A month known for the Easter holiday might not seem to bode well for Goth retailer Hot Topic
Hot Topic's same-store sales increased 3.4% in March (overall sales increased 7% to $63.3 million). It may have beat analysts' expectations, but the comps increase paled in comparison to impressive increases posted by retailers like American Eagle Outfitters
I often rail against the volatile stock movements that can accompany same-store sales reports, since this data only covers a single month's performance. It's certainly useful information, but on its own, it provides little useful long-term insight. In Hot Topic's case, March may have been heartening, but then again, it was a very successful month for lots of retailers.
Last year at this time, Hot Topic's comps were pretty gloomy -- down 12.7% -- making this quarter's comps an especially easy comparison. (It's also interesting that last year's March sales announcement included a year-over-year comparison, absent from this year's edition.) When releasing last March's comps, Hot Topic even lowered its first-quarter earnings guidance, making its results look even bleaker.
I see little reason for investors to get excited about Hot Topic right now. We still don't know the company's plans to strengthen its long-term growth. I'm personally intrigued by how it might leverage the strong individualistic and musical angles of its business and its customers, as the retailer alluded to last quarter. Shares are trading at 36 times earnings, and Hot Topic needs strong growth ahead to justify that premium. Until we know more about promising new plans and strategies, I'm not convinced that such growth is in the tarot cards yet.
- Hot Topic got "goth-served" last quarter.
- The chain also played a role in our tale of two retailers.
- In February, Hot Topic was still a bit chilly.
Alyce Lomax does not own shares of any of the companies mentioned.