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Vail Resorts Hopes for a Winter Rebound

By Dan Caplinger - Sep 28, 2018 at 9:49AM

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The ski resort operator put a tough year behind it.

When it comes to snow sports, weather is important. Skiers and snowboarders love good powder, and when conditions are ideal, Vail Resorts (MTN 2.50%) sees droves of visitors to its global network of ski resorts. Yet the winter of 2017-18 was less than ideal for Vail Resorts, especially in key areas like Colorado, Utah, and the Lake Tahoe region.

Coming into Friday's fiscal fourth-quarter financial report, Vail Resorts investors were ready for the substantial losses the company usually suffers during the summer months. Yet they also wanted to see signs that the coming winter season will go well, and Vail's guidance for the new fiscal year wasn't as optimistic as some had hoped, despite extensive efforts to grow the business through acquisition.

Red tram car running down a valley of pine trees and snow-capped mountains.

Image source: Vail Resorts.

Another big loss for Vail Resorts

Vail Resorts' fiscal fourth-quarter results weren't pretty, but they also weren't surprising for those who're familiar with the business. Total revenue inched higher by 1% to $211.6 million, which was just shy of the 2% growth rate that those following the stock were looking to see. Net losses of $83.7 million worked out to a per-share loss of $2.07, but that was better than the $2.25 per-share loss that marked the consensus forecast among investors in Vail Resorts.

Because the summer quarter is so quiet from an operational standpoint, Vail focused mostly on its full-year results for fiscal 2018. For the year, total skier visits were up 2.5% from the previous year, with the key lift revenue figure rising by nearly 8% over the period. Ancillary items like ski schools, dining, and retail and rental operations also showed reasonable growth.

What really saved Vail over the past year was strong performance at the Whistler Blackcomb resort in British Columbia. There, weather conditions were better than in most of its properties in the western U.S., and the strength of the U.S. dollar and certain other key currencies versus the Canadian dollar encouraged international visitors to flock to the resort just north of Vancouver. In addition, the acquisition of the Stowe resort in Vermont added some incremental revenue and profit to Vail Resorts' coffers, and that was critical in light of poor conditions elsewhere in Vail's network.

Vail Resorts' lodging segment also suffered from the difficult environment. Overall, lodging revenue was higher by 2%, with occupancy rates rising, but declines in average daily rates contributed to a roughly 8% drop in pre-tax operating profit for the segment. On the real-estate front, the completion of sales of condominium units resulted in a plunge of more than 75% for the division's revenue.

CEO Rob Katz praised Vail's work. "This year's results highlight the positive impact of our expanding geographical diversification," Katz said, "the stability provided by our growing season pass program, and the success of our guest-focused marketing efforts." The CEO also noted that despite "historically poor conditions" in the western U.S., season pass sales managed to keep revenue from falling precipitously.

More acquisitions for Vail Resorts

Vail continues to rely on adding more properties to its portfolio of resort locations in order to boost the value of its season passes. In August, the company closed on its acquisition of the Stevens Pass resort in northwestern Washington state, paying $64 million for the property. Just this week, Vail completed its purchase of Triple Peaks for $74 million, which includes the New England resorts of Okemo Mountain in Vermont and Mount Sunapee in New Hampshire as well as Colorado's Crested Butte resort. The company has high hopes that boosting its exposure to the Northeastern U.S. will give it even more protection against disparate winter conditions across the nation.

Season pass sales are also going well. Through the beginning of this week, pass sale counts are up 25%, leading to 15% more money collected compared to where Vail was this time last year. The highly discounted new Military Epic Pass has weighed on dollar revenue, but even excluding those passes, sales still look encouraging, especially in Whistler. Sales of the Epic Australia pass have also been quite strong.

Yet those following the stock weren't entirely pleased with Vail's guidance for fiscal 2019. Net income estimates of between $288 million and $335 million would mark a significant decrease from the final figure of roughly $380 million in fiscal 2018, working out to a range of somewhere around $7 to $8 per share for the coming year.

Vail Resorts investors reacted negatively to that news, and the stock was down more than 4% in pre-market trading following the announcement. Despite its success in growing an enviable mix of properties around the world, Vail still needs to get some help from Mother Nature this winter in order to make the most of its big opportunities.

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