Posted on: May 14, 2024, 02:44h.
Last updated on: May 14, 2024, 03:48h.
RCI Hospitality Holdings, Inc. (NASDAQ: RICK), the parent company of Rick’s Cabaret and other gentleman’s clubs, could pull the plug on plans for casinos in Colorado.
In December 2022, the company acquired a four-story, 30,000-square-foot building at 130 Main Street in Central City for $2.4 million in cash with hopes of turning that property into Rick’s Cabaret Steakhouse & Casino. At that time, RCI told investors that affiliated entities had “applied for a gaming license to operate 175 slot machines, six blackjack tables, one craps table, and one roulette table in Central City.”
Now, the company appears to be having second thoughts about its Central City plans. While no firm decision has been made as of yet, RCI may have other avenues through which to better deploy capital instead of waiting for the Colorado regulatory process to take shape.
We may end up with actually withdrawing the gaming license at some point instead of paying all this money for the investigation and waiting the time line they want, I just don’t know yet,” said RCI President and CEO Eric Langan on the company’s recent first-quarter earnings conference call.
RCI and its subsidiaries run more than 60 gaming venues, gentleman’s clubs, and sports bars across the US.
Rick’s Casino Ambitions in Limbo
While the $2.4 million RCI paid for the Central City property isn’t a massive sum of money, it’s arguably somewhat significant for a company with a market capitalization of $449 million.
Add to that, the expenditure becomes harder to justify if the property can’t be used for gaming purposes, and while the owner is paying regulatory fees and taxes on the land. Those could be among the reasons why Langan described RCI’s Colorado casino plans as being “in limbo,” and why the company could be looking for other ways to deploy capital.
“I’m currently basically evaluating that timeline with our new refocus on capital allocation, doing a lot of math right now and calculating whether or not we want to even continue to focus on that at all or take our money and energy and focus instead of casino operations back us back on our core business,” said the chief executive office on the earnings call.
He added that the company could consider share buybacks as the Colorado casino efforts move to the back burner. A share repurchase program could be beneficial at a time when RCI is off 29.5% year to date.
Rick’s Not Abandoning Colorado Outright
While casino efforts may be pushed back or abandoned, RCI isn’t giving up on Central City. It will move ahead with opening Rick’s Cabaret Steakhouse there as well as proceed with a new Bombshells restaurant in the city.
Even if it doesn’t operate casinos in Central City, Rick’s adult entertainment and dining options could position the company to benefit gaming expansion in the city and Colorado’s status as one of the fastest-growing casino markets in the US.
Gaming venues in Central City include Century Casino, Dostal Alley Casino, Dragon Tiger Casino, and Easy Street Casino, among others.
