It's a good thing that Hot Topic
Hot Topic said that it now expects a quarterly loss of $0.02 or $0.03 per share, where analysts had expected the company to break even; sales are expected to increase by 5%. July sales fell sharply (same-store sales decreased 7.2%, in fact) and the company said that its decision to be less promotional this year was factored into the new outlook.
A slight uptick in Hot Topic's sales at the end of May held some false promise -- when I pondered Hot Topic at the time, I decided it thought it was too early to rush anything. Good thing, too. Otherwise, I might have to eat crow today: Hot Topic shares are down a whopping 17%.
Depressing financial news is nothing new for Hot Topic these days. However, today a whole slew of teen retail stocks have dropped, and I've seen at least one headline connecting their travails to Hot Topic's warning (regardless of the fact that the whole stock market is getting battered). Stocks like Pacific Sunwear
I can't help but make fun of the concept of linking all these teen retailers in one breath (or one investment thesis). If these stocks were high school kids, most of them probably wouldn't be hanging out together (in fact, I'd imagine Hot Topic might get a kick out of punching Abercrombie in the face). Sure, when it comes to the entire market's downward trajectory, there's a lot of uncertainty as to how much consumers are willing to spend. And while teens tend to be a bit more resilient when it comes to throwing around cash, for many there's an important caveat: how much Mom and Dad are willing to dole out.
So why would Hot Topic drag down the whole sector? I wouldn't say that Hot Topic, with its punk, Gothic focus, has anything at all to do with the kids who shop at the other retailers I named above, which cater to surfers, preps, and altogether cheerier, even sun-worshipping, kids. It stands to reason that there's a finite number of rebels. Because if rebels were everywhere, we'd call them mainstream.
So let's take some of these silly, blanket-statement headlines with a grain of salt and realize that there are different kinds of teen retailers. Hot Topic knows all about being an individualist. And kids' trends can obviously be a lonely, lonely road. It's clear that Hot Topic's got problems of its own right now.
Pacific Sunwear and American Eagle Outfitters are recommendations of Motley Fool Stock Advisor , where Tom and David Gardner are always on the lookout for the market's best investments. Try it out for yourself -- it's free for 30 days .
Alyce Lomax does not own shares of any of the companies mentioned.