It appears I wasn't entirely off the mark back in September, when I theorized that Hot Topic (NASDAQ:HOTT) might start looking better to investors soon. I'm not sure that my logic held up, but the retailer did report an improved third quarter Wednesday evening.

Hot Topic's third-quarter net income increased 19% to $7.1 million, or $0.16 per share. However, sales increased only 2% to $196.7 million, with same-store sales down 6.8%, compared with last year's 6.2% decrease. Margins improved across the board -- see our Fool by Numbers for more. The company met Wall Street's expectations and reiterated guidance, and considering Hot Topic's recent history, I guess there's reason for the market's excitement.

I speculated two months ago that a return to punk styling for fall might help Hot Topic, but I don't think the sales increase really backs up that theory. And in cases like Hot Topic's, you have to wonder how long a retailer can flail before it starts to show improvement.

Back in September, on a whim, I put an "outperform" on Hot Topic in our new Motley Fool CAPS database, careful to include in my related pitch that this was a speculative, "let's see what happens" selection for my mock portfolio. I enjoyed a 14-point increase in my HOTT score before I got cold feet and closed it out. I suppose I might have waited a little longer; on my last check, Hot Topic was up almost 18% today! Good grief. (The CAPS community, however, seems to justify my lack of faith; they've given Hot Topic a one-star rating out of five.)

I still consider Hot Topic a deeply speculative stock, and I'd avoid it with real money as a long-term investment. Punk and goth may come and go as mainstream fashion. Meanwhile, the kids who really consider themselves punk by lifestyle, regardless of what's on the runways or in the fashion magazines, may find a mall-based punk retail chain too mainstream. And Hot Topic's emphasis on music and pop-culture merchandise hasn't really helped it lately.

Meanwhile, teen retailers like American Eagle Outfitters (NASDAQ:AEOS), Abercrombie & Fitch (NYSE:ANF), and Aeropostale (NYSE:ARO) at least have more fashion flexibility when it comes to carrying the mainstream fashion in which most kids are consistently interested.

Too bad I didn't keep Hot Topic as a CAPS pick, at least until today. But after today's big jump, investors who are really in this stock (or considering it) might want to tread carefully. Hot Topic's third quarter did look better in many ways, but it might be a false start, instead of a certain turnaround.

For more on Hot Topic, see the following Foolish headlines:

American Eagle Outfitters is a Motley Fool Stock Advisor recommendation. To find out what other stocks David and Tom Gardner have recommended, click here for a 30-day free trial.

Alyce Lomax does not own shares of any of the companies mentioned. As of this writing, she was ranked 1585 out of 13051 in CAPS.