Mixed Results at Teen Retailers - Analyst Blog

In a season of steep discounting to lure shoppers, two teen retailers, Hot Topic Inc. (HOTT) and Zumiez Inc. (ZUMZ), posted improved same-store sales for the month of August 2010, helped by back-to-school buying and state sales-tax holidays. Tax free shopping days boosted mid-month sales though the lift was short-lived.

Zumiez

Zumiez remained the bright spot with positive same-store sales of 9.1% for August, handily surpassing a negative 12.1% in the same period last year. The year-over-year improvement in same store sales was mainly due to traction from popular merchandise. The August results marked the 9th consecutive month of positive same-store sales. Net sales jumped 14.9% to $59.4 million from $51.7 million in the same period last year.

Zumiez sees comparable store sales to increase in the mid-single-digit range for the third quarter of 2010. The company plans to open 27 new stores in fiscal 2010.

Hot Topic

Hot Topic still remained in the red with same-store sales growth being negative 3.7% in August. However, the fall in the same-store sales narrowed from a negative 8.1% witnessed in the prior-year period. This was the 16th consecutive month of negative same-store sales. It was in April 2009 that the company had last reported positive same-store sales of 3.1%. Total sales, at $65.3 million, dropped 2.0% for the month of August.

Segment Details at Hot Topic

Hot Topic: Segment same-store sales had declined 7.5%, 12.5% and 9.6% in the months of March, April and May, respectively. However, numbers improved somewhat in June with a decline of 1.6%, but again plunged 9.4% in July. In the month under review, although same-store sales of 3.3% was still red; it fared better than the preceding month.

Torrid: Torrid registered a fall of 5.6% in August with total sales of $92.0 million.

Lingering high unemployment levels and lower consumer spending continue to cast doubt on any type of near-term economic recovery. Thus, it is not surprising that promotional activity is steep and that traffic levels remain inconsistent, with conversion driven primarily by heavy discounting and events such as tax-free holidays.