Hot Topic Still In Red - Analyst Blog

Hot Topic Inc. (HOTT) reported a decline of 1.7% in same-store sales for the five weeks ended January 1, 2011. However, the drop in same-store sales narrowed considerably from a decline of 10.9% witnessed in the prior-year month and slightly from a decline of 2.1% in November 2010.

This marked the twentieth consecutive month of falling same-store sales. The company had last registered same-store sales growth of 3.1% in April 2009.

Hot Topic recorded a 0.1% drop in total sales, for the month, grossing $118.8 million.

Segment Results

Hot Topic: Segment same-store sales had declined 2.1% in December 2010, an improvement from a decline of 11.9% in the prior-year period. Total sales declined 1.2% year over year to gross $100 million for the five weeks ended January 1, 2011.

Torrid: Torrid registered same-store sales growth of 0.3%, while sales improved 4.9% year over year to gross $18.8 million for the five weeks ended January 1, 2011.

Dividend

The board of directors of Hot Topic Inc. approved a quarterly dividend of 7 cents to shareholders of record as of January 18, 2011. The company will pay the dividend on January 31, 2011.

The company expects fourth-quarter fiscal 2010 earnings per share in the range of 11 cents to 14 cents. Hot Topic expects comparable-store sales to decline in the low single digits.

The Zacks Consensus Estimate for fourth-quarter 2010 is 12 cents per share. For fiscal years 2010 and 2011, the Zacks Consensus Estimates are, respectively, a loss of 1 cent per share and earnings of 19 cents per share.

We maintain our long-term Neutral recommendation on Hot Topic Inc. The quantitative Zacks #3 Rank (short-term Neutral rating) for the company indicates no clear directional 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) .

 
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