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Earnings at Hot Topic Rise on Strong Sales

NEW YORK — Skull-buckled pleated skirts and barbed-wire bracelets certainly appear to have room in today’s fashion scene, as Hot Topic rocked on with double-digit increases in its first quarter profits and sales.<br><br>The City of...

NEW YORK — Skull-buckled pleated skirts and barbed-wire bracelets certainly appear to have room in today’s fashion scene, as Hot Topic rocked on with double-digit increases in its first quarter profits and sales.

The City of Industry, Calif.-based retailer said late Tuesday income for the three months ended May 3 jumped 19.7 percent to $4.4 million, or 14 cents a diluted share, beating its own, as well as Wall Street’s, analysts’ estimates by a penny. In the year-ago first quarter, HT reported income of $3.7 million, or 11 cents.

Sales for the quarter escalated 26 percent to $100.7 million over $79.9 million, driven by accessories and the music-related categories of rock T-shirts, CDs and music-licensed accessories. Same-store sales for the period rose 2.6 percent, reflecting an increase in the average number of transactions per day, per store. However, this was offset by a 5 percent decrease in the average unit retail price, a result of the increased penetration of its accessories business, weakness in men’s bottoms and fashion top categories and lower dress volume.

At HT, by division, women’s comps were negative low-single digits, which were on plan, and dresses were negative double digits. Excluding dresses, women’s comps were flat. HT this year decided not to have a prom presence compared with prior years because the company said it felt it could get better results from accessories, novelty T-shirts and bottoms.

Men’s comps were down 13 percent.

Many of the accessories categories, including leather, intimates and jewelry, performed well, resulting in an 11 percent comp increase in the quarter.

In highlighting the results, its sixth year of double-digit earnings growth, Betsy McLaughlin, president and chief executive, said higher transactions and tighter expense control produced the solid growth.

McLaughlin said she continues to be optimistic about Torrid, its second concept that sells plus-sized fashion-forward apparel and accessories. She also said the company is making progress on a number of strategies, including adding new merchandise like a wear-to-work category and sizing, tweaking the store design and in-store marketing.

HT, which operates 437 HT stores and 37 Torrid stores, plans to open 25 new Torrid and 70 HT stores in 2003.

Looking ahead, it said it anticipates net income for the year to climb to $42 million, or $1.27 a diluted share, in line with consensus estimates and bounding ahead of earnings in 2002 of $1.05. By quarter, HT expects earnings of 16 cents for the second quarter, 37 cents for the third and 60 cents for the fourth.