Melco's World Cup Hangover: Navigating Headwinds with a New Flagship and a Paused Dividend

Q2 results pay tribute to soccer fever, but the company's long-term growth story rests on REM, retail, and a disciplined balance sheet.

MLCO · Earnings Call · 2026-08-13

The World Cup's Toll on the Premium Player

Melco's Q2 results were hit harder than expected by the global soccer tournament. On the call, Evan Winkler admitted that “this year, World Cup probably had a larger impact relative to prior periods” — Evan Winkler, Executive (likely CFO or COO) · 2026-08-13 and that it "took some of the gaming wallet." This is a theme echoed across the sector — World Cup appeared as a top keyword in our global tracking and in the earnings calls of many other reporters (DLO, ARCO, etc.). For Melco, the impact was amplified by a low VIP win rate of 2.7% at City of Dreams, which knocked roughly $9 million off property EBITDA. The company is clearly betting that this is a temporary blip. Geoff Davis noted that “we continue to be disciplined in our cost management with total daily OpEx in Macau for the second quarter of 2026, remaining steady at approximately $3.4 million per day” — Geoffrey Davis, Executive (likely CFO) · 2026-08-13 — but they're now actively looking for more flexibility in that cost base.

REM and the Retail Revamp: A Double-Edged Sword

The big strategic news is the phased opening of REM, a new suite product at City of Dreams. Lawrence Ho described it as "unlike anything in Asia, probably in the world," and the company is positioning it to capture high-end demand. However, the upside comes with near-term pain: the retail revamp at City of Dreams will create construction disruption for the next few quarters. Evan Winkler was blunt:

we are going to be suffering through some pretty significant construction disruption between now and middle of next year.
Evan Winkler, Executive (likely CFO or COO) · 2026-08-13

That echoes a familiar theme from past calls — in the Feb 2025 call, management discussed similar hoarding at Studio City, but this time the disruption is on the core property. Despite this, the company's guest experience focus remains intact, and the new 18-table gaming area near the Southwest entrance is already expected to attract walk-in traffic.

Capital Allocation: Buybacks Over Dividends

A notable shift: Melco has spent ~$134M on share repurchases in 2026, and Geoff Davis now expects to recommence dividends only in 2027, not at the end of 2026 as previously signaled. “The intention is to commence the dividend when it can be substantive and meaningful.” — Geoffrey Davis, Executive (likely CFO) · 2026-08-13 This is a continuation of the disciplined approach we saw in earlier quarters — Lawrence Ho reiterated that “the priority is still on debt repayment” — Yau Ho, Executive (likely CEO or President) · 2026-08-13 and getting the balance sheet in order. Back in Feb 2025, Geoff Davis had already stated: “I think paying down debt is and will continue to be our primary objective for the foreseeable future.” — Geoff Davis, Chief Financial Officer · 2025-02-28 That commitment remains intact, but the current pace of buybacks — 25 million ADSs for $134 million year-to-date — shows the company is also using the discounted share price to create shareholder value. The company's liquidity is robust — $2.8 billion available — and the recent extension of the RCF to 2031 provides a cushion ahead of the 2027 bond maturity. The diversified footprint (Philippines, Cyprus, Sri Lanka) is also helping, with positive EBITDA from Sri Lanka for the first time. But the real question is whether the REM launch and the retail revamp can re-accelerate growth once the World Cup distortion fades and construction wraps. For now, investors will need to look past the noise.