HOTT Hot Topic, Inc. (MM)

Hot Topic Inc. (HOTT) posted positive sales results for the first quarter ended May 4, 2013, while comparable-store sales (comps) remained negative in the quarter.

Calif. based company saw its comps decline 1.6% compared with a 7.5% increase reported in the comparable year-ago period. The decline in comps was driven by weak results at the company’s namesake stores, offset slightly by improved sales at the Torrid division. Comps at the company’s namesake stores dipped 2.4%, while Torrid stores witnessed a 1.0% jump in comps.

The company’s net sales for the quarter increased 1.9% year over year to $174.8 million, on account of robust sales at the Torrid stores.

On a segmental basis, net sales declined 1.5% year over year to $121.8 million at the company’s namesake stores, while Torrid stores registered a 10.7% increase in sales of $53.0 million. Management believes the success of the company’s Torrid store concepts, through new Torrid branding and vertical product strategies has strengthened the brand’s unit growth opportunity.

Hot Topic’s core business strategy focuses on music/pop culture related merchandise, based on the foundation of the pop culture and mainly targets customers in the teenage group. As of May 4, 2013, the company operated 621 Hot Topic stores across 50 states in the U.S., in Puerto Rico and in Canada, 195 Torrid outlets and 9 Blackheart stores. The company’s e-Commerce business looks strong and it runs 3 e-Commerce sites - hottopic.com, torrid.com and blackheartlingerie.com.

Currently, Hot Topic has a Zacks Rank #2 (Buy). Other stocks that continue to perform well in the retailing space are Big 5 Sporting Goods Corp. (BGFV ), Build-A-Bear Workshop Inc. (BBW) and Cabela’s Inc. (CAB ) , all of which carry a Zacks Rank #1 (Strong Buy).

 
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