The announcement of the teen clothing retailer's expansion plans comes on the heels of a jump in third-quarter profits that brought in $7.1 million, or 15 cents per share, for the City of Industry-based firm during the 13 weeks ended Oct. 28. That's a 19% hike in profits, more than the $5.9 million, or 13 cents per share, earned in the same period last year.
The company, which currently operates 693 Hot Topic and 129 Torrid mall-based stores, said overall sales rose 2% to $196.7 million during the quarter, up from $192.7 million from the same period one year earlier. Sales at stores open at least a year were off, however, declining 6.8%.
For the first nine months of the fiscal year, Hot Topic Inc. reported that sales grew to $511.1 million, an increase from the $494.7 million in sales for the same period last year. Net income, however, dropped to $4.8 million, or 11 cents a share, down $7 million from the $11.8 million, or 26 cents per share, reported in the first nine months of fiscal 2005.
The seller of trendy, rock n' roll inspired apparel, Hot Topic has been struggling with declining sales at its established stores in the last two quarters, but company officials said several cost cutting measures, along with higher markups and lower freight cost, helped improve the third quarter results.
Chief Executive Betsy McLaughlin said in a conference call with analysts that strong demand for shoes, and costume and body jewelry, along with a rebound in sales of women's novelty T-shirts, which had been delayed but arrived in time for back-to-school business, helped bolster sales.
The company also is working to redesign its stores to appeal to younger shoppers and will begin an aggressive effort to remodel its older stores next year, she says. Hot Topic currently has 15 stores with a "less intimidating" brighter setting that offer the same mix of merchandise which are currently outperforming the rest of the company's holdings McLaughlin says.
The firm's current stores feature a dark, Gothic design. All 35 of the new stores it plans to open in 2007 will feature the brighter, "less intimidating" design, the company says.
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