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Hot Topic widens loss in Q2

By
August 18, 2010 2:11 PM

Press Release:

CITY OF INDUSTRY, Calif.--(BUSINESS WIRE)--Hot Topic, Inc. (Nasdaq Global Select Market: HOTT) today announced that the company incurred a net loss in the second quarter of fiscal 2010 (13 weeks ended July 31, 2010) of $6.3 million, or $0.14 per share, compared with a net loss of $3.2 million, or $0.07 per share, in the second quarter of fiscal 2009 (13 weeks ended August 1, 2009). The results for the second quarter of fiscal 2010 and fiscal 2009 include approximately $0.02 per share of expense related to ShockHound (www.shockhound.com), the company’s online music site.

Total sales for the second quarter of fiscal 2010 decreased 4.9% to $150.0 million compared to $157.8 million for the second quarter last year. Total company comparable store sales declined 6.4% for the second quarter of fiscal 2010.

At the end of the second quarter of fiscal 2010, the company operated 679 Hot Topic stores and 155 Torrid stores compared to 679 Hot Topic stores and 156 Torrid stores at the end of the second quarter of fiscal 2009. During the second quarter of fiscal 2010, the company opened one new Hot Topic store and one new Torrid store, and closed three Hot Topic stores and two Torrid stores. The company also remodeled or relocated six Hot Topic stores during the quarter.

The company issued third quarter (13 weeks ending October 30, 2010) guidance of earnings in the range of $0.05 to $0.08 per diluted share based upon a mid-single-digit decline in comparable store sales. Included in the guidance is expense related to ShockHound (www.shockhound.com), the company’s online music site, of approximately $0.02 per share.

A conference call to discuss second quarter results, business trends, guidance and other matters is scheduled for August 18, 2010 at 4:30 PM (ET). The conference call number is 866-202-4367, pass code “Hot Topic”, and will be accessible to all interested parties. It will also be webcast on the company’s Investor Relations website located at http://investorrelations.hottopic.com. A replay of the conference call will be available at 888-286-8010, pass code 66128973, for approximately two weeks. In addition, a webcast replay of the conference call will be available on the company’s Investor Relations website for approximately two weeks.

Hot Topic, Inc. is a mall and web based specialty retailer operating the Hot Topic and Torrid concepts, as well as the e-space music concept, ShockHound. Hot Topic offers music/pop culture-licensed and music/pop culture-influenced apparel, accessories, music and gift items for young men and women principally between the ages of 12 and 22. Torrid offers apparel, lingerie, shoes and accessories designed for various lifestyles for plus-size females principally between the ages of 15 and 29. ShockHound (www.shockhound.com) is a genre-spanning music website where people of all ages can purchase MP3s and music merchandise, share their music interests, read the latest music news and view exclusive editorial content.

In addition to historical information, this news release and the aforementioned conference call contain forward-looking statements, which may include statements relating to financial results, guidance, store operations, closures, remodels and relocations, projections and other financial performance. These statements involve risks and uncertainties, including risks and uncertainties associated with meeting expected financial results, fluctuations in sales and comparable store sales results, our online music site, music, license and fashion trends, competition from other retailers, uncertainties generally associated with specialty retailing, technology and other risks associated with Internet sales, the effect of negative conditions in the economic environment (including global capital and credit markets), the effect of severe weather or natural disasters, political and/or social changes or events that could negatively impact shopping patterns and/or mall traffic, relationships with mall developers and operators, relationships with our vendors, litigation proceedings and contingent liabilities, as well as other risks detailed in the company’s SEC reports including its Annual Report on Form 10-K for the year ended January 30, 2010 and its Quarterly Reports on Form 10-Q. Historical results achieved are not necessarily indicative of the future prospects of the company, and actual results or circumstances could differ materially from the forward-looking statements.

HOT TOPIC, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

Second Quarter Ended

July 31, 2010 Aug. 1, 2009

 Net sales $150,007 $157,793

Cost of goods sold, including buying, distribution and occupancy costs

103,985 108,135

Gross margin 46,022 49,658

Selling, general & administrative expenses 56,381 55,084

Loss from operations (10,359 ) (5,426 )

Interest income-net 58 183

Loss before benefit for income taxes (10,301 ) (5,243 )

Benefit for income taxes (4,032 ) (2,066 )

Net loss $(6,269 ) $(3,177 )

Loss per share:

Basic and Diluted $(0.14 ) $(0.07 )

Shares used in computing loss per share:

Basic and Diluted 44,563 44,064

Six Months Ended

July 31, 2010 Aug. 1, 2009

Net sales $312,654 $332,917

Cost of goods sold, including buying, distribution and occupancy costs

212,169 223,129

Gross margin 100,485 109,788

Selling, general & administrative expenses 113,836 113,362

Loss from operations (13,351 ) (3,574 )

Interest income-net 132 353

Loss before benefit for income taxes (13,219 ) (3,221 )

Benefit for income taxes (5,173 ) (1,269 )

Net loss $(8,046 ) $(1,952 )

Loss per share:

Basic and Diluted $(0.18 ) $(0.04 )

Shares used in computing loss per share:

Basic and Diluted 44,480 44,032

HOT TOPIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

July 31, 2010 Aug. 1, 2009

Current Assets:

Cash, cash equivalents and short-term investments $61,790 $82,052

Inventory 88,572 90,363

Prepaid expenses and other 22,268 18,292

Deferred tax assets 6,041 6,213

Total current assets 178,671 196,920

Property and equipment, net 135,095 148,954

Deposits and other 3,860 2,901

Long-term investments 6,614 5,170

Deferred tax assets 5,532 8,440

Total assets $329,772 $362,385

Current Liabilities:

Accounts payable $35,939 $26,395

Accrued liabilities 35,690 35,985

Income taxes payable 538 910

Total current liabilities 72,167 63,290

Deferred rent 29,820 34,356

Deferred compensation liability 3,609 2,601

Income taxes payable 2,380 1,850

Total liabilities 107,976 102,097

Total shareholders’ equity 221,796 260,288

Total liabilities and shareholders’ equity $329,772 $362,385

OTHER DATA

(Dollars in thousands)

(Unaudited)

Six Months Ended

July 31, 2010 Aug. 1, 2009

Depreciation and amortization $19,626 $18,980

Capital expenditures $14,983 $13,356

Total company store square footage 1,583,600 1,582,500

Hot Topic average store size 1,762 1,758

Torrid average store size 2,497 2,493

 

 

 

 

 


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