Hot Topic Earnings: Margins Rise with Revenues, Net Income Rises

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Hot Topic Inc. (NASDAQ:HOTT) reported net income above Wall Street’s expectations for the third quarter. Hot Topic is a mall- and web-based specialty retailer.

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Hot Topic Inc. Earnings Cheat Sheet

Results: Net income for Hot Topic Inc. rose to $4.3 million (10 cents per share) vs. $3.1 million (7 cents per share) in the same quarter a year earlier. This marks a rise of 37.8% from the year-earlier quarter.

Revenue: Rose 2% to $179.4 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Hot Topic Inc. beat the mean analyst estimate of 9 cents per share. It beat the average revenue estimate of $160.3 million.

Quoting Management: “We validated the new merchandising and sourcing strategies at Torrid this quarter, and continue to be enthusiastic about Torrid as a growth vehicle for the company,” said Lisa Harper, Chairman and CEO of Hot Topic, Inc. “Customers reacted positively to the new fashion-forward assortment and brand marketing introduced in late July, and our new vertical sourcing model significantly improved our gross margin rate. At Hot Topic, we continue to see improvement in the fashion apparel and tee businesses, which offset the challenges in the accessory categories.”

Key Stats:

Revenue has now increased for three quarters in a row. In the second quarter, revenue rose 4.6% to $157.8 million while the figure rose 6.4% in the first quarter from the year earlier.

The company beat estimates last quarter after meeting expectations in the second quarter with a loss of 2 cents per share.

The company reported a profit last quarter after being in the red the prior quarter. In the first quarter, the company booked a net loss of $3.8 million, or a loss of 9 cents per share.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 26 cents per share to 25 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from 42 cents a share to 41 cents over the last sixty days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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