Simply put, Hot Topic (NASDAQ:HOTT) has had a rough time. Edgy music and its fans put the company on the map as a fast-growing youth-oriented retailer, but times and fashions change, and Hot Topic has occasionally been used as a case in point for the dangers of fad investing.

And things certainly didn't get much better in the fourth quarter. Sales rose 9% but dropped nearly 4% on a same-store basis. Furthermore, management decided to hack and slash to move merchandise, and that aggressive discounting sent gross margins down 5 full percentage points, though the drop in actual merchandise margins was more on the order of 380 basis points.

When a retailer has trouble on the top line and the gross margin line, you know the rest of the story isn't going to be much prettier. Operating income was cut in half, and net income was down nearly 40% -- and that's with the net benefit of gift-card breakage.

Management isn't in denial about the performance. Transaction volume dropped 14% in the quarter, and the folks running the place seem to realize they need to get more feet through their doors if they're going to turn things around. That said, they are also scaling back their expansion plans -- particularly in the so-far-disappointing Torrid line.

I think there's a fair chance that Hot Topic is at, or near, a bottom. But I just wish there were more analysts and Bubblevision pundits out there still hammering on the company. After all, turnarounds work best when the vast majority of people are still disgusted with a concept.

I also would like to see a little more in terms of strategic change at the stores. See, I think Hot Topic is still somewhat ignoring its true calling in life -- catering to kids who want to honk off their parents. That's perhaps the most evergreen market opportunity of all time, and if it can find a way to cater to all manner of would-be poseurs, bad seeds, and self-exiles, growth could get going again.

I love buying retail stores that have been ignored or taken out back and shot. It's worked in the past with the likes of Stage Stores (NASDAQ:STGS), Wet Seal (NASDAQ:WTSLA), and American Eagle Outfitters (NASDAQ:AEOS), and it could work here, too. Still, until the comp numbers get a little better (or, rather, start looking less bad), this will be a riskier-than-average idea.

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Fool contributor Stephen Simpson owns shares of American Eagle Outfitters but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares). The Motley Fool has a disclosure policy.