Exhibit 99.1
** NEWS RELEASE **
HOT TOPIC, INC. REPORTS 3rd QUARTER EARNINGS
OF $0.16 PER DILUTED SHARE
CITY of INDUSTRY, CA, November 15, 2006 — Hot Topic, Inc. (Nasdaq Global Select Market: HOTT), reported results for its third fiscal quarter (13 weeks) ended October 28, 2006.
The company reported net income in the third quarter of $7.1 million, or $0.16 per diluted share, compared to $5.9 million or $0.13 per diluted share for the comparable period last year. The third quarter 2006 results include approximately $0.02 per share of stock-based compensation. Net sales for the third quarter increased 2% to $196.7 million from $192.7 million for the third quarter of fiscal 2005.
As previously reported, comparable store sales decreased 6.8% for the quarter compared to a decrease of 6.2% during the third quarter of fiscal 2005.
At the end of the quarter, the company operated 693 Hot Topic stores and 129 Torrid stores compared to 648 Hot Topic stores and 114 Torrid stores at the end of the third quarter of fiscal 2005. During the third quarter of fiscal 2006, the company opened a total of 11 Hot Topic stores and 3 Torrid stores and closed 1 Torrid store. The company also remodeled or relocated 7 Hot Topic stores during the quarter.
The company also announced that it expects to open 35 new stores in fiscal 2007 (year ending February 2, 2008). This includes opening an estimated 15 new Hot Topic stores and 20 new Torrid stores. In addition, the company plans to remodel approximately 60 to 80 Hot Topic stores.
A conference call to discuss third quarter, business trends, guidance and other matters is scheduled for today at 4:30 PM Eastern time. The conference call number is 800-561-2601, pass code “Hot Topic”, and will be accessible to all interested parties. The conference call will also be webcast at www.companyboardroom.com. A replay will be available at 888-286-8010, pass code 85899277, for approximately two weeks.
Hot Topic, Inc. is a national mall-based specialty retailer. Hot Topic offers apparel, accessories and gifts to young men and women principally between the ages of 12 and 22. Torrid, the company’s second concept, provides plus-size fashion-forward apparel and accessories that target young women principally between the ages of 15 and 29. As of October 28, 2006 the company operated 693 Hot Topic stores in all 50 states and Puerto Rico, 129 Torrid stores, and Internet storeswww.hottopic.com andwww.torrid.com.
In addition to historical information, this news release and the aforementioned conference call contain forward-looking statements, which include statements relating to financial results, guidance, projections and other financial performance, managing growth, and litigation matters and contingent liabilities. These statements involve risks and uncertainties, including risks and uncertainties associated with meeting expected financial results, management of growth, relationships with mall developers and operators, the risk that available cash or mall space will not be adequate for planned expansion, fluctuations in sales and comparable store sales results, risks and uncertainties with respect to new store openings including risks associated with the company’s new store concepts and Internet stores, music and fashion trends, competition from other retailers, uncertainties generally associated with specialty retailing, the effect of economic conditions, the effect of severe weather or natural disasters, political and/or social changes or events that could negatively impact shopping patterns and/or mall traffic, litigation proceedings and contingent liabilities, as well as other risks detailed in the company’s SEC reports including its Quarterly Reports on Form 10-Q and its Annual Report on Form 10-K for the year ended January 28, 2006. Historical results achieved are not necessarily indicative of the future prospects of the company, and actual results or circumstances could differ materially from the forward-looking statements.
Contact:
Hot Topic, Inc., City of Industry, CA
Mr. Jim McGinty, CFO 626-839-4681 x2675
Ms. Megan Hall, Manager of I.R. 626-839-4681 x2173
HOT TOPIC, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Third Quarter Ended | ||||||
Oct. 28, 2006 | Oct. 29, 2005 | |||||
Net sales | $ | 196,669 | $ | 192,747 | ||
Cost of goods sold, including buying, distribution and occupancy costs | 128,271 | 129,271 | ||||
Gross margin | 68,398 | 63,476 | ||||
Selling, general & administrative expenses | 56,904 | 54,043 | ||||
Income from operations | 11,494 | 9,433 | ||||
Interest income, net | 277 | 180 | ||||
Income before income taxes | 11,771 | 9,613 | ||||
Provision for income taxes | 4,701 | 3,682 | ||||
Net income | $ | 7,070 | $ | 5,931 | ||
Earnings per share: | ||||||
Basic | $ | 0.16 | $ | 0.13 | ||
Diluted | $ | 0.16 | $ | 0.13 | ||
Weighted average shares outstanding | ||||||
Basic | 44,207 | 45,108 | ||||
Diluted | 44,735 | 45,738 | ||||
Nine Months Ended | ||||||
Oct. 28, 2006 | Oct. 29, 2005 | |||||
Net sales | $ | 511,058 | $ | 494,743 | ||
Cost of goods sold, including buying, distribution and occupancy costs | 343,566 | 332,479 | ||||
Gross margin | 167,492 | 162,264 | ||||
Selling, general & administrative expenses | 160,388 | 143,942 | ||||
Income from operations | 7,104 | 18,322 | ||||
Interest income, net | 919 | 840 | ||||
Income before income taxes | 8,023 | 19,162 | ||||
Provision for income taxes | 3,265 | 7,339 | ||||
Net income | $ | 4,758 | $ | 11,823 | ||
Earnings per share: | ||||||
Basic | $ | 0.11 | $ | 0.26 | ||
Diluted | $ | 0.11 | $ | 0.26 | ||
Weighted average shares outstanding | ||||||
Basic | 44,150 | 44,978 | ||||
Diluted | 44,744 | 46,064 |
HOT TOPIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Oct. 28, 2006 | Oct. 29, 2005 | |||||
Current Assets: | ||||||
Cash, cash equivalents and short-term investments | $ | 37,704 | $ | 19,917 | ||
Inventory | 102,030 | 96,404 | ||||
Prepaid expenses and other | 7,007 | 19,258 | ||||
Deferred tax assets | 2,725 | 2,541 | ||||
Total current assets | 149,466 | 138,120 | ||||
Property and equipment, net | 173,457 | 173,712 | ||||
Deposits and other | 387 | 248 | ||||
Total assets | $ | 323,310 | $ | 312,080 | ||
Current Liabilities: | ||||||
Accounts payable | $ | 33,027 | $ | 29,141 | ||
Accrued liabilities | 34,962 | 35,545 | ||||
Income taxes payable | 1,870 | — | ||||
Total current liabilities | 69,859 | 64,686 | ||||
Deferred rent | 41,411 | 38,624 | ||||
Deferred tax and other | 314 | 5,994 | ||||
Total liabilities | 111,584 | 109,304 | ||||
Shareholders’ equity | 211,726 | 202,776 | ||||
Total liabilities and shareholders’ equity | $ | 323,310 | $ | 312,080 |
HOT TOPIC, INC.
OTHER DATA
(Dollars in thousands)
(Unaudited)
Nine Months Ended | ||||||
Oct. 28, 2006 | Oct. 29, 2005 | |||||
Depreciation and amortization | $ | 28,398 | $ | 23,526 | ||
Capital expenditures | $ | 31,522 | $ | 61,101 | ||
Number of stores open at end of period: | ||||||
Hot Topic | 693 | 648 | ||||
Torrid | 129 | 114 | ||||
Total store square footage | 1,533,100 | 1,409,300 |