CITY OF INDUSTRY, Calif.--(BUSINESS WIRE)-- Hot Topic, Inc. (Nasdaq:HOTT - News), today reported net income in the third quarter of fiscal 2010 (13 weeks ended October 30, 2010) of $0.4 million, or $0.01 per share, compared to $5.8 million, or $0.13 per share, in the third quarter of fiscal 2009 (13 weeks ended October 31, 2009). The third quarter results include the previously announced non-cash asset impairment charge of $3.0 million, or $0.04 per diluted share, related to the impairment of ShockHound assets.
Total sales for the third quarter of fiscal 2010 decreased 3.4% to $183.2 million compared to $189.6 million for the third quarter last year. Total company comparable store sales declined 5.0% for the third quarter of fiscal 2010. A summary of the sales results by division was included in the October sales release.
At the end of the third quarter of fiscal 2010, the company operated 680 Hot Topic stores and 155 Torrid stores compared to 680 Hot Topic stores and 156 Torrid stores at the end of the third quarter of fiscal 2009. During the third quarter of fiscal 2010, the company opened four new Hot Topic stores and closed three stores. The company also remodeled or relocated nine Hot Topic stores during the quarter.
The company is also announcing that it has developed and is in the process of implementing a cost reduction plan to meet the challenges of the current environment. Beginning in 2011, these efforts are expected to result in an estimated annual pre-tax income improvement of approximately $13 million.
The key elements of this plan are as follows:
Closure of approximately 40 to 50 underperforming store locations by the end of the first quarter of 2011. These closures will occur as a result of natural lease expirations, exercising lease kick out clauses and other negotiations. The company expects to incur costs of approximately $6 million, primarily in the fourth quarter of 2010. These costs are associated with the write down of store assets, early lease terminations and store management severance.
Reduction of capital expenditures for 2011 to approximately $20 million from an estimated $30 to $32 million in 2010.
Reduction of approximately 14% of the home office and field management positions plus planned savings in other non-payroll overhead expenses. The company expects to incur approximately $2 million in expenses in the fourth quarter of 2010 primarily related to severance and outplacement.
The company issued fourth quarter (13 weeks ending January 29, 2011) guidance of earnings in the range of $0.11 to $0.14 per diluted share, excluding the costs associated with the cost reduction plan. This guidance is based upon a low-single-digit decline in comparable store sales.
The company expects to incur the additional costs primarily in the fourth quarter, as previously discussed related to the implementation of the cost reduction plan, that will equate to approximately $8 million or $0.11 per diluted share.
A conference call to discuss third quarter results, business trends, guidance and the cost reduction plan is scheduled for November 17, 2010 at 4:30 PM (ET). The conference call number is 800-706-7749, 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 29783398, 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.