Hot Topic Inc. said lower sales and gross margins significantly hurt third-quarter earnings, but investors responded positively when the teen apparel retailer said it would close underperforming stores and cut jobs to reduce costs.
The City of Industry company late Tuesday reported net income of $400,000 (1 cent per share) compared with income of $5.8 million (13 cents) a year earlier.
Revenue fell 3.4 percent to $183 million, with same-store sales down 5 percent. The results included an impairment charge of $3 million (-4 cents) related to the company’s struggling ShockHound music website.
Analysts surveyed by Thomson Reuters on average expected per-share profit of 5 cents on revenue of $182 million.
Hot Topic, which operates 680 Hot Topic stores and 155 Torrid stores, said it will cut about 14 percent of corporate and field management positions, and close 40 to 50 stores. During the third quarter, it opened four new Hot Topic stores and closed three others.
The cuts are expected to save $13 million in annual pre-tax income starting next year. The company, which two years ago benefited from licensed merchandise sales from the hit Twilight movie franchise, has seen revenue drop in the past six quarters.
Shares were up 47 cents, or 8.6 percent, to $5.91 in midday trading on the Nasdaq.