CEO: RCI Is ‘Well Positioned’ as Adult Clubs Open, Re-Close

HOUSTON—Adult entertainment venues serving up exotic dancing are wiggling into form as more states update their COVID-19 responses. But changing governmental rules, depending on location, are creating some uncertainty for club owners despite pent-up customer demand. Eric Langan, CEO of RCI Hospitality Holdings Inc., which operates more than 40 adult entertainment clubs across the U.S., said his company’s Tootsie’s Cabaret in Miami generated a banner $400,000 in sales the first week it was open in June after lockdown rules were lifted. However, Langan said the Miami location did not reopen “as anticipated this week due to changing conditions in South Florida.” “There will no doubt continue to be some ups and downs over what’s allowed to open and what’s not,” Langan said today in a Securities and Exchange Commission filing, which reported $5.8 million in sales for its adult nightclubs for the third quarter ending June 30. A gentlemen's club market leader, RCI Hospitality operates more than 40 adult entertainment venues in New York, Miami, Charlotte, Dallas, Chicago, Pittsburgh, Houston, Minneapolis, St. Louis and other markets under brand names such as Rick's Cabaret, XTC, Club Onyx, Vivid Cabaret, Jaguars, Tootsie's Cabaret and Scarlett's Cabaret. The Houston company also operates sports bars and restaurants under the brand name Bombshells Restaurant & Bar. Langan noted a generational trend with customers as they returned to check out exotic dancers at the clubs. “The under-40 demographic returned to our nightclubs right away, while the over-40 crowd took a couple of weeks more to see that our subsidiaries were following all safety regulations,” Langan said.   RCI Hospitality’s $5.8 million in sales during the COVID-19 crisis was just a fraction of last year’s figures for the same quarter. Its third quarter yielded $37.5 million in sales in 2019. “We believe our [third-quarter 2020] sales demonstrates the resiliency of our business based on the geographic diversity and variety of formats of our subsidiary locations,” Langan said. Langan also noted “the impressive efforts of our subsidiaries’ staff to return after being furloughed in March, quickly reopen locations when they could, and deal with the challenges the new normal presents. A huge round of thanks is in order.” During the COVID-19 crisis, RCI Hospitality furloughed more than 1,900 employees after the pandemic forced stay-at-home directives. The company also reduced pay of about 100 remaining employees to 75 percent of previous levels. RCI, however, was able to receive $1.1 million in PPP assistance for its nightclub and restaurant “shared-services” division, the company said in a SEC filing. “We continue to believe that based on a combination of revenues generated, locations currently operating and those anticipated to reopen, plus cash on hand, we are well positioned to weather temporary closings due to regional conditions,” Langan said. The company—whose stock was trading at $11.61 a share, down 30 cents, on the Nasdaq on Friday—also said it has filed business interruption insurance claims because of the pandemic.