on the Nasdaq, closed up 0.03 percent on Thursday to $39.05.

McKenna Ross is a corps member with Report for America, a national service program that places journalists into local newsrooms. Contact her at mross@reviewjournal.com. Follow @mckenna_ross_ on Twitter.