RCI Hospitality Holdings, Inc. (NASDAQ: RICK), the parent company of Rickβs Cabaret and other gentlemanβs 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 Rickβs Cabaret Steakhouse & Casino. At that time, RCI told investors that affiliated entities had βapplied for a gaming license to operate 175 slot machines, six blackjack tables, one craps table, and one roulette table in Central City.β
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 donβt know yet,β said RCI President and CEO Eric Langan on the companyβs recent first-quarter earnings conference call.
RCI and its subsidiaries run more than 60 gaming venues, gentlemanβs clubs, and sports bars across the US.
Rickβs Casino Ambitions in Limbo
While the $2.4 million RCI paid for the Central City property isnβt a massive sum of money, itβs 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 canβt 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 RCIβs Colorado casino plans as being βin limbo,β and why the company could be looking for other ways to deploy capital.
βIβm 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,β 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.
Rickβs Not Abandoning Colorado Outright
While casino efforts may be pushed back or abandoned, RCI isnβt giving up on Central City. It will move ahead with opening Rickβs Cabaret Steakhouse there as well as proceed with a new Bombshells restaurant in the city.
Even if it doesnβt operate casinos in Central City, Rickβs adult entertainment and dining options could position the company to benefit gaming expansion in the city and Coloradoβs 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.