Personal Finance
MTN

What Vail Resorts Wants Investors to Know

A man holding skis looks out over a mountain.

Vail Resorts (NYSE: MTN) disappointed investors by announcing a slight sales decline for its fiscal first quarter and an expanding net loss for the period. Wall Street reacted to the news by sending shares down by 16% immediately following the report.

In a subsequent conference call with analysts , the ski resort chain explained why those worsening sales and profit trends aren't worrying the management team, and why investors can be confident that Vail's long-term growth outlook is intact.

Below are a few highlights from that presentation.

A man holding skis looks out over a mountain.

Image source: Getty Images.

First-quarter losses aren't shocking

Our first fiscal quarter historically operates at a loss, given that our North American mountain resorts are not open for ski operations during the period.-- CEO Rob Katz

The company has been bulking up its offseason revenue sources by adding things like mountain zip-lining tours and outdoor water parks at its resorts. But modest success there hasn't changed the fact that the summer months produce operating losses because of the lack of ski revenue in its U.S. and Canadian resorts. In fact, reported net loss expanded to $108 million from $28 million a year ago.

Still, the Perisher property in Australia saw solid ski demand, and its North American locations attracted more warm-weather visitors. The operating loss included several one-time charges that, once accounted for, make the period consistent with Vail's recent history. "Overall, we were pleased with our results," Katz explained.

Season pass sales are running strong

We are very pleased to see double-digit revenue growth in our season pass program after a very strong record performance last year.-- Katz

Vail sold 21% more season passes this period, with total revenue rising 13% through the first few days of December. Stripping out the impact from its discounted military pass, sales volumes were up 8% while total revenue rose 10% with help from a 3% average price increase.

That price boost is down from the 5% increase that Vail had been posting in past years, which implies some pricing challenges. But management blamed the slowdown on their deliberate effort to expand season pass sales to lower-frequency guests.

Spending money to make money

We remain committed to reinvesting in our resorts, creating an experience of a lifetime for our guests and generating strong returns for our shareholders.-- Katz

Vail plans a surge of investment spending across its resorts on expensive projects including lift upgrades and other typical maintenance initiatives. This year's plan also includes installing integrated snow production capabilities that could add precious days to its ski seasons beginning in late 2019. Overall, these initiatives will require about $180 million in cash to mark a significant increase from last year's $150 million capital plan.

Executives said they were aware that this spending is higher than usual, but they noted that the snow manufacturing capabilities will add value to season passes, including by adding more consistent ski opportunities around the Thanksgiving holiday.

Wait and see

Given our first-quarter results and the indicators we are seeing for the upcoming season, we are reiterating our resort-reported EBITDA guidance for fiscal 2019 that was included in our September earnings release. That said, the North American ski season has just begun, with our primary earnings period still in front of us.-- CFO Michael Barkin

Vail affirmed full-year guidance that calls for adjusted earnings to range between $718 million and $750 million compared to $617 million in fiscal 2018. The kickoff to the ski season has been encouraging, with its Colorado-based resorts enjoying the best conditions they've seen in nearly a decade. The Whistler Blackcomb property in Canada, on the other hand, had a sluggish start as snow totals have been weak.

In any case, with its biggest earnings-producing period just beginning, investors will have to wait until Vail's next official update to find out how closely actual results tracked management's optimistic forecasts.

10 stocks we like better than Vail Resorts

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Vail Resorts wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 14, 2018

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Vail Resorts. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

MTN

Other Topics

Stocks

Latest Personal Finance Videos

    #TradeTalks: A Holistic Financial Picture to Give a True Indicator of your Financial Health

    Harvest Founder Nami Baral joins Jill Malandrino on Nasdaq #TradeTalks to discuss the Harvest PRO Index, holistic financial picture to give a true indicator of your financial health, not just a credit score.

    Oct 9, 2020

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More