(RICK) News Bites for Thursday January 15th, 2009: Rick’s Tries To Clean Up Its Act, GeoEye Update

January 17th, 2009

I wanted to update you on 2 of the companies in the PeakStocks.com portfolio that have had developments in the last few days that you should be aware of.

This includes:

Rick’s Cabaret International, Inc. (NASDAQ: RICK), which in the last few days has pre-reported Q1/09 sales and rebranded one of their underperforming locations, and
GeoEye Inc. (NASDAQ: GEOY), which announced a continuation deal with an image provider, even though GeoEye-1 imagery has not yet been certified by the NGA, and helped to stop pirates in Kenya

Let’s get right to it.

Rick’s Cabaret Logo New to the Rick’s story?

Rick’s Cabaret International (NASDAQ: RICK), owns and operates upscale adult nightclubs serving primarily businessmen and professionals.

Rick’s differentiates themselves by providing an atmosphere where they can offer a unique quality entertainment environment that includes highly experienced and well screened entertainers, high quality managers hired from within the adult entertainment industry, and finally, providing an atmosphere and ambiance Incorporatedluding exclusive VIP rooms, that appeal to upscale clientele.

Rick’s also owns and operates several online and offline media properties that produce adult websites as well as cater to owners and operators of intimate apparel and adult retail stores.

Rick’s nightclubs offer live adult entertainment, restaurant, and bar operations in Houston, Austin, San Antonio, Minneapolis, Minnesota, New York, Dallas Fort Worth, Charlotte, and other cities under the names Rick’s Cabaret, XTC, and Club Onyx.

As of September 30, 2008, Rick’s operated 19 adult nightclubs.

Want more?

Read my update on the company’s last earnings release and conference call here.
OR: Read my initial company buy recommendation here.

Rick’s Peddling the News Hard

Company preannounces higher sales, less profit

On Monday January 12th, Rick’s Cabaret preannounced their Q1/2009 sales in a press release and also hinted that their profit would be woefully short of expectations, and last year’s numbers.

This is not entirely a surprise, as just a few weeks ago, during Rick’s Q4/2008 analyst conference call, we were bombarded by bad news and resignation by the CEO that things were not going to hot at several of Rick’s locations, specifically, their Las Vegas club that they recently purchased.

Rick’s said that its nightclub sales in its first quarter ending December 31, 2008 were $16,942,864 versus $10,774,293 for the same period a year earlier, a 57 percent improvement.

Sales for clubs it has operated for more than one year were $8,767,191 for the quarter, essentially level with the $8,772,902 reported in the same period a year ago.

This means that same-club sales were essentially flat vs. a year ago, which in aggregate is an amazing number considering the poor performance at some of Rick’s clubs, as well as the precipitous decline of the U.S. economy, and the U.S. consumer in particular.

The bad news is that most of the offsetting of the same-club sales came from Rick’s heavily trafficked and profitable New York City location, which had record sales.

In addition, CEO Eric Langan stated that even though same-club sales were essentially flat in aggregate, Rick’s profit margins were “getting squeezed” and so Rick’s Q1/09 earnings are going to come in below previous expectations, even the lowered expectations of just a few weeks ago.

CEO Langan said in a statement:

“We have begun to make operating changes in the clubs that are not meeting expectations and this is already having an impact. For example, we have converted our Philadelphia location to a Club Onyx and have seen an immediate improvement there. We will re-brand our Rick’s Cabaret in Dallas as an all-nude XTC Cabaret later this week and we expect a quick and positive impact. Our primary focus at this time is improving revenues and margins, and if we determine that certain clubs do not have the potential for improvement we will sell them or shut them.”

So How Do You Counter This?

Why, by creating the largest all-nude bar in Texas of course!

Later in the week, Rick’s then made good on their intention to convert their Texas location to an XTC Cabaret, by announcing that the club, at a staggering 25,000 square feet, is now the largest all-nude bar in the state of Texas.

Hey that’s something to be proud of no?

Rick’s talked about the location of this club being ideal for heavy traffic, which begs the question: If the location were so good, why did they have to rebrand it in the first place?

It will remain to be seen whether this change of monikers and focus (all-nude vs. partially nude) will do the trick at this struggling location.

Update: Late last night, it crossed the wires that Rick’s didn’t have a permit necessary to open the club as planned. It was not conclusive as to whether Rick’s would be able to resolve the issue before they are scheduled to open.

You can read the entire local article by clicking here.

Other Clubs Now On Watch

With this change, as well as Rick’s club in Philadelphia being rebranded as a Club Onyx, Rick’s has put pretty much all underperforming clubs on watch.

If they don’t improve their results in short order, the purveyor of gentelmen’s clubs will be forced to shut down some of those underperforming locations.

Bottom Line:

The proof is in the pudding.

Action is always better than inaction, so I like the moves that Rick’s is making to clean things up.

This means most likely, that Q1 results are absolutely atrocious, so don’t be shocked when they are released in another couple of months.

This also means that Rick’s is trying to remedy the situation, and as long as they are successful, Rick’s should be able to make 2009 a decent year, even at their current valuation, via their cash generating capabilities.

You can read all about my thoughts on that here.

New to the Rick’s story?

Read my update on the company’s last earnings release and conference call here.
OR: Read my initial company buy recommendation here.

*Variables You Should Know About Rick’s (NASDAQ: RICK)
Current Recommendation:	BUY
The Company:	Rick’s Cabaret International, Inc., owns and operates upscale adult nightclubs serving primarily businessmen and professionals. Rick’s also owns and operates several online and offline media properties that produce adult websites as well as cater to owners and operators of intimate apparel and adult retail stores.
Why Buy Now:	Best In Breed Player in a Largely Fragmented Industry With liquidity Intact, Better Able To Weather an Economic Downturn Extremely High Levels of Cash Flow and Free Cash Flow High Levels of Insider Ownership Intelligent Acquisition Strategy Valuation Extremely Attractive Using Many Metrics “Sin” Stock Largely Underfollowed by Wall Street Continued Execution by Tenured Management Team
Market Cap:	$39.6
Revenue (TTM):	$59.9
Cash/Debt:	$5.6/33.6
Current Price:	$5.00
Risk Rating (?):	8 (High)
Position Size (?):	1/4 (10-8-08)
Buy Around Price (?):	$7.00 (10-8-08)

*As of 1-14-08. Except share price, all values in millions.

Now let’s take a look at what’s going on with GeoEye…

View original at: PeakStocks.com

Stock Blog Hub

(RICK) News Bites for Thursday January 15th, 2009: Rick’s Tries To Clean Up Its Act, GeoEye Update

Rick’s Peddling the News Hard

So How Do You Counter This?

BUY

Author

Chris Fernandez

Keyword Topics

Stock Blog Hub

(RICK) News Bites for Thursday January 15th, 2009: Rick’s Tries To Clean Up Its Act, GeoEye Update

Rick’s Peddling the News Hard

So How Do You Counter This?

BUY

Author

Chris Fernandez

Keyword Topics

Tag Cloud

Share This Post