Hot Topic's Negative Comps Better - Analyst Blog

Hot Topic Inc. (HOTT), a shopping mall-based specialty retailer, remained in the red with same-store sales sliding 2.1% in November 2010.

This marked the 19^th consecutive month of falling same-store sales. However, the drop in same-store sales narrowed considerably from a decline of 11.7% witnessed in the prior-year month.

It should be noted that the company had last registered same-store sales growth of 3.1% in April 2009.

Hot Topic recorded a 1.8% drop in total sales, for the month, grossing $54.3 million. The company operates the Hot Topic and Torrid store concepts across the U.S. as well as the e-space music discovery concept, ShockHound.

Segment Results

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.

After experiencing a fall of 3.3% in August, same-store sales showed a marginal improvement declining 3.1% in September. However, the improvement was offset by a fall of 10.7% in October while improving somewhat in November with a decline rate of only 2.9%. Segment sales declined 2.9% to $41.6 million.

Torrid: Torrid registered a growth of 1.2% in same-store sales in October with total sales of $12.7 million, a rise of 1.5% year over year.

Same-store sales of the company have been continuously reporting negative results attributable to the sluggish economic conditions.

The company operates in a highly fragmented specialty retail sector and faces intense competition from other teenage-focused retailers, such as Abercrombie & Fitch Co. (ANF), Aeropostale, Inc. (ARO) and American Eagle Outfitters Inc. (AEO).

Hot Topic's shares maintain a Zacks #5 Rank, which translates into a short-term Strong Sell recommendation. Our long-term recommendation for the stock remains Neutral.

 
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