While I'm definitely not in the target demographic of goth retailer Hot Topic (NASDAQ:HOTT), there actually was a time I was able to go into the store and find some things to buy. The alt-rock, indie music scene has always held a bit of an attraction with groups like Jane's Addiction and Three Days Grace.
As I've noted in the past, I've always liked the Hot Topic store because it was dark. The walls were black and it had an edgy feel. So I was surprised to find my preferred store had been remodeled, with bright walls, bright lights, and a big-screen TV flashing "Hot Topic-Everything About the Music." I felt like I was shopping at PacSun (NASDAQ:PSUN) or Quiksilver (NYSE:ZQK).
Not that the sales help was any different. They still had spiky, purple hair and ropes of chain linking their wallets to their belt loops, but the customers looked different. These were not the goth kids of before, but, well, kids you'd see in PacSun or Quiksilver shopping with their soccer moms! That's part of why Alyce Lomax gets nostalgic for what used to be.
Hot Topic has always had a close relationship with alternative music. Its T-shirts and music selections often featured the latest bands that weren't yet getting radio play but were creating a buzz in the underground scene. The company's marketing was not done through ad buys, but instead at local concerts and trendsetting events. You can still find that at Hot Topic. I mean, I don't know too many other places that are promoting The Red Jumpsuit Apparatus.
So on the one hand, the company seems to be going back to its undyed roots of highlighting the latest indie bands, but on the other hand is saying it wants a different audience to grow with, too. Yet as fellow Fool Jeremy MacNealy noted last week, the remodeling and repositioning the company is doing hasn't been moving the ball down the field, but rather has been attracting yellow flags.
No turnaround is accomplished quickly. In reality, I've always wondered how long catering to the goth scene would last, as it appeared more fad than trend. Hot Topic cooled down quite a while ago and has been flailing about in trying to get it right. It hasn't done so yet, and I'm not sure that looking more like another Urban Outfitters (NASDAQ:URBN) or American Apparel is the answer. There's too much risk of alienating its core customer base.
Music-related T-shirts may ultimately be Hot Topic's moneymakers to shake, and highlighting that with bright lights and big TVs may be key to drawing renewed attention, but fast-forward fashion has a way of blurring lines, too. Hot Topic just might have been too popular for its own good and now runs the risk of looking like another T-shirt hawker.
With a multiple twice as large as better-run rivals Abercrombie & Fitch (NYSE:ANF) and American Eagle Outfitters (NYSE:AEO), it's a pricey investment that no patent leather platform boot can get it to rise above.
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Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
