Hot Topic Finds Itself Out of Step With Preppy Trend

With its punk-rock T-shirts and spiked chokers, Hot Topic Inc. is anything but preppy.

But clean-cut trends are popular this season, and City of Industry-based Hot Topic warned Thursday that it wouldn’t meet analysts’ expectations for the rest of the year.

Hot Topic, a chain known for its gothic-style offerings, said that as of mid-July, sales at stores open at least a year -- a key measure of a retailer’s growth -- were down 4% and this month’s sales would probably fall 6% to 8%.

Net income for the fiscal second quarter, which ends July 31, will be about 10 cents a share, the company said. The average estimate of 19 analysts polled by Thomson First Call was 13 cents a share. Hot Topic expects per-share earnings of 30 to 33 cents in the third quarter and 49 to 52 cents in the fourth quarter, compared with analysts’ forecasts of 36 cents and 53 cents, respectively.

Hot Topic’s stock closed Thursday at $19.06, up 14 cents, on Nasdaq but plunged more than $3 in after-hours trading.

For several years, Hot Topic’s alternative niche made it a retail success story: Sales more than doubled from 2000 to 2003. For the quarter ended May 1, Hot Topic reported a 27.3% jump in sales, fueled by strong growth at Torrid, its plus-size clothing and accessories chain.

But Chief Executive Betsy McLaughlin said in a statement that Hot Topic was having trouble “translating the current ‘clean and preppy’ fashion trends to styles that appeal to our core customer base.”

Through next quarter, the chain will “take steps to address the resulting inventory risk,” she said.

McLaughlin added that sales of music-related items at 16-year-old Hot Topic were good and that Torrid’s performance was “exceeding our expectations.”

The company operates 550 Hot Topic stores and 58 Torrid stores.

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Bloomberg News was used in compiling this report.