Exhibit 99.1
** NEWS RELEASE **
HOT TOPIC, INC. REPORTS 2nd QUARTER
LOSS OF $0.04 PER SHARE
Provides guidance for the 3rd and 4th quarters of 2007
CITY of INDUSTRY, CA, August 22, 2007 — Hot Topic, Inc. (Nasdaq Global Select Market: HOTT), today announced that the company incurred a net loss in the fiscal second quarter of 2007 (13 weeks ended August 4, 2007) of $1.7 million, or $0.04 per share, compared with a net loss of $0.9 million, or $0.02 per share, in the fiscal second quarter of 2006 (13 weeks ended July 29, 2006).
As previously reported, total sales for the 13 weeks ended August 4, 2007 increased 1% to $161.7 million compared to $160.3 million for the 13 week period ended July 29, 2006. Comparable store sales declined 5.8% for the second quarter of 2007. Due to a 53rd week in fiscal 2006, second quarter comparable store sales are compared to the corresponding 13 week period ended August 5, 2006.
At the end of second quarter fiscal 2007, the company operated 693 Hot Topic stores and 133 Torrid stores compared to 682 Hot Topic stores and 127 Torrid stores at the end of second quarter fiscal 2006. During second quarter fiscal 2007, the company opened a total of two Hot Topic stores and four Torrid stores and closed four Hot Topic stores and two Torrid stores. The company also remodeled or relocated 27 Hot Topic stores during the quarter, bringing the total number of remodeled or relocated stores during the year-to-date period to 44.
The company issued third quarter (13 weeks ending November 3, 2007) guidance of earnings in the range of $0.13 to $0.16 per diluted share based upon a comparable store sales decline of low-single digits. The company also issued fourth quarter (13 weeks ending February 2, 2008) guidance of earnings in the range of $0.29 to $0.33 per diluted share based upon a comparable store sales decline of low-single digits.
A conference call to discuss second quarter, business trends, guidance and other matters is scheduled for today at 4:30 PM (ET). The conference call number is 800-901-5218, pass code “Hot Topic”, and the call will be accessible to all interested parties. It will also be webcast at www.earnings.com. A replay will be available at 888-286-8010, pass code 23534375, 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 August 4, 2007 the company operated 693 Hot Topic stores in all 50 states and Puerto Rico, 133 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, store operations, projections and other financial performance and managing growth. 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 February 3, 2007. 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)
Second Quarter Ended | ||||||||
Aug. 4, 2007 | Jul. 29, 2006 | |||||||
Net sales | $ | 161,684 | $ | 160,348 | ||||
Cost of goods sold, including buying, distribution and occupancy costs | 110,728 | 109,514 | ||||||
Gross margin | 50,956 | 50,834 | ||||||
Selling, general & administrative expenses | 54,313 | 52,540 | ||||||
Loss from operations | (3,357 | ) | (1,706 | ) | ||||
Interest income-net | 554 | 239 | ||||||
Loss before benefit for income taxes | (2,803 | ) | (1,467 | ) | ||||
Benefit for income taxes | (1,074 | ) | (562 | ) | ||||
Net loss | (1,729 | ) | (905 | ) | ||||
Loss per share | ||||||||
Basic | $ | (0.04 | ) | $ | (0.02 | ) | ||
Diluted | $ | (0.04 | ) | $ | (0.02 | ) | ||
Shares used in computing loss per share: | ||||||||
Basic | 44,349 | 44,180 | ||||||
Diluted | 44,349 | 44,180 |
Six Months Ended | ||||||||
Aug. 4, 2007 | Jul. 29, 2006 | |||||||
Net sales | $ | 318,966 | $ | 314,389 | ||||
Cost of goods sold, including buying, distribution and occupancy costs | 216,422 | 215,295 | ||||||
Gross margin | 102,544 | 99,094 | ||||||
Selling, general & administrative expenses | 107,717 | 103,485 | ||||||
Loss from operations | (5,173 | ) | (4,391 | ) | ||||
Interest income-net | 1,060 | 642 | ||||||
Loss before benefit for income taxes | (4,113 | ) | (3,749 | ) | ||||
Benefit for income taxes | (1,575 | ) | (1,436 | ) | ||||
Net loss | (2,538 | ) | (2,313 | ) | ||||
Loss per share | ||||||||
Basic | $ | (0.06 | ) | $ | (0.05 | ) | ||
Diluted | $ | (0.06 | ) | $ | (0.05 | ) | ||
Shares used in computing loss per share: | ||||||||
Basic | 44,297 | 44,122 | ||||||
Diluted | 44,297 | 44,122 |
HOT TOPIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Aug. 4, 2007 | Jul. 29, 2006 | |||||
Current Assets: | ||||||
Cash, cash equivalents and short-term investments | $ | 49,071 | $ | 19,883 | ||
Inventory | 93,515 | 106,227 | ||||
Prepaid expenses and other | 15,118 | 17,277 | ||||
Deferred tax assets | 3,973 | 2,487 | ||||
Total current assets | 161,677 | 145,874 | ||||
Property and equipment, net | 169,024 | 174,070 | ||||
Deposits and other | 1,130 | 249 | ||||
Deferred tax assets | 4,119 | — | ||||
Total assets | $ | 335,950 | $ | 320,193 | ||
Current Liabilities: | ||||||
Accounts payable | $ | 41,716 | $ | 47,429 | ||
Accrued liabilities | 31,238 | 27,595 | ||||
Total current liabilities | 72,954 | 75,024 | ||||
Deferred rent | 39,375 | 41,224 | ||||
Deferred compensation liability | 890 | — | ||||
Income taxes payable | 1,258 | — | ||||
Deferred tax liability | — | 209 | ||||
Total liabilities | 114,477 | 116,457 | ||||
Shareholders’ equity | 221,473 | 203,736 | ||||
Total liabilities and shareholders’ equity | $ | 335,950 | $ | 320,193 |
HOT TOPIC, INC.
OTHER DATA
(Dollars in thousands)
(Unaudited)
Six Months Ended | ||||||
Aug. 4, 2007 | Jul. 29, 2006 | |||||
Depreciation and amortization | $ | 21,138 | $ | 18,693 | ||
Capital expenditures | $ | 23,956 | $ | 21,753 | ||
Number of stores open at end of period: | ||||||
Hot Topic | 693 | 682 | ||||
Torrid | 133 | 127 | ||||
Total store square footage | 1,549,700 | 1,505,200 |