Shares in Red Rock decline due to worries about rivalry with Durango.
Red Rock Resorts' (NASDAQ: RRR) stock plummeted during trading on Wednesday after the casino operator reported first-quarter revenue that failed to meet analyst expectations. The company also disclosed that its new Durango Casino & Resort in Southwest Las Vegas had stolen business from its existing properties.
In the afternoon, Red Rock's shares were down 7.5% on trading volumes beyond the daily average. The weakness suffered by the gaming stock in recent weeks, down a whopping 18.8% since early January, continued. December saw the debut of Durango, therefore, the first three months of 2024 signified the first full quarter of results for the newly opened casino.
During a conference call with analysts on Tuesday, Red Rock Chief Financial Officer Stephen Cootey highlighted that Durango's initial financial and operational performance has been promising and that some impact on the operator's other Las Vegas venues was to be anticipated following the Durango opening.
"We've said before that we anticipated and have experienced cannibalization, mainly at our Red Rock property due to the Durango opening. However, this has all been in line with our expectations," explained Cootey.
The nearest Red Rock property likely to lose business to Durango is the Summerville location that bears the company's name. Cootey divulged that Red Rock would counteract the revenue Durango is poaching from sister properties with the assistance of Las Vegas' rapidly growing population and the operator's other casinos being situated in areas with robust population growth. According to estimates, the region in which Durango is located is expanding at double or triple the pace of Las Vegas as a whole.
Red Rock Secure on Durango's Future Prospects
Although Durango might pose a temporary disadvantage for some Red Rock properties, cannibalization is not expected to serve as a long-term hindrance. On the bright side, the long-term prospects for the new property are optimistic.
"In prior earnings calls, we have stated that we believe Durango will eventually have one of our highest-margin properties over the medium to long term and will deliver a return consistent with, or exceeding, our earlier investments in new properties," added Cootey. "With a full quarter behind us, we are confident that Durango is on course to achieve both its margin target and return objective even sooner than initially planned."
Red Rock Vice Chairman Lorenzo Fertitta disclosed on the call that the operator is assessing expansion options for Durango and is in a position to potentially act on that front in late 2024 or early 2025. The company did not provide details on any potential additions to the casino's repertoire.
Although not yet confirmed, there are unsubstantiated rumors that new amenities at Durango may include a bowling alley, a movie theatre, and other non-gaming attractions.
Red Rock Unfazed by Increased Promo Spending
In addition to Durango, one other factor impacting the locals' market in Las Vegas is heightened promotional spending by some operators, as disclosed by Red Rock's main competitor, Boyd Gaming (NYSE: BYD), during its first-quarter earnings call last month.
Red Rock President Scott Kreeger acknowledged the increase in promotional spending among Las Vegas locals' operators, yet he asserted that it's chiefly linked to a few independent companies operating a small number of casinos.
"From our perspective, the landscape of competition has not altered, and it has not prompted us to reconsider our tactics. We've always stated that there are certain one-off, single operator properties in the local market that deploy significant promotional expenditures, and we've been aware of that for quite some time," remarked Kreeger.
Read also:
- Remaining contenders down to two in DFB's struggle versus Brazil.
- Law enforcement agencies in various metropolises plan expansive measures for May 1.
- Berlin Transport Senator Schreiner Steps Down over Doctorate Issues
- The Next Development in the DAZN/DFL Billion Euro Controversy
Source: www.casino.org
