Shares of Hot Topic Inc. plunged 18 percent the day after the trendy teen retailer forecast weaker-than-expected earnings for the rest of the year, despite a smaller loss in the last quarter.

City of Industry-based Hot Topic after Wednesday's market close reported a narrower-than-expected loss for its fiscal second quarter, which ended Aug. 2. The company reported a loss of about $400,000, or 1 cent a share, compared with a $1.7 million loss (- 4 cents) a year ago. Total net sales rose 3 percent to $167 million.

Analysts polled by Thomson Reuters had expected a loss of 2 cents a share, before one-time items, on net sales of $166 million.

Hot Topic said the quarter was helped by strong net sales at its Torrid stores for large-size teens, which rose more than 15 percent to $39.6 million. Sales at its flagship Hot Topic stores fell 0.2 percent to $127 million.

The company "has done a good job of protecting margins with promotion, inventory and expense control," said analyst Amy Wilcox Noblin at Pali Capital Inc. "However the investment question ... is the sustainability of trend, particularly as the company laps (these initiatives) and Torrid's business has softened."

Hot Topic said it expects third-quarter earnings of 12 cents to 15 cents per share and fourth-quarter earnings of 25 cents to 28 cents per share. The forecast includes expenses of about 2 cents and 1 cent per share for the third and fourth quarter respectively, related to the launch of the company's online music initiative.

Excluding that expense, analysts on average were expecting the company to earn 16 cents per share for the third quarter and 27 cents a share for the fourth quarter.

Hot Topic shares closed down $1.23, or 18 percent, to $5.64 on the Nasdaq Thursday, after falling as low as 22 percent earlier in the day.

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