Hot Topic Earnings Preview

If Hot Topic (Nasdaq: HOTT  ) hits analysts estimates, it will be the fifth consecutive quarter it has hit the number on the nose. The company will unveil its latest earnings on Wednesday. Hot Topic is a mall- and Web-based specialty retailer.

What analysts say:

• Buy, sell, or hold?: Analysts think investors should stand pat on Hot Topic with five of seven analysts rating it hold. Analysts don't like Hot Topic as much as competitor Wet Seal overall. Four out of eight analysts rate Wet Seal a buy compared to two of seven for Hot Topic. Analysts still rate the stock a hold, but they are a bit more wary about it compared to three months ago.
• Revenue forecasts: On average, analysts predict $179.2 million in revenue this quarter. That would represent a decline of 2.2% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is earnings of $0.07 per share. Estimates range from $0.07 to $0.09.

What our community says:
Most CAPS All-Stars are skeptical of HOTT prospects, with 61.8% giving it an underperform rating. The community is split on the stock with 54.6% Fools awarding it an outperform rating and 45.4% giving it an underperform rating. Fools are bearish on Hot Topic and haven't been shy with their opinions lately, logging 264 posts in the past 30 days. Hot Topic's bearish CAPS rating of one out of five stars falls short of the Fool community sentiment.

Management:

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter	Q2	Q1	Q4	Q3
Gross Margin	32.2%	31.3%	32.2%	35.2%
Operating Margin	(6.7%)	(7.7%)	(0.3%)	0.2%
Net Margin	(4.1%)	(4.8%)	(0.3%)	0.2%

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Earnings estimates provided by Zacks