Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, specialty retailer Hot Topic (Nasdaq: HOTT ) has received the dreaded one-star ranking.
With that in mind, let's take a closer look at Hot Topic's business and see what CAPS investors are saying about the stock right now.
Hot Topic facts
|Headquarters (Founded)||City of Industry, Calif. (1988)|
|Market Cap||$385.6 million|
|Trailing-12-Month Revenue||$715.1 million|
|Management||Chairman/CEO Lisa Harper
CFO James McGinty
|Return on Equity (Average, Past 3 Years)||1.2%|
|Cash/Debt||$63.6 million / $0|
|Competitors||Abercrombie & Fitch
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 46% of the 386 members who have rated Hot Topic believe the stock will underperform the S&P 500 going forward.
[T]his is a very high price for a very risky stock. Trading at 27 times earnings and 13 times cash flows. This company is attempting to compete in a very tough industry. In addition, teen and young adult unemployment continue to be at very high levels across the country. Do they really have the extra $$ to spend in stores such as this? My guess is no but maybe Mommy and Daddy are making up for the lack of cash in most teens' pockets.
I expect margins to continue to get squeezed across the clothing industry. Mostly due to higher cotton and material costs (driven by high soft commodity and oil prices). I did not look at their website for long but it looks very grungy and maybe a little Goth. How many teens still adhere to this style?
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