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Hot Topic Results Suit It to a Tee

The Industry-based retailer posts a 33% rise in quarterly profit, despite slowing pants sales to male buyers.

March 05, 2003|Leslie Earnest | Times Staff Writer

Hot Topic Inc., which sells music-themed clothes and accessories to teens and young adults, on Tuesday reported a 33% increase in fourth-quarter profit as shoppers snapped up T-shirts, costume jewelry, belts and beanies.

The Industry-based company, which operates 446 Hot Topic and Torrid stores, said earnings in the quarter ended Feb. 1 rose to $16.6 million, or 51 cents a share, from $12.5 million, or 38 cents, a year earlier.

A consensus of analysts surveyed by Thomson First Call expected profit of 49 cents a share.

Hot Topic said sales rose to $148.3 million from $109.1 million a year earlier, a 36% increase. Sales at stores open at least a year, a key measure of growth, increased 9.7%.

As the company entered a new fiscal year, its same-store sales rose 4% last month, compared with a 1.4% decline the previous February. Valentine's Day shoppers, in particular, collected costume jewelry, underwear and novelty T-shirts.

Overall sales jumped 29% for the month to $29.9 million, in line with the company's expectations.

Analysts say Hot Topic has been outshining many other teen-oriented retailers in part because its products are unusual.

"There's nothing in the mall like Hot Topic," said analyst Jeffrey Van Sinderen of B. Riley & Co.

Despite a strong performance overall, the company has struggled with one part of its business, the sale of long pants for male buyers. Hot Topic, like many other retailers, has been trying to figure out how to tempt male shoppers, who seem willing to wear pants until they become threadbare. That's because there has been a dearth of new styles in the last couple of years, analysts and retailers say.

Sales of male apparel, excluding music-themed T-shirts, fell 22% in the fourth quarter and 18% in February, compared with those a year earlier, Chief Executive Betsy McLaughlin said.

The retailer is continuing to test pants styles and is "ready to react to a new trend as soon as it emerges," she said.

Male buyers are buying T-shirts and accessories, she said, and still represent about half the stores' shoppers.

For the year, Hot Topic's profit rose 21% to $34.6 million, or $1.05 a share, from $28.6 million, or 86 cents, the year before. Analysts were expecting earnings of $1.03 a share.

Sales for the year climbed 32% to $443.2 million, compared with $336.1 million in fiscal 2001. Comparable-store sales rose 5%.

Hot Topic shares fell 68 cents Tuesday to $21.23 on Nasdaq. The earnings were released after the market closed.

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