Summer is high season in the travel industry, but for Vail Resorts (MTN +2.78%), it's largely a time for reflection. Although the ski resort operator has done its best to tap into opportunities to utilize its locations for summer recreational opportunities, it still does almost all of its business during the Northern Hemisphere's winter and early spring months. That makes this time of year a good one to look forward to how the business will do as the days grow shorter and the nights grow colder.
Coming into Thursday's fiscal fourth-quarter financial report, Vail Resorts investors were fully prepared for the typical losses that the company posts in the off-season but wanted a favorable outlook for how the coming season is going to go. Vail didn't really have any big surprises, and it will now be largely up to Mother Nature to decide how well the winter will treat the company.
Farewell to fiscal 2019
Vail Resorts' fiscal fourth-quarter results looked a lot like what we usually see this time of year. Total revenue picked up 15%, to $244 million, which was faster than the 13% growth rate that most of those following the stock had anticipated. Vail's losses amounted to $89.5 million, but the resulting $2.22 loss in per-share terms wasn't as bad as the $2.53 per share that most investors were looking to see.
Image source: Vail Resorts.
With so little activity during the quarter, Vail spent nearly all of its time talking about full-year results. In the key mountain segment, total lift revenue was higher by 17% from year-ago levels, coming in at $1.03 billion. The company attributed much of that performance to strong sales of its North American season passes, and better weather conditions brought in more non-pass traffic, as well.
Acquisitions contributed to a roughly 13% rise in both ski school sales and dining revenue, and rentals and retail sales climbed 8% year over year. Although acquisitions lifted operating expenses by 13%, adjusted pre-tax operating earnings for the segment were still up 15% for the year.
All told, though, Vail Resorts had to deal with year-over-year net income declines. Some of the drop was due to one-time tax benefits that Vail had in fiscal 2018, but even after adjusting for that $61 million item, profits eased lower.
CEO Rob Katz was happy with how things went. "After the challenging early season period for destination visitation," Katz said, "our results for the remainder of the year were largely in line with our original expectations." The CEO highlighted the fact that season-pass sales help promote stability even in the face of volatile weather conditions throughout the winter season.
Can Vail get in gear?
Vail talked about a number of initiatives to boost traffic and accelerate its growth. Acquisitions have boosted the size of the company's overall operations, and in Katz's words, "With a strong base of high-end consumers, we are continuing to leverage our growing network of resorts and sophisticated marketing strategies to drive guest spending."
Meanwhile, Vail will soon see the positive impact of its acquisition of Peak Resorts. The deal, which closed earlier this week, will add 17 new ski areas to the Vail line, and Epic Pass products will include access to those areas to boost demand for the season passes.
Pass sales have picked up, with Vail seeing a 14% rise in unit sales and a 15% rise in dollar terms compared to where sales were this time last year. The Northeast U.S. has been particularly promising, now that Vail has Stowe, Okemo, and Mount Sunapee included on Epic Pass lineups. Other pass products are doing well, especially in the specific markets for which they're tailored.
Vail's guidance for fiscal 2020 is encouraging. Net income attributable to Vail of $293 million to $353 million should compare favorably to fiscal 2019's $301 million figure, with total adjusted pre-tax operating earnings of $776 million to $822 million also showing signs of likely growth.
Vail Resorts investors didn't have a huge reaction to the news, and the stock was largely unchanged in after-hours trading following the announcement. Yet after a great fiscal 2019, shareholders hope that Vail will be able to carry its forward momentum into the new season and benefit from some of the same good conditions that prevailed last year.
