The City of Industry, CA—Hot Topic, the teen oriented specialty retailers, reported Wednesday that it’s second quarter loss narrowed in line with expectations as its comparable store sales and margins improved.
For the second quarter, Hot Topic’s net loss narrowed slightly to $6.2 million from a net loss of $6.3 million in the year-ago period. The loss per share was unchanged at 14 cents. Results for the quarter include $4.1 million of expenses or 6 cents a share per share, for the implementation of its recently announced strategic business changes and cost reduction plan. Excluding the charges, loss for the quarter was $3.6 million or 8 cents a share.
Revenue edged up 0.7% to $150.9 million from $150.0 million in the year ago quarter. Total comparable store sales increased 2.6%. Gross margin improved to 32.2% from 30.7%.
Analysts’ average estimate expected a loss of 8 cents a share on sales of $148.0 million.
Total company comparable store sales increased 2.6 percent for the quarter. By division, its Hot Topic stores posted 1.2% increase in comparable store sales, while Torrid’s were up 7.4%.
Cost Reduction Plan in Place
The numbers appear to reflect that the company’s cost-reduction plan announced in December is in its earlier stages of a turnaround, analysts said. Longtime CEO Betsy McLaughlin and Amy Kocourek, merchandising chief at Hot Topic resigned earlier this year in the wake of the plan.
Since then, Hot Topic has reported comparable store sales that beat retail analysts’ average estimates in three out of four months. But like all retailers with a strong back to school business, there’s worries how an uncertain economy and high unemployment may affect the season.
Looking ahead, Hot Topic forecast 7 cents to 9 cents a share earnings in its third quarter based on a comparable store sales increase in the low single digits. Analysts’ average estimate expects 8 cents a share.
For its full year, Hot Topic now expects earnings in the range of 17 to 23 cents a share on excluding 23 cents a share in charges related to the cost reduction plan. In March, the company had projected per-share earnings of 5 cents to 15 cents.
Excluding the expenses, full-year results are now indicated to range from a loss of $0.06 per share to breakeven per share.
Starting in January 2012, the company expects to open between 25 and 45 new torrid stores, and to close between 10 and 20 Hot Topic stores and approximately five torrid stores.
The company’s board authorized a $25 million repurchase program, expected to remain in effect through January 28, 2012 unless extended or shortened.
