Hot Topic Inc. (HOTT) reported a decline of 1.4% in same-store sales for the four weeks ended February 26, 2011. However, the drop in same-store sales narrowed marginally from a decline of 3.3% witnessed in the prior-year month and from a decline of 3.3% as of January 29, 2011.
This marked the 22nd consecutive month of negative same-store sales. The company had last registered same-store sales growth of 3.1% way back in April 2009.
Hot Topic recorded a 1.5% year-over-year drop in total sales for the month, grossing $53.4 million.
February Sales Update
Hot Topic: Segment same-store sales declined 2.6% in January 2011, moderating from an 11.2% drop in the prior-year period. Total sales, at $38.1 million, declined 3.9% year over year for the four weeks ended February 26, 2011.
Torrid: Torrid registered same-store sales growth of 2.1% while sales improved 4.7% year over year to reach $15.3 million for the four weeks ended February 26, 2011.
Outlook
The company expects fourth-quarter fiscal 2010 earnings per share in the range of 11 cents to 14 cents. The Zacks Consensus Estimate for fourth-quarter 2010 is presently at 12 cents per share, in tandem with the guided range. For fiscal years 2010 and 2011, the Zacks Consensus Estimates are, respectively, a loss of 1 cent per share and earnings of 16 cents per share.
We maintain our long-term Neutral recommendation on Hot Topic Inc. The quantitative Zacks #5 Rank (short-term Strong Sell rating) for the company indicates downward pressure on the stock over the near term.
Headquartered in City of Industry, California, Hot Topic Inc. is a shopping mall-based specialty retailer operating the Hot Topic and Torrid store concepts across the U.S. as well as the e-space music discovery concept, ShockHound. The company competes with Abercrombie & Fitch Co. (ANF).
Hot Topic’s same-store sales have suffered due to the continued economic downturn, which has squeezed disposable incomes compelling customers to cut back on non-essential spending. Also, Hot Topic’s business is seasonal in nature and generates a high proportion of sales during the fiscal third and fourth quarters, which are characterized by the back-to-school, Halloween and holiday seasons. As a result, the company is exposed to significant risks should the seasons fail to deliver expected operating performance.
Furthermore, Hot Topic sources its merchandise primarily from foreign vendors and manufacturers. This renders the company vulnerable to political, social and economic risks associated with operations in these countries.
ABERCROMBIE (ANF): Free Stock Analysis Report
HOT TOPIC INC (HOTT): Free Stock Analysis Report
Zacks Investment Research
