CITY of INDUSTRY, Calif., March 15, 2006 (PRIMEZONE) -- Hot Topic, Inc. (Nasdaq:HOTT) reported net income for the quarter ended January 28, 2006 of $10.6 million or $0.23 per diluted share, compared to $17.4 million or $0.38 per diluted share for the same period last fiscal year.
As previously reported, net sales for the fourth quarter increased 9% to $230.4 million from $211.3 million for the fourth quarter of fiscal 2004. Comparable store sales decreased 3.8% for the quarter compared to a decrease of 6.0% in the fourth quarter of fiscal 2004.
Fourth quarter results include an asset impairment charge of $1.6 million, or $0.02 per diluted share, in selling, general and administrative expenses in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". In addition, the company recognized gift card breakage income of $3.1 million, or $0.04 per diluted share, reported in other income. Gift card breakage is income recognized due to the non-redemption of a portion of gift cards sold by the company for which a liability was recorded in prior periods.
At the end of the quarter, the company operated 663 Hot Topic stores and 120 Torrid stores compared to 592 Hot Topic stores and 76 Torrid stores at the end of the fourth quarter of fiscal 2004. During fiscal 2005, the company opened a total of 71 Hot Topic stores and 46 Torrid stores. The company closed two Torrid stores during fiscal 2005.
The company also announced that it has reduced the number of new stores it plans to open during fiscal 2006 (53 weeks ending February 3, 2007). The company now expects to open approximately 50 stores during the year. This includes an estimated 40 new Hot Topic stores, 20 less than previously announced, and an estimated 10 new Torrid stores, 15 less than previously announced.
A conference call to discuss 2005 fourth quarter and fiscal year results, business trends, guidance and other matters is scheduled for today at 4:30 PM (ET). The conference call number is 866-543-6411, pass code "Hot Topic", and will be accessible to all interested parties. It will also be webcast at www.companyboardroom.com. A replay will be available at 888-286-8010, pass code 83247896, for approximately two weeks.
Hot Topic, Inc. is a national mall-based specialty retailer. Hot Topic offers apparel, accessories and gifts to young men and women principally between the ages of 12 and 22. Torrid, the company's second concept, provides plus-size fashion-forward apparel and accessories that target young women principally between the ages of 15 and 29. As of February 25, 2006 the company operated 662 Hot Topic stores in all 50 states and Puerto Rico, 120 Torrid stores, and Internet stores www.hottopic.com and www.torrid.com.
In addition to historical information, this news release and the aforementioned conference call contain forward-looking statements, which include statements relating to financial results, guidance, projections and other financial performance, managing growth, and litigation matters and contingent liabilities. These statements involve risks and uncertainties, including risks and uncertainties associated with meeting expected financial results, management of growth, relationships with mall developers and operators, the risk that available cash or mall space will not be adequate for planned expansion, fluctuations in sales and comparable store sales results, risks and uncertainties with respect to new store openings including risks associated with the company's new store concepts and Internet stores, music and fashion trends, competition from other retailers, uncertainties generally associated with specialty retailing, the effect of economic conditions, the effect of severe weather or natural disasters, political and/or social changes or events that could negatively impact shopping patterns and/or mall traffic, litigation proceedings and contingent liabilities, as well as other risks detailed in the company's SEC reports including its Quarterly Reports on Form 10-Q and its Annual Report on Form 10-K for the year ended January 29, 2005. Historical results achieved are not necessarily indicative of the future prospects of the company, and actual results or circumstances could differ materially from the forward-looking statements.
HOT TOPIC, INC.
SUMMARY STATEMENTS OF INCOME
(Unaudited)
Fourth Quarters Ended
------------------------------
Jan. 28, Jan. 29,
2006 2005
--------- ----------
(In thousands, except per share
amounts)
Net sales $230,399 $211,254
Cost of goods sold, including
buying, distribution and
occupancy costs 156,469 132,873
Gross margin 73,930 78,381
Selling, general and
administrative expenses 60,052 50,331
Operating income 13,878 28,050
Other income / expense 2,945 --
Interest income-net 213 175
Income before income taxes 17,036 28,225
Provision for income taxes 6,440 10,805
Net income $10,596 $17,420
Earnings per share
Basic $0.24 $0.39
Diluted $0.23 $0.38
Weighted average shares
outstanding
Basic 44,762 44,944
Diluted 45,350 46,127
Fiscal Years Ended
------------------------------
Jan. 28, Jan. 29,
2006 2005
--------- ----------
(In thousands, except per share
amounts)
Net sales $725,142 $656,468
Cost of goods sold, including
buying, distribution and
occupancy costs 488,948 422,712
Gross margin 236,194 233,756
Selling, general and
administrative expenses 203,995 170,384
Operating income 32,199 63,372
Other income / expense 2,945 --
Interest income-net 1,054 919
Income before income taxes 36,198 64,291
Provision for income taxes 13,779 24,618
Net income 22,419 $39,673
Earnings per share
Basic $0.50 $0.86
Diluted $0.49 $0.83
Weighted average shares
outstanding
Basic 44,924 46,379
Diluted 45,877 47,875
HOT TOPIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Jan. 28, Jan. 29,
2006 2005
--------- ----------
Current Assets:
Cash, cash equivalents and
short-term investments $37,674 $66,339
Inventory 71,160 60,481
Prepaid expenses and other 16,781 12,390
Deferred tax assets 2,487 2,541
Total current assets 128,102 141,751
Property and equipment - net 171,089 136,401
Deposits and other 244 243
Total assets $299,435 $278,395
Current Liabilities:
Accounts payable $18,122 $17,874
Accrued liabilities 33,569 27,769
Income taxes payable 5,788 8,887
Total current liabilities 57,479 54,530
Deferred rent 39,941 30,227
Deferred tax liability 954 6,076
Total liabilities 98,374 90,833
Shareholders' equity 201,061 187,562
Total liabilities and
shareholders' equity $299,435 $278,395
HOT TOPIC, INC.
OTHER DATA
(Dollars in thousands)
(Unaudited)
Fiscal Years Ended
------------------------------
Jan. 28, Jan. 29,
2006 2005
--------- ----------
Depreciation and amortization $32,800 $24,635
Capital expenditures $69,419 $57,853
Number of stores open at end
of period:
Hot Topic 663 592
Torrid 120 76
Total store square footage 1,452,700 1,214,400