Bloomberg News

Hot Topic Drops on Report of Second-Quarter Loss (Update1)

August 01, 2006

Shares of Hot Topic Inc. (HOTT:US) fell as much as 17 percent after the teen retailer said it had a loss in the second quarter because sales were lower than expected last month.

The net loss of 2 cents to 3 cents a share in the period ended July 29 compares with net income of 2 cents a year earlier. Sales at stores open at least a year dropped 7.2 percent in July in part because of fewer promotion offers and lower demand for back-to-school items during Florida's sales-tax-free days last week, the City of Industry, California-based company said.

Customers may have been less excited about the statewide tax holiday because they are waiting for more compelling sales from retailers, Chief Financial Officer Jim McGinty said in a message to Bloomberg News. Hot Topic said in a statement that it may take time to boost sales of the chain's new products and apparel.

Back-to-school gear appears to offer more newness than in years past, JPMorgan Securities Inc. analyst Brian Tunick said in a note to investors, adding that ``an improvement in apparel may not be enough to move the needle in the short term.''

Shares of Hot Topic fell $2.49, or 17 percent, to $12.21 as of 2:05 p.m. New York time in Nasdaq Stock Market composite trading. The stock dropped as low as $12.13 earlier, the biggest decline since an 18 percent slide on July 16, 2004. The stock had lost 14 percent in the year before today.

Hot Topic was expected to break even in the quarter, according to the average estimate of 14 analysts surveyed by Thomson Financial.

The company will report full second-quarter results on Aug. 16.

To contact the reporter on this story: Catherine Larkin in Washington at

To contact the editor responsible for this story: Glenn Holdcraft at

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