NEW YORK — Music-loving teens helped Hot Topic turn its T-shirt stocks without having to resort to deep discounts in the second quarter, prompting a 35.6 percent increase in profits for the period.
The City of Industry, Calif.-based specialty retailer said net income soared to $5.9 million, or 18 cents a diluted share, 1 cent above its expectations as well as those of Wall Street analysts, for the three months ended Aug. 2. That compares with earnings of $4.3 million, or 13 cents, in the corresponding period last year. Sales for the quarter rose 25.1 percent to $115.7 million from $92.5 million and grew 5.2 percent on a comparable-store basis.
Apparel accounted for 52 percent of sales during the quarter, 1 percent higher than in the year-ago period.
Betsy McLaughlin, president and chief executive, said on an afternoon conference call that the music-license, CD and accessories businesses continued to trend strongly, collectively comping up 9 percent in the quarter. In June, the company boosted its T-shirt inventory, enabling it to gain momentum for back-to-school, she said.
Based on results for the first half of the month, August comps should land in the midsingle-digit range, she noted.
Women’s comps gained 1 percent, driven by sales in bottoms, but offset by weakness in dress sales.
McLaughlin didn’t break out results from its 42-unit Torrid plus-sized division, but said she is pleased with its selling of regularly priced merchandise. She also said the firm is making product adjustments, improving its in-store marketing to create store-aspiration brand awareness and expanding its sizing. Its newer wear-to-work category is receiving a positive response, the ceo said, noting the challenge has been carrying sufficient inventory.
The company expects to end the year with 498 Hot Topic stores, 35 more than are currently in operation and 10 more than originally planned. Ten Torrid units will open before yearend.
Based on business trends, chief financial officer James McGinty guided investors to expect 2003 earnings of $43 million, or $1.30, above the current consensus estimate of $1.28 and the $1.05 it reported in 2002. In addition, he said he is anticipating sales for the year to reach $550 million, including a low-single-digit comp increase for both the third and fourth quarters, when earnings are expected to hit 37 cents and 61 cents, respectively.McLaughlin said she was very pleased with the women’s business across the board and said she is looking forward to Halloween. “We plan for October to do what we do best — ‘boutiquing out’ and providing great ideas for parties,” she said, noting there will be an additional day of selling for Halloween this year.
As reported, Hot Topic earlier this month reported an 8.7 percent improvement in July comps, and McLaughlin raised guidance to 17 cents from the 16 cents predicted at the beginning of the quarter.
Lauren Levitan, a retail analyst with SG Cowen, wrote in research notes, “Hot Topic’s continued solid trends amidst a still-shaky retail environment — which we note have been achieved in the absence of meaningful promotional activity compared to most other teen mall retailers — attest to HT’s differentiation and potential for continued outperformance.”
For the first half, income rose 28.3 percent to $10.3 million, or 32 cents a diluted share, versus income of $8 million, or 24 cents. Sales for the six months rose 25.5 percent to $216.4 million from $172.4 million and jumped 4 percent on a comp basis.
From overseeing America’s fastest-growing speciality retailers to codifying cool, WWD talked to the women who are leading the way for the future of beauty. Check out our Instagram Stories to see how these women built today and are creating tomorrow. (📸: @hannah_khymych) #wwdbeauty
For @laperlalingerie's spring 2018 show, the brand chose to host their event at @thevenetianmacao. With Chinese megastars @bingbing_fan and @hubing in attendance, La Perla debuted a rock ‘n’ roll-inspired collection. The show marked the start of Sands Macao Fashion Week, which runs from October 19 to 24 — the city’s first such event. Pictured here are models backstage with glimmering eyes. #wwdfashion (📷: Cheuk-Yin To)
Trending for spring 2018: top stitch design. Gone are the days of stitch just for seams — designers are using the once-minimal detail to create strong decorative elements. (📷: Paola Testa; Styled by @andrew_shang) #wwdfashion
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)