A slowdown in apparel revenues and overall sales contributed to lower profits in the third quarter at Hot Topic Inc., the company said Wednesday.

This story first appeared in the November 19, 2009 issue of WWD. Subscribe Today.

In the quarter ended Oct. 31, the City of Industry, Calif.-based teen retailer’s net income fell 21.4 percent to $5.8 million, or 13 cents a diluted share. A year ago the firm posted net income of $7.4 million, or 17 cents a share. The earnings per share results matched estimates by analysts polled by Yahoo Finance.

Revenues in the three months fell 3.9 percent to $189.6 million from $197.3 million in 2008.

Sales at its namesake stores fell 5.6 percent to $151 million but grew 2.9 percent at its Torrid division to $38.6 million. Total company same-store sales fell 5 percent. Apparel accounted for 51 percent of overall sales at Hot Topic stores versus 53 percent last year and 72 percent of revenues at Torrid versus 75 percent last year.

The company said sales in the women’s category at Hot Topic were down 23 percent due in part to an unfavorable comparison to last year, when its “Twilight” merchandise was on shelves for most of the three months. The company did not start displaying product tie-ins for the film’s sequel, “New Moon,” until October this year.

Lower margins also contributed to the profit decline. The company said gross margin fell 70 basis points in the quarter to 36.9 percent from 37.6 percent, largely due to markdowns.

In looking to its current quarter, Hot Topic said it is anticipating a high-single-digit decline in comps and EPS of between 23 cents and 26 cents. Before Wednesday’s release, which came after markets had closed, analysts had been expecting fourth-quarter EPS of 30 cents, on average.

For the first nine months of its fiscal 2009, the retailer saw a 30.2 percent slide in net income to $3.9 million, or 9 cents a share, versus $5.6 million, or 13 cents a share, in 2008. Sales in the three quarters slipped less than 1 percent to $522.5 million from $523.1 million.

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