From T’s to Tease

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Hot Topic Inc. is imposing its dark, skulls-studded fashion sensibility on the flirty pink world of lingerie.

The City of Industry company opened five stores in Southern California and Texas last month to test its latest retail concept, Blackheart. It’s a lingerie line boasting bras with names such as the Wicked Push-up, Toxic Demi and Deadly Plunge.

Lisa Stanley, vice president of marketing for Hot Topic, said Blackheart’s styles differ from current lingerie trends, which emphasize bright pinks, pastels and lace.

“Blackheart is about rock ’n’ roll and being irreverent,” she said. “No one’s doing what we’re doing in regard to edgy fashion lingerie with sexy rock-star aesthetics.”

The stores opened the same week the company announced third quarter earnings last month, which were healthier than analysts expected.

But even with strong company financials backing the concept, Blackheart will have to contend with intense competition to succeed. Today, the lingerie market is dominated by only a few major players, most notably Victoria’s Secret, the multibillion-dollar brand of Limited Brands Inc. in Columbus, Ohio. Its Pink sub-brand targets younger women, the demographic Blackheart is chasing. Other competitors include American Eagle Outfitters Inc. in Pittsburgh, Pa., with its intimates sub-brand Aerie, and L.A. retailer Frederick’s of Hollywood Group Inc.

Stephanie Wissink, an analyst with Piper Jaffray Co. in Minneapolis, said the concept could work well for the chain, even if it only caters to a niche.

“It can be small but still very attractive, and it could be that way forever; it doesn’t have to grow,” she said. “It’s an interesting incubation opportunity, but I don’t think anyone is putting their hopes and dreams on this driving growth.”

Lisa Harper, chief executive at Hot Topic, said that the stores will help the company expand its customer reach.

“Blackheart gives us the opportunity to leverage our customer base at Hot Topic, as well as appeal to a broader customer, with product offerings that do not cannibalize the core Hot Topic business,” she said in a conference call with investors when the earnings were announced.

Hot Topic, founded in 1988, sells apparel, accessories, music and novelty items with heavy influences from music and pop culture. The company’s main specialty retail chain, with the same name as the company, has 620 stores in North America. Torrid, its plus-size fashion concept for young women, has 186 stores. Blackheart is the third retail concept for the company.

The company struggled to keep sales up as the Goth fashions it was best known for in the ’90s and the early years of this century fell out of favor with young consumers.

The company’s stock reflected the rise and fall of the chain’s popularity, peaking at $31.85 in January 2004 and sinking to $3.96 in January 2008. Shares have slowly risen since then to trade between $8 and $10 for most of the past year.

The company brought Harper in to turn the company around in 2011. In its most recent earnings report, the company showed significant improvement.

The company’s net income spiked for the quarter to $4.3 million, compared with $3.1 million in the same quarter last year. Same-store sales increased only 0.2 percent, but revenue increased 2 percent to $179 million.

Also noteworthy: The company announced plans to open as many as 140 Hot Topic stores in the next five years, including discount outlets and locations in Canada. As for Torrid, Harper said she believes the chain can support more than 600 stores. Blackheart stores will open at a much slower pace, assuming the five now open test well with consumers.

There are three Blackheart stores in Southern California, at the Glendale Galleria – right next to a Victoria’s Secret – and at the Irvine Spectrum and Brea Mall. There are two other shops at Houston malls.

Novelty nod

The stores are somewhat small, averaging between 1,800 and 2,000 square feet, and they borrow from the Hot Topic aesthetic for interior décor. Walls and ceilings are painted black, floors look like concrete, and a sign reading “Peep Show” flanks the entryway to dressing rooms.

The stores primarily sell bras and panties, but also stock loungewear and other apparel, as well as a few novelty items, including faux leather Batman undies with a yellow minicape, and pink wrist cuffs attached to lengths of chain.

But while novelty items are not a surprising find at a Hot Topic affiliate, Harper said the bras are the main attraction.

“We are very serious about the product,” she said. “It fits well, it’s well-produced and it’s high quality.”

Blackheart bras cost between $29.50 and $44.50, which puts it in line with the lower prices at Victoria’s Secret and Aerie, but above Frederick’s, which sells some for as low as $9.99.

Blackheart is meant to attract women ages 18 to 30, a slightly older demographic than at Hot Topic stores. Harper said the stores already draw customers that wouldn’t ordinarily buy from Hot Topic.

“We are seeing customer trends in the store that really indicate we are getting a much broader base of customers checking it out and purchasing,” she said.

Piper Jaffray analyst Wissink said Blackheart is a promising concept.

“Whether they end up turning this into something big or it gets folded into Hot Topic’s existing business, it has the potential to expand customer reach,” she said. “Blackheart would age up a little bit from what Hot Topic’s core customer currently is, so I think there’s strategic value even if there’s not significance on a growth basis.”

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