Hot Topic Reports Decreased 3Q Earnings
Hot Topic Inc.'s net income and samestore sales decreased for the third quarter, ending Oct. 30, company officials said during a Nov. 17 conference call. The company’s net income dropped to $12.6 million from the $15.3 million earned during the same period of the last fiscal year, and same-store sales decreased 4.2 percent.
But the City of Industry, Calif.–based retailer also announced that net sales increased 12 percent during the third quarter to $180.8 million, up from $161.5 million during the same quarter last year.
Hot Topic’s rocky third quarter was blamed on poor sales during the company’s traditionally thriving Halloween and Back to School seasons. Sales also lagged in men’s and accessories categories, said Jerry Cook, president of the company’s Hot Topic stores. “There’s more opportunity in men’s than we’re harvesting,” he said.
The company hopes to turn around its men’s sales with the creation of a men’s buyer position, which will be filled in 60 days, according to Jim McGinty, Hot Topic’s chief financial officer.
Hot Topic also announced that it will open approximately 115 stores in 2004: 91 Hot Topic stores and 24 Torrid stores. The company expects to end the year operating 76 Torrid stores and 592 Hot Topic stores.
The road back to healthy comparable sales may not be so difficult, said Jeffrey Van Sinderen, a retail analyst with Los Angeles–based B. Riley & Co. He said Hot Topic successfully turned around women’s business this year with the “Dark Romance” micro assortment, based on the Goth style of rock singer Amy Lee. The company may be able to remedy the men’s and accessories categories in a similar fashion.
Hot Topic’s same-store sales should be stronger in 2005 because they will be compared with the soft numbers of this year, according to Van Sinderen.
And most important, he noted, styles may change. “Fashion that is anti–Hot Topic will not last forever,” he said of this year’s preppy fashions, which were blamed for Hot Topic’s woes. —Andrew Asch
