RCI Reports 3Q24 Club & Restaurant Sales & Other Updates

Rhea-AI Summary

RCI Hospitality Holdings (RICK) reported its fiscal third-quarter 2024 sales. Nightclubs saw a 0.7% YoY increase to $62.4 million, driven by a 1.7% same-store sales growth and new club openings. Bombshells experienced an 8.9% YoY decline to $13.1 million due to a 16.2% same-store sales decrease. Total combined sales dipped by 1.1% YoY, totaling $75.5 million. Sequentially, Nightclubs and Bombshells reported sales increases of 5.9% and 2.7%, respectively. RCI also announced a $25 million increase in its share buyback program, the withdrawal of its Colorado casino license applications, and an update on post-Hurricane Beryl operations. CEO Eric Langan emphasized the company's focus on core businesses, cost-cutting, and optimizing locations. RCI opened two new locations in FY24 and is working on five more openings. Full 3Q24 financial results are expected by August 8, 2024.

Positive

• Nightclubs sales increased by 0.7% YoY, totaling $62.4 million.
• Sequential Nightclubs sales grew by 5.9%.
• Positive same-store sales growth of 1.7% in Nightclubs.
• Sequential increase of 2.7% in Bombshells sales.
• RCI's Board authorized an additional $25 million for share buybacks.

Negative

• Bombshells sales declined 8.9% YoY due to a 16.2% drop in same-store sales.
• Total combined sales decreased by 1.1% YoY to $75.5 million.

Insights

Financial Analyst

RCI Hospitality Holdings, Inc.’s sales results for the third quarter of 2024 show a mixed performance across their business segments. The Nightclubs segment posted a modest increase in total sales by 0.7 year-over-year, with a noteworthy 1.7 growth in same-store sales (SSS). This marks their first SSS increase since 2Q23, suggesting some recovery in customer spending and operational efficiency. Additionally, their sequential quarterly sales improvement by 5.9 is a positive indicator of short-term momentum.

Conversely, the Bombshells segment experienced a significant 8.9 drop in total sales year-over-year, largely driven by a 16.2 decline in SSS. While the recent opening of new locations and the 2.7 sequential increase in total sales provide some hope, the overall performance indicates deeper challenges in this segment. The sharp decline in SSS is particularly concerning as it reflects underlying issues that may not be easily rectified by new openings alone.

The share buyback authorization increasing by 25.0 million can be seen as an effort to return value to shareholders and may provide some support to the stock price in the short term. However, this move also suggests management’s belief that the stock is undervalued, which could have mixed interpretations depending on investor sentiment.

Withdrawing the casino applications in Colorado and pivoting to open Rick’s Cabaret & Steakhouse without gambling might realign resources to more profitable ventures. Yet, it also means foregoing potential revenue streams from the gaming industry. Investors should watch closely how these strategic shifts affect overall profitability and growth prospects.

In summary, RCI is taking proactive steps to stabilize and grow its core operations, but challenges remain, particularly in the Bombshells segment. Investors should weigh these factors carefully and monitor upcoming financial results in August for a clearer picture.

Market Research Analyst

The performance of RCI Hospitality Holdings, Inc. within their club and restaurant sectors presents a nuanced picture for retail investors. The slight increase in nightclub sales, both on a year-over-year and sequential basis, indicates some resilience and successful operational strategies. The 5.9 increase compared to 2Q24 is particularly promising, suggesting that recent efforts to reformat and optimize locations are beginning to yield results.

However, the Bombshells segment’s significant decline in same-store sales by 16.2 is cause for concern, reflecting potential broader market challenges or specific issues within the brand. The segment's 8.9 overall sales drop year-over-year cannot be ignored, even though new openings and sequential gains might temporarily buoy the numbers.

The share buyback program increase signals management’s commitment to delivering shareholder value and could be seen as a sign of confidence. Yet, this move also requires careful consideration of the opportunity cost, as these funds could alternatively be invested in growth initiatives or mitigating the underperformance within certain segments.

The withdrawal from casino licensing in Colorado underscores a strategic pivot, focusing on optimizing their current operational footprint rather than expanding into potentially riskier ventures. This cautious approach might yield stability but at the expense of diversifying income streams.

The aftermath of Hurricane Beryl, with only minor damages and quick reopening schedules, suggests robust operational readiness and resilience in the face of natural disasters. This is a positive indicator for sustained performance through unforeseen disruptions.

Overall, RCI is navigating through both opportunities and challenges. Investors should remain cautious but optimistic, keeping an eye on how well the company can stabilize and grow its underperforming segments while leveraging strengths in its nightclub operations.

HOUSTON, July 11, 2024 /PRNewswire/ -- RCI Hospitality Holdings, Inc. (Nasdaq: RICK) reported club and restaurant sales for the fiscal third quarter ended June 30, 2024. Sales do not include non-core operations and are subject to final closing. Full 3Q24 financial results are expected by August 8, 2024. The company also announced a new share buyback authorization, the withdrawal of its Colorado casino license applications, and a post-Hurricane Beryl update.

Nightclubs: Total sales of $62.4 million increased 0.7% compared to the year-ago quarter. The increase primarily reflected 1.7% same-store sales growth and two new and reformatted clubs, partially offset by the temporary closing of three clubs being reformatted to liquor from BYOB. Compared to 2Q24, total Nightclubs sales increased 5.9%.

Bombshells: Total sales of $13.1 million declined 8.9% compared to the year-ago quarter. This reflected a 16.2% decline in SSS, partially offset by three locations not in SSS: Bombshells in San Antonio and Stafford in Texas and Cherry Creek Food Hall & Brewery in Greenwood Village (CO) with its Bombshells Kitchen. Compared to 2Q24, total Bombshells sales increased 2.7%.

Buyback Authorization: RCI's Board of Directors has authorized increasing the amount available under the company's share repurchase program by $25.0 million.

Casino Withdrawal: Applications to operate casinos were formally withdrawn from the Colorado Division of Gaming. Plans are moving ahead in Central City to open Rick's Cabaret & Steakhouse without gambling and to sell other properties no longer needed.

Beryl Update: After Hurricane Beryl made landfall in the greater Houston area, four Bombshells opened Monday, a fifth on Tuesday, and a club on Wednesday. The other two clubs and four Bombshells in the area are waiting for electricity to be restored. A couple of properties had minor damage that is being repaired, but not expected to affect operations.

Eric Langan, President & CEO of RCI, commented: "As we said on our last conference call, we are going 'back to basics,' focusing on the core tenets of our capital allocation strategy, to concentrate on our core businesses, generate higher sales, cut costs, optimize underperforming locations, finish projects as fast and efficiently as possible, and buy back shares."

"To that end, we're pleased to report our first quarterly increase in Nightclubs same-store sales since 2Q23 and the initial success of our current club reformatting program. We're also pleased to see Bombshells total sales increase sequentially. This reflects changes initiated mid-February. Clubs and restaurants also benefited from a strong pro sports playoff line-up, partially offset by temporary closures due to severe weather in Texas and South Florida."

"To date in FY24, we have opened two new locations—Bombshells Stafford (TX) in November 2023 and PT's Centerfold in Lubbock (TX) in March 2024. We expanded a location in June 2024, creating 'two clubs in one,' adding a Chicas Locas BYOB club in unused space in the same building as the Chicas Locas Dallas (TX) liquor club. We also reformatted three Texas clubs from BYOB to liquor, reopening them as Baby Dolls Abilene in April 2024 and Dallas Showclub and Chicas Locas Harlingen in June 2024. We continue to work on opening five more locations: Rick's Cabaret & Steakhouse in Central City (CO); Bombshells Denver (CO), Lubbock (TX) and Rowlett (TX); and Baby Dolls West Fort Worth (TX)."

Club & Restaurant Sales ($ in Millions)

3Q24	Total Sales	Total Sales vs. 3Q23	Same-Store Sales vs. 3Q23
Nightclubs	$62.4	+0.7 %	+1.7 %
Bombshells	$13.1	-8.9 %	-16.2 %
Combined	$75.5	-1.1 %	-1.5 %

 

9M24	Total Sales	Total Sales vs. 9M23	Same-Store Sales vs. 9M23
Nightclubs	$181.9	+4.3 %	-3.6 %
Bombshells	$38.6	-8.0 %	-19.0 %
Combined	$220.6	+1.9 %	-6.5 %

Notes

• Revenues from non-core operations, such as third-party rents, and revenues from RCI's Other segment, are not included in Nightclubs and Bombshells sales above.
• All references to "RCI Hospitality Holdings, Inc.," "company," "we," "our," and similar terms refer to RCI and/or its subsidiaries, unless the context indicates otherwise.

About RCI Hospitality Holdings, Inc. (Nasdaq: RICK) (X: @RCIHHinc)

With more than 60 locations, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country's leading company in adult nightclubs and sports bars-restaurants. See all of our brands at www.rcihospitality.com.

Forward-Looking Statements

This press release may contain forward-looking statements that involve a number of risks and uncertainties that could cause the company's actual results to differ materially from those indicated, including, but not limited to, the risks and uncertainties associated with (i) operating and managing an adult entertainment or restaurant business, (ii) the business climates in cities where it operates, (iii) the success or lack thereof in launching and building the company's businesses, (iv) cyber security, (v) conditions relevant to real estate transactions, (vi) the impact of the COVID-19 pandemic, and (vii) numerous other factors such as laws governing the operation of adult entertainment or restaurant businesses, competition and dependence on key personnel. For more detailed discussion of such factors and certain risks and uncertainties, see RCI's annual report on Form 10-K for the year ended September 30, 2023, as well as its other filings with the U.S. Securities and Exchange Commission. The company has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances.

Media & Investor Contacts

Gary Fishman and Steven Anreder at 212-532-3232 or gary.fishman@anreder.com and steven.anreder@anreder.com

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SOURCE RCI Hospitality Holdings, Inc.

FAQ

What were RCI's nightclub sales for the third quarter of 2024?

RCI's nightclub sales for the third quarter of 2024 were $62.4 million, an increase of 0.7% year-over-year.

How did Bombshells sales perform in the third quarter of 2024?

Bombshells sales in the third quarter of 2024 were $13.1 million, reflecting an 8.9% decline year-over-year.

What is the new share buyback authorization announced by RCI?

RCI's Board of Directors authorized an additional $25 million for the company's share repurchase program.

Why did RCI withdraw its Colorado casino license applications?

RCI withdrew its Colorado casino license applications to focus on opening Rick's Cabaret & Steakhouse without gambling and to sell other unneeded properties.

How were RCI's operations impacted by Hurricane Beryl?

Post-Hurricane Beryl, four Bombshells reopened on Monday, a fifth on Tuesday, and a club on Wednesday. Other locations are awaiting power restoration, with minor damages being repaired.

When will RCI release its full 3Q24 financial results?

RCI is expected to release its full third-quarter 2024 financial results by August 8, 2024.