Exhibit 99.1
** NEWS RELEASE **
HOT TOPIC, INC. REPORTS 3rd QUARTER EARNINGS
OF $0.15 PER DILUTED SHARE
CITY of INDUSTRY, CA, November 20, 2007 — Hot Topic, Inc. (Nasdaq Global Select Market: HOTT), reported results for its third fiscal quarter (13 weeks) ended November 3, 2007.
The company reported net income in the third quarter of $6.7 million, or $0.15 per diluted share, compared to $7.1 million, or $0.16 per diluted share, for the comparable period last year.
As previously reported, total sales for the 13 weeks ended November 3, 2007 decreased 4% to $188.5 million compared to $196.7 million for the 13 week period ended October 28, 2006. Comparable store sales declined 2.6% for the third quarter of 2007. A summary of the third quarter sales results by division (including internet) is as follows:
Third Quarter Sales | |||||||||
$ Millions | % Change to Last Year (1) | Third Quarter Comparable Store Sales % Change (2) | |||||||
Hot Topic | $ | 155.3 | -6.4 | % | -3.1 | % | |||
Torrid | $ | 33.2 | 7.7 | % | 0.4 | % | |||
Total Co. | $ | 188.5 | -4.2 | % | -2.6 | % |
(1) | Compares the current fiscal quarter to last year’s reported fiscal quarter, ended October 28, 2006. |
(2) | Compares the current fiscal quarter to the corresponding 13 week period, ended November 4, 2006. |
At the end of third quarter fiscal 2007, the company operated 695 Hot Topic stores and 147 Torrid stores compared to 693 Hot Topic stores and 129 Torrid stores at the end of third quarter fiscal 2006. During third quarter fiscal 2007, the company opened a total of 5 Hot Topic stores and 14 Torrid stores and closed 3 Hot Topic stores. The company also remodeled or relocated 14 Hot Topic stores during the quarter, bringing the total number of remodeled or relocated stores during the year-to-date period to 58.
The company also announced the repurchase of an aggregate of 870,470 shares of its common stock between August 24 and August 29, 2007 at an average cost of $8.23, which was pursuant to its Board of Directors’ authorization of the repurchase of up to an aggregate of $40,000,000 of its common stock. The repurchase program is expected to continue through February 2, 2008, subject to appropriate market conditions, unless extended or shortened by the Board of Directors.
The company reiterated its fourth quarter (13 weeks ending February 2, 2008) earnings guidance in the range of $0.29 to $0.33 per diluted share.
The company also announced that in fiscal 2008 (year ending January 31, 2009) it expects to open approximately 30 to 35 new stores. This includes opening 5 new Hot Topic stores and between 25 to 30 new Torrid stores. The company also plans to close approximately 20 Hot Topic stores and 5 Torrid stores in fiscal 2008. In addition, the company plans to remodel or relocate approximately 30 Hot Topic stores by the end of fiscal 2008.
A conference call to discuss third quarter results, business trends, guidance, Torrid store economics and other matters is scheduled for November 20, 2007 at 4:30 PM (ET). The conference call number is 866-713-8566, pass code “Hot Topic”, and 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 19527307, 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 November 3, 2007 the company operated 695 Hot Topic stores in all 50 states and Puerto Rico, 147 Torrid stores, and Internet stores www.hottopic.com and www.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, the company’s share repurchase program, 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 or the aforementioned share repurchase, 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, Investor Relations 626-839-4681 x2173
HOT TOPIC, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Third Quarter Ended | ||||||
Nov. 3, 2007 | Oct. 28, 2006 | |||||
Net sales | $ | 188,462 | $ | 196,669 | ||
Cost of goods sold, including buying, distribution and occupancy costs | 119,994 | 128,271 | ||||
Gross margin | 68,468 | 68,398 | ||||
Selling, general & administrative expenses | 57,961 | 56,904 | ||||
Income from operations | 10,507 | 11,494 | ||||
Interest income, net | 414 | 277 | ||||
Income before income taxes | 10,921 | 11,771 | ||||
Provision for income taxes | 4,246 | 4,701 | ||||
Net income | $ | 6,675 | $ | 7,070 | ||
Earnings per share: | ||||||
Basic | $ | 0.15 | $ | 0.16 | ||
Diluted | $ | 0.15 | $ | 0.16 | ||
Weighted average shares outstanding | ||||||
Basic | 43,788 | 44,207 | ||||
Diluted | 44,112 | 44,735 |
Nine Months Ended | ||||||
Nov. 3, 2007 | Oct. 28, 2006 | |||||
Net sales | $ | 507,427 | $ | 511,058 | ||
Cost of goods sold, including buying, distribution and occupancy costs | 336,416 | 343,566 | ||||
Gross margin | 171,011 | 167,492 | ||||
Selling, general & administrative expenses | 165,678 | 160,388 | ||||
Income from operations | 5,333 | 7,104 | ||||
Interest income, net | 1,474 | 919 | ||||
Income before income taxes | 6,807 | 8,023 | ||||
Provision for income taxes | 2,670 | 3,265 | ||||
Net income | $ | 4,137 | $ | 4,758 | ||
Earnings per share: | ||||||
Basic | $ | 0.09 | $ | 0.11 | ||
Diluted | $ | 0.09 | $ | 0.11 | ||
Weighted average shares outstanding | ||||||
Basic | 44,128 | 44,150 | ||||
Diluted | 44,236 | 44,744 |
HOT TOPIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Nov. 3, 2007 | Oct. 28, 2006 | |||||
Current Assets: | ||||||
Cash, cash equivalents and short-term investments | $ | 35,634 | $ | 37,704 | ||
Inventory | 104,881 | 102,030 | ||||
Prepaid expenses and other | 15,355 | 7,007 | ||||
Deferred tax assets | 4,104 | 2,725 | ||||
Total current assets | 159,974 | 149,466 | ||||
Property and equipment, net | 174,244 | 173,457 | ||||
Deposits and other | 1,283 | 387 | ||||
Deferred tax assets | 4,204 | — | ||||
Total assets | $ | 339,705 | $ | 323,310 | ||
Current Liabilities: | ||||||
Accounts payable | $ | 40,494 | $ | 33,027 | ||
Accrued liabilities | 33,327 | 34,962 | ||||
Income taxes payable | 1,470 | 1,870 | ||||
Total current liabilities | 75,291 | 69,859 | ||||
Deferred rent | 40,986 | 41,411 | ||||
Deferred compensation liability | 1,124 | 139 | ||||
Income taxes payable | 300 | — | ||||
Deferred tax liability | — | 175 | ||||
Total liabilities | 117,701 | 111,584 | ||||
Shareholders’ equity | 222,004 | 211,726 | ||||
Total liabilities and shareholders’ equity | $ | 339,705 | $ | 323,310 |
HOT TOPIC, INC.
OTHER DATA
(Dollars in thousands)
(Unaudited)
Nine Months Ended | ||||||
Nov. 3, 2007 | Oct. 28, 2006 | |||||
Depreciation and amortization | $ | 31,274 | $ | 28,398 | ||
Capital expenditures | $ | 40,230 | $ | 31,522 | ||
Number of stores open at end of period: | ||||||
Hot Topic | 695 | 693 | ||||
Torrid | 147 | 129 | ||||
Total store square footage | 1,583,100 | 1,533,100 |