Hot Topic's 1Q Comps Rise - Analyst Blog

By Zacks Equity Research,

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Hot Topic Inc. ( HOTT ), a shopping-mall based retail chain, posted solid sales and comparable store sales results for the first quarter ended April 28, 2012.

Hot Topic's first-quarter 2012 comparable store sales (comps) were up 7.5% compared with 1.2% reported in the year-ago period. Comps increase in the quarter was driven by a 9.5% rise in comps at the company's namesake stores and a 2.5% rise in Torrid stores.

Comps gain in the quarter also resulted from improvements in fashion attire validating the company's planned direction and positive comps at Torrid.

Hot Topic's net sales for the quarter increased 6.4% year over year to $171.6 million, on account of robust sales in both namesake and Torrid concepts. Quarterly sales also fared better than the Zacks Consensus Estimate of $168 million.

On a segmental basis, net sales rose 7% year over year to $124.0 million at the company's namesake stores, while Torrid stores registered a 5.0% increase with sales of $47.6 million.

Following better-than-expected sales results, Hot Topic lifted its earnings guidance for the first quarter to 7 cents - 8 cents per share, compared with its prior guidance range of 2 cents - 5 cents per share. The current Zacks Consensus Estimate for the first quarter stands at 5 cents, which is below the company's revised guidance range.

Additionally, the company initiated its second-quarter guidance projecting a loss per share of 4 cents - 6 cents compared to a loss per share of 14 cents recorded in the year-ago period. The company's guidance is based on comparable-store sales growth in the low to mid-single-digit range. The current Zacks Consensus Estimate for second quarter stands at a loss of 5 cents per share.

Hot Topic is scheduled to release its first quarter 2012 results on May 16, 2012.

Hot Topic mainly competes with teenage-focused retailers such as Abercrombie & Fitch Company ( ANF ) and American Eagle Outfitters Inc. ( AEO ). The company also competes with Wal-Mart Stores Inc. ( WMT ) and Best Buy Company ( BBY ), among others.

We reiterate our Neutral recommendation on Hot Topic as macroeconomic headwinds, intense competition and seasonal nature of the business undermine the company's future growth prospects. However, the company has a Zacks #2 Rank, implying a short-term Buy rating.

AMER EAGLE OUTF (AEO): Free Stock Analysis Report
ABERCROMBIE (ANF): Free Stock Analysis Report
BEST BUY (BBY): Free Stock Analysis Report
HOT TOPIC INC (HOTT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: AEO , ANF , BBY , HOTT , WMT

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