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Sunday, Jan 29, 2023

Hot Topic Shares Skid on Earnings, Lower Guidance

Shares of Hot Topic Inc. fell nearly 11 percent on Thursday after the mall-based retailer’s second-quarter earnings missed analysts’ estimates and it cut its profit forecast for the next two quarters.

The City of Industry-based company closed down 10.6 percent to $14.14, recovering slightly after falling nearly 17 percent in after-hours trading late Wednesday, soon after the quarterly results were released.

Hot Topic reported net income of $893,000 (2 cents per diluted share) for the second quarter ended June 30, compared with $4.5 million (9 cents) for the like period a year earlier. Revenue rose 12 percent to $152.2 million from $136.3 million in the year-ago period.

The company also cut its third quarter earnings forecast to a range of 15 cents to 18 cents a share, down from analysts’ average estimates of 27 cents, according to Thomson Financial.

Amid a sales slump, Hot Topic has had a hard time meeting its own forecasts, even after lowering expectations. In July, Hot Topic cut its second quarter earnings estimate for the second time in two months because of weak apparel and accessories sales. Still, the company failed to meet analysts’ consensus estimates for earnings of 3 cents per diluted share and revenues of $153.2 million.

Hot Topic said its second-quarter comparable store sales fell 3.5 percent compared to the prior year. And its comparable-store sales month-to-date through August 16 have dipped approximately 8 percent from the same period last year.

As a result, the company now expects third-quarter revenues of $192 million to $195 million and comparable sales to be down in the mid-single digit percentage range from a year ago. Analysts had expected revenues of around $209.2 million.

For the fourth quarter, Hot Topic now projects earnings of 30 cents to 38 cents per diluted share, revenues of $220 million to $230 million and comparable sales to be down in the low to mid-single digit percentage range from 2004. Analysts were expecting fourth quarter earnings of between 27 cents to 44 cents per share on revenue estimates averaging $243.5 million.


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