Hot Topic Releases 4Q Sales Results - Analyst Blog

Hot Topic Inc. (HOTT), a shopping-mall based retail chain, reported sales results for the fourth quarter ending January 28, 2012.

Hot Topic’s fiscal fourth-quarter 2011 comparable store sales (comps) was up 1.3% compared with negative comps of 2.1% reported in the year-ago period. Comps increase in the quarter was driven by a 2.2% rise in comps at the company’s namesake stores, offset by a 3.2% decline recorded at the Torrid stores.

For fiscal year 2011, the company’s comps inched up 0.6%, with a 0.1% comps increase at the namesake stores and a 2.5% rise in Torrid comps.  Yearly comps in 2011 compare to negative comps of 5.3% reported in fiscal 2010.

However, Hot Topic’s net sales for the fourth quarter dipped 1.2% year over year to $209 million, on account of sales decline at both namesake and Torrid concepts. Quarterly sales, however, fared better than the Zacks Consensus Estimate of $207 million. Fiscal year sales also declined 1.5% from last year to $697.9 million.

Following better-than-expected sales results, Hot Topic lifted its earnings guidance for the fourth quarter to 19 cents – 20 cents per share, compared with its prior guidance range of 17 cents -19 cents per share and above last year’s earnings per share of $0.12. The current Zacks Consensus Estimate for the fourth quarter stands at 18 cents, which is below the company’s revised guidance range.

Hot Topic is scheduled to release complete fourth quarter and fiscal 2011 results on March 7, 2012.

Hot Topic mainly competes with teenage-focused retailers such as Abercrombie & Fitch Company (ANF) and American Eagle Outfitters Inc. (AEO). The company also competes with Wal-Mart Stores Inc. (WMT) and Best Buy Company (BBY), among others.

We reiterate our Neutral recommendation on Hot Topic as macroeconomic headwinds, intense competition and seasonal nature of the business undermine the company’s future growth prospects. However, the company has a Zacks #4 Rank, implying a short-term Sell rating.

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