NEW YORK — Despite an increase in sales, Hot Topic Inc.’s second-quarter earnings plunged 80.3 percent, coming in below Wall Street estimates.
Net income for the struggling specialty retailer dropped to $893,000 from $4.5 million in the same quarter last year, while on a per-share basis earnings totaled 2 cents, a penny below analysts’ consensus. Total revenues increased 11.7 percent to $152.2 million. Analysts had been expecting a profit of 3 cents on $153 million in revenues.
To make matters worse, Hot Topic forecast third- and fourth-quarter earnings below analysts’ consensus estimates partially due to weak back-to-school sales so far.
Elizabeth McLaughlin, chief executive officer of Hot Topic, said on a subsequent conference call with analysts that during the quarter, “the consumer was still in summer mode and not yet interested in purchasing true back-to-school product.”
The weak profits come as no surprise, however, considering the company’s ongoing decline in sales levels and prior earnings expectations announcements. On July 28, the company had reduced its second-quarter EPS estimates for the second time to 2 cents to 4 cents, saying sales trends in apparel and accessories were negative and early b-t-s were weaker than expected.
That followed a June 20 statement from the company, where it cut its original EPS guidance of 12 cents down to 7 to 9 cents. At that time, the company said it expected total revenues in the second quarter to be $155 million to $158 million.
During the quarter, same-store sales for the City of Industry, Calif.-based specialty retailer, which specializes in selling Goth apparel, popular music CDs and novelty T-shirts, fell 1.9 percent, 3.3 percent and 5 percent in May, June and July, respectively, for a total same-store sales decline of 3.5 percent.
In the six months of the fiscal year, Hot Topic reported a net income drop of 39.9 percent to $5.9 million, or 13 cents, versus $9.8 million, or 20 cents, last year.
Meanwhile, the retailer said August month-to-date same-store sales are down 8 percent. Consequently, the company forecast third-quarter revenues in the range of $192 million to $195 million and EPS of 15 to 18 cents. For the fourth quarter, the company expects sales of $220 million to $230 million and EPS of 30 to 38 cents.
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Analysts are expecting a profit of 27 cents in the third quarter and 43 cents for the fourth quarter.