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Strip Clubs: Low-Cut Meets Low-Cost


Money-makers looking shaky for gentleman's chains.

As the economy struggles to keep its head above water, numerous markets--housing, banking, auto -- are facing plummeting revenue. And now -- contrary to all expectation -- live nude entertainment is feeling the pinch.

But, in accordance with stringent club policy, not literally.

With consumers opting not to splurge on magnums of Cristal, the champagne rooms at strip clubs have also emptied out. The recent slump in clientele has sidelined 2 companies in particular that cater to men's entertainment. Both Rick's Cabaret International Inc. (RICK) and VCG Holding Corp. (VCGH) have been forced to run damage control on existing clubs rather than expand their nationwide chains.

According to the Wall Street Journal, Rick's had to cut billboard advertising by two-thirds since April to maintain a healthy bottom line. Along with cutting payroll by 4.2% this year, the club had to occasionally forgo cover charges and invite its Dallas patrons to BYOB after it had difficulty obtaining a liquor license.

As the slump continues to be industry-wide, Rick's and VCG aren't the only ones forced to cut costs. Most venues are offering lower drink prices, smaller dinner portions and longer happy hours.

Rick's Vegas Club has also been hurt by declining tourism to the gambling capital. To get more laps in the seats, the club has raised the $30-per-customer "bounty" it pays cabbies to bring in their passengers to a whopping $100. The astonishing $1 million the club gave cab drivers in April seems to have been well spent, since the club reported smaller losses than in previous months.

Rick's and VCG have seen small gains this year, but their stocks have taken a nosedive since reporting highs in December 2007. Rick's is down 77% and VCG is down 84%.

But as the audience has grown sparser, the stage has gotten more crowded. The sluggish job market has increased the number of women who are willing to drop their inhibitions and give exotic dancing a try.

Unfortunately, in the words of Billy Idol: They just might be dancing with themselves.
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