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Hot Topic CEO resigns

Former Gymboree chief Lisa Harper is to take over Betsy McLaughlin's post. Hot Topic has posted year-over-year revenue declines for seven straight quarters.

March 22, 2011|By Shan Li, Los Angeles Times

Beleaguered teen retailer Hot Topic Inc. announced the resignation of Chief Executive Betsy McLaughlin amid continuing weak sales and earnings.

Board member Lisa Harper, a former CEO of children's retailer Gymboree Corp., is to take the helm of the City of Industry-based company, which operates 653 Hot Topic stores and 151 Torrid stores.

McLaughlin, who became CEO in 2003, will stay three months to assist the transition, the company said Monday in a statement.

Hot Topic has posted year-over-year revenue declines for seven straight quarters. It recently hired an outside financial consultant to review operations and recommend "potential future improvements," the company said.

The retailer's fourth-quarter results, reported this month, fell short of analysts' expectations. Hot Topic posted a loss of $600,000, or 1 cent a share, for the three months that ended Jan. 29.

Last November, the company announced plans to close 40 to 50 underperforming stores and cut about 14% of its management positions as part of "a cost reduction plan to meet the challenges of the current environment."

The Hot Topic chain is known for its music- and pop-culture-inspired clothing but has focused heavily on punk and goth apparel in recent years. That merchandise didn't have broad appeal among teenagers, hurting sales, analysts said.

The retailer did receive a jolt two years ago from sales of licensed merchandise from the blockbuster "Twilight" movie franchise. But that boost faded, and the chain has struggled ever since.

Retail experts said the company has been trying to cut costs and to shake up its merchandise mix by stocking apparel that would appeal to a wider swath of teenagers, such as band T-shirts and skinny jeans.

"Our checks show a move towards more 'mom- and kid-friendly' pop culture icons and away from much of the goth and punk apparel product Hot Topic has traditionally been associated with," a March analyst report from Janney Capital Markets said. "We believe this move widens the target audience, and we look for continued traction with this broader customer base."

On Monday, Hot Topic shares rose 26 cents, or 5.14%, to $5.42.

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