LAS VEGAS (KLAS) — Red Rock Resorts has seen the new normal, and it’s not as scary as it used to be.
Profits that are higher than last year — along with profit margins that are the highest in company history — will calm your fears, even if those fears are far more real than ghosts and goblins.
It’s all a matter of perspective.
But if you’re thinking about hitting the buffet, or going back to work at one of the company’s four shuttered casinos, your perspective might be a little different than an investor’s evaluation of “new normal.”
Last year, the balance sheet was showing some wear and tear — a lot of it from what was happening at the Palms. This year, the Palms is closed, along with Texas Station, Fiesta Rancho and Fiesta Henderson.
This year, the numbers are up, making for a positive comparison to last year and with Red Rock CEO Frank Fertitta talking about a “permanent shift” to the most profitable parts of running a resort in Las Vegas — the casino.
“While we are missing profit from hotel and catering, really we’re a gaming company at the end of the day,” Fertitta said Tuesday during Red Rock’s third-quarter earnings call.
The hard numbers tell a story.
Net revenues of $353.2 million for the third quarter of 2020 fell 24.2% — or $112.7 million — from $465.9 million for the same period of 2019. But profits were way up — 44.8% up — based on a measure known as EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization). That’s a measure often used to compare performance.
Net income was $72.0 million for the third quarter of 2020, an increase of $98.8 million, from a net loss of $26.8 million for the same period of 2019.
Numbers like that are reinforcing beliefs across the industry that casinos can recover if they focus on what is profitable and eliminate what isn’t making money.
It’s the reason that the Feast Buffet won’t return “anytime soon,” according to Fertitta, and there’s no hurry to reopen a property that might not immediately turn profits.
And while investors wonder how long Red Rock can count on cost savings built on more efficient operations, executives show little doubt. They talk about future savings when the pandemic is over and there will no longer be a need for extra staffing and cleaning solely to combat the virus.
Stephen Cootey, Red Rock’s chief financial officer, says revenues are back to about 80 percent of pre-pandemic levels. And some older customers have started coming back to the casinos since Labor Day.
The company reports that customer bases from the four closed properties have found their way to the casinos that are open, and Red Rock’s strength in reaching those local customers is solid.
“We went back to the basics that we have the best locations and the best properties,” Fertitta said.