‘Adults Only’ Investments Send Sex Stocks Soaring
Business + Economy

‘Adults Only’ Investments Send Sex Stocks Soaring

Ashley Madison

We all know sex sells. But the last couple of weeks have offered a few glimpses of just how and where it’s selling — and where it isn’t — in our Internet era.

For example, Ashley Madison, a dating website for people who want to cheat on their spouses, is preparing for an initial public offering on the London Stock Exchange. Strip club operator RCI Hospitality Holdings (RICK) recently reported record sales, while lingerie chain Frederick’s of Hollywood and many pornography sites continue to struggle amidst fierce competition and rampant piracy.

Related: The App-Selling Power of Kate Upton’s Cleavage

Ashley Madison has 36 million members in 46 countries and generated $115 million in revenue last year, a nearly fourfold increase since 2009. Its corporate parent, Avid Life Media of Toronto, will use the money raised by the IPO to fund its international expansion, according to Bloomberg News.

“We are the world's second largest paid dating website and the leading married dating site with more than 34 million members and growing, and yes we are profitable,” Paul C. Keable, Avid Life Media’s vice president for communications, wrote in an email to The Fiscal Times.

RCI, which operates “adult gentlemen’s clubs” under the Rick's Cabaret, XTC and Club Onyx brand names, among others, recently reported sales of $36.7 million in the quarter ended March 31, a record for the company, which has been consistently profitable. Stores open a year or more saw sales climb to $29.1 million, up from $28.5 million in the same quarter last year.

“Same store sales reflected growth at many clubs,” CEO Eric Langan said in a press release earlier this month. “This was partially offset by adverse weather in March, especially in the Dallas-Fort Worth market, where the company has 11 locations. New York City units had difficult comparisons to the year ago quarter, when the pro football championship was played locally.”

Shares of RCI have surged more than 9 percent this year, outperforming the S&P 500 Index, which has barely budged.

On the other hand, Frederick’s of Hollywood, which has sold undergarments about 30 years longer than Victoria has kept her secret, has announced plans to shutter its 94 bricks-and-mortar stores and convert itself to an e-commerce operation.

Though founder Frederick Mellinger believed that “sex never goes out of fashion,” the lingerie chain has had a rough couple of years. It filed for bankruptcy protection in 2000 and emerged in 2003. It was taken private in 2013 in a $10.3 million deal by a consortium including Harbinger Group’s HGI Funding and some of its own shareholders.

“As a company, I think they became old and stale,” retail consultant Ron Friedman told The Los Angeles Times.

Frederick’s, which was founded in 1947, isn’t the only sex-related business that had difficulty in adjusting to the digital age. The proliferation of free and pirated porn on the Internet has created challenges for some in the adult entertainment industry.

Related: Porn, Drugs, Hitmen, Hackers — This Is the Deep Web

MetArtNetwork, a network of adult websites, last month filed a series of lawsuits against tube site operators whom it argues are stealing its content. Publisher Adult Empire has formed a group called PayforYourPorn and is trying to educate fans of the genre about the larger financial issues at stake.

“People don't realize illegal downloading of copyrighted digital content results in a loss of jobs, lower wages, higher unemployment rates and higher taxes,” adult star Jessica Drake told X-Biz, an adult business news site, last year.

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