Wall Street seemed to go out of its way to see the silver lining on the dark clouds over City of Industry-based clothing manufacturer and retailer Hot Topic Inc.
Or maybe it was a case of lowered expectations.
Hot Topic started last week by reporting a 7 percent decline in same-store-sales, a critical gauge of performance in the retail industry. Analysts had projected a 5.7 percent drop. The company has also reported some of the biggest declines came in the typically buoyant back-to-school buying season.
Then, Hot Topic lowered its fourth-quarter earnings guidance to between 33 and 44 cents per share, citing sales trends. In August, Hot Topic had told the Street to look for 44 to 48 cents per share.
Despite all that, the company’s stock rose 3 percent. The company had also reported that overall October sales at its roughly 800 Hot Topic and Torrid outlets which included returns from stores that have been open less than a year were up 3 percent.
“Expectations were already pretty muted for the holiday season,” said analyst Sharon Zackfia, of William Blair & Co. “What they said wasn’t that out of line with what we expected them to say.”
Hot Topic has been foundering for several years. When the goth craze that made its company stores the rage in the 1990s faded, so did sales.
“Obviously Hot Topic is struggling to regain traffic that it’s lost over the last couple of years,” Zackfia said. “It’s always easier to lose a customer than get one back. They’ve had some steps in the right direction, but so far nothing has been strong enough to lift the overall tide.”
Zackfia added that while the fashion division has actually experienced some gains, the company has lost ground on its licensing. The company’s performance has been hit-and-miss in that realm, with a licensing roster that ranges from the film “Napoleon Dynamite” to the 1980s rock band Van Halen.
“They had some struggles with the non-music licensing,” she said, describing it as a “lack of compelling newness.”
As for when Hot Topic might be able to regain its mojo with teenagers, Zackfia said it’s still unclear.
New Deals
What health craze?
It appears that the dining public’s passion for IHOP Corp.’s combinations of French toast, cream cheese and fruit gels may keep the company’s locations proliferating for the foreseeable future.
The Glendale-based pancake purveyor signed franchisee agreements during the third quarter that will result in 20 new restaurants, scheduled to open over the next eight years. IHOP currently has about 388 restaurants in the pipeline to be built in the next 13 years. Legal agreements are being finalized for an additional 110 restaurants. At the end of September, there were nearly 1,300 IHOPs in the United States.
Raymond James Financial Inc. analyst Bryan Elliott said that he expects IHOP to keep growing at a rapid rate and posting strong same store sales for the foreseeable future, absent a recession, of course.
“The business has gotten progressively healthier with the arrival of the current management team several years ago,” Elliott said.
And speaking of healthier, could it be that IHOP’s high-calorie menu is actually a selling point for diners assaulted with warnings about carbs, calories and cholesterol?
“IHOP is a concept that serves relatively inexpensive meals to moderate income folks and allows them to enjoy a meal prepared outside the home more frequently than they would otherwise be able to do,” said Elliott.
In other words, they like French toast and they don’t care how fattening it is.
Casual dining restaurants like Cheesecake Factory Inc., and, to a lesser extent, California Pizza Kitchen Inc., fought their way through a long, hot summer as high gas prices kept consumers home. IHOP, meanwhile, was able to reap the rewards as families that did venture out sought lower-priced fare. The company’s stock hovered around $52, just of its 52-week high of $53.80.
True Religion Apparel, Inc., the L.A.-based high-end jeans maker that in the past two years has diversified its product line and executed a successful reverse merger, is broadening its retail base.
True Religion opened its first branded store, the Manhattan Beach flagship, almost a year ago. The first outlet opened last month and three more stores in New York, Miami, and on Robertson Boulevard in West Hollywood are all slated to open in January.
Last week, the company announced two more lease agreements, one for a Short Hills, N.J, store and another in Oyster Bay in Long Island, NY.
The company has also hired Emilio Fields as the company’s first director of marketing and public relations. Fields has worked for Andrew Marc, Yves Saint Laurent and Christian Dior.
On the Street
Mossimo Inc. was de-listed from the Nasdaq this week, indicating that the company’s acquisition by founder Mossimo Giannulli has been finalized. The California Fashion Association has named Barbara Graff as its events director. She had been the West Coast bureau chief for Women’s Wear Daily and previously ran her own import/export agency. Alexis Tereszcuk is the new Westfield Century City marketing director. She most recently served as director of membership for the Century City Chamber of Commerce. Jak & Rae;, a contemporary women’s sportswear company, has appointed Coco Kliks as design director. Kliks previously designed her own line.
Staff reporter Emily Bryson York can be reached at (323) 549-5225, ext. 235, or at
[email protected]
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