Exhibit 99.1
** NEWS RELEASE **
HOT TOPIC, INC. REPORTS 4th QUARTER EARNINGS
OF $0.20 PER DILUTED SHARE
CITY of INDUSTRY, CA, March 14, 2007 — Hot Topic, Inc. (Nasdaq Global Select Market: HOTT), today announced that net earnings for the fiscal fourth quarter of 2006 (14 weeks ended February 3, 2007) were $8.9 million, or $0.20 per diluted share, compared with $10.6 million, or $0.23 per diluted share, for the fiscal fourth quarter of 2005 (13 weeks ended January 28, 2006).
As previously reported, total sales for the 14 weeks ended February 3, 2007 increased 4% to $240.5 million compared to $230.4 million for the 13 week period ended January 28, 2006. Comparable store sales decreased 5.3% for the fourth quarter of 2006. Due to the 53rd week in fiscal 2006, fourth quarter comparable store sales are compared to the corresponding 14 week period ended February 4, 2006.
Results for the fourth quarter of 2006 include an asset impairment charge of $2.8 million, or $0.04 per diluted share, in selling, general and administrative expenses in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. The fourth quarter 2006 results also include approximately $0.01 per diluted share of stock-based compensation.
Fourth quarter of 2005 results included an asset impairment charge of $1.7 million, or $0.02 per diluted share, in selling, general and administrative expenses. The fourth quarter of 2005 results also included other income of $3.1 million, or $0.04 per diluted share, associated with gift card breakage.
At the end of the fourth quarter of fiscal 2006, the company operated 694 Hot Topic stores and 131 Torrid stores compared to 663 Hot Topic stores and 120 Torrid stores at the end of the fourth quarter of fiscal 2005. During the fourth quarter of fiscal 2006, the company opened a total of 2 Hot Topic stores and 2 Torrid stores and closed 1 Hot Topic store. The company also remodeled or relocated 2 Hot Topic stores during the quarter.
A conference call to discuss fourth quarter and fiscal year end business trends, guidance and other matters is scheduled for today at 4:30 PM Eastern time. The conference call number is 866-700-0133, pass code “Hot Topic”, and will be accessible to all interested parties. The conference call will also be webcast at www.earnings.com. A replay will be available at 888-286-8010, pass code 94816544, 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 March 3, 2007 the company operated 694 Hot Topic stores in all 50 states and Puerto Rico, 131 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)
Fourth Quarter Ended | ||||||
Feb. 3, 2007 | Jan. 28, 2006 | |||||
Net sales | $ | 240,500 | $ | 230,399 | ||
Cost of goods sold, including buying, distribution and occupancy costs | 158,842 | 156,469 | ||||
Gross margin | 81,658 | 73,930 | ||||
Selling, general & administrative expenses | 67,192 | 60,052 | ||||
Income from operations | 14,466 | 13,878 | ||||
Other income / expense | — | 2,945 | ||||
Interest income, net | 530 | 213 | ||||
Income before income taxes | 14,996 | 17,036 | ||||
Provision for income taxes | 6,128 | 6,440 | ||||
Net income | $ | 8,868 | $ | 10,596 | ||
Earnings per share: | ||||||
Basic | $ | 0.20 | $ | 0.24 | ||
Diluted | $ | 0.20 | $ | 0.23 | ||
Weighted average shares outstanding | ||||||
Basic | 44,218 | 44,762 | ||||
Diluted | 44,775 | 45,350 |
Fiscal Years Ended | ||||||
Feb. 3, 2007 | Jan. 28, 2006 | |||||
Net sales | $ | 751,558 | $ | 725,142 | ||
Cost of goods sold, including buying, distribution and occupancy costs | 502,408 | 488,948 | ||||
Gross margin | 249,150 | 236,194 | ||||
Selling, general & administrative expenses | 227,580 | 203,995 | ||||
Income from operations | 21,570 | 32,199 | ||||
Other income / expense | — | 2,945 | ||||
Interest income, net | 1,450 | 1,054 | ||||
Income before income taxes | 23,020 | 36,198 | ||||
Provision for income taxes | 9,394 | 13,779 | ||||
Net income | 13,626 | 22,419 | ||||
Earnings per share: | ||||||
Basic | $ | 0.31 | $ | 0.50 | ||
Diluted | $ | 0.30 | $ | 0.49 | ||
Weighted average shares outstanding | ||||||
Basic | 44,167 | 44,924 | ||||
Diluted | 44,752 | 45,877 |
HOT TOPIC, INC.
OTHER DATA
(Dollars in thousands)
(Unaudited)
Fiscal Years Ended | ||||||
Feb. 3, 2007 | Jan. 28, 2006 | |||||
Cash, cash equivalents and short-term investments | $ | 55,490 | $ | 37,674 | ||
Inventory | $ | 73,868 | $ | 71,160 | ||
Depreciation and amortization | $ | 38,941 | $ | 32,396 | ||
Capital expenditures | $ | 38,617 | $ | 69,419 | ||
Number of stores open at end of period: | ||||||
Hot Topic | 694 | 663 | ||||
Torrid | 131 | 120 | ||||
Total store square footage | 1,541,300 | 1,452,700 |