HOT TOPIC HEATS UP

Byline: Melanie Kletter

NEW YORK — Teen retailer Hot Topic is on a roll.
The music-inspired apparel and lifestyle chain has had stellar sales results in the last several months, and April was no exception, as same-store sales soared 24.3 percent. In the quarter ended April 29, sales surged 59 percent to $44.9 million from $28.3 million and were ahead 24.1 percent on a same-store basis.
Betsy McLaughlin, president of the firm, based in City of Industry, Calif., said all major product categories and all geographic regions exceeded sales plans during February, March and April.
The company, which was founded in 1989 and went public in 1998, has had double-digit sales gains every month this year and during much of last year.
Hot Topic is benefiting from its intense merchandising focus and the authenticity of its buying staff, according to analyst James Gassman at Southwest Securities.
“They have differentiated themselves to such a large degree,” Gassman said. “Their stores are energetic, and their staff is knowledgeable. I am very impressed with how much of a pulse they have on their customer.”
Hot Topic, which now operates 224 stores in malls across the U.S., carries club and street-culture fashions, logo merchandise, CDs and lifestyle regalia such as body jewelry and blue hair dye. And all stores offer ear piercing.
The company’s staff is integral to merchandising. To stay connected with music and teen trends, store management gives each staff member free concert passes and asks them to report back the next day on trends they see at the show, according to Gassman.
Fashion apparel fills about half the store space, and includes juniors, young men’s and unisex, and women’s dresses and shoes. About 20 percent of the apparel is private label and the rest focuses on youth brands, including Porn Star, Lip Service and Caffeine. The company also sells products on its Web site.
Marcia Aaron, analyst at Deutsche Banc Alex.Brown, said the company has the potential to have between 400 and 500 stores in the U.S. within the next five years.
“They have done a great job with novelty T-shirts, which appeal to a wide range of teens,” she noted.
Gassman added, “There is a lot of potential with this chain. They are targeting a market segment that is growing in size and spending power, with a merchandise assortment that cannot be found in its specialty retail competition.”