Specialty retailer Hot Topic
After bottoming out at $13.85 last summer, the stock began clawing its way back to a high of $23.49 in April. But then Hot Topic warned investors that it will be missing its mark again, and that news sent the stock down to $19.40 last night. Yes, the dreaded teens.
The company suffered a 4% decline in comps though the first 20 days in June, and that has the company watering down its July-quarter earnings targets. It originally expected to earn as much as $0.12 for the quarter, but it is now guiding the market to expect profitability of just $0.07 to $0.09 a share. The company earned $0.11 a share in the April quarter.
With 713 stores under the Hot Topic and Torrid brands, coming up short early in the summer is usually a bad omen. The trends often carry over when the critical back-to-school shopping season follows two months later.
Hot Topic has gone about things all wrong. When same-store sales first began to tumble, the company maintained its aggressive expansion plan instead of pausing to cure the ills. In its most recent fiscal year, Hot Topic saw its earnings fall from $0.96 to $0.83 a share. We're not necessarily going to see another bottom-line dip this year: We still have the pivotal holiday selling season, after all, and let's not write off the back-to-school shoppers just yet.
But why would you invest in Hot Topic these days, when you could opt instead for chains like Urban Outfitters
Here are some of the company's recent retailing woes:
- The company's April-quarter results weren't so hot, but at least comps inched higher.
- It won't cost much to change the name to Rot Topic.
- A bad summer is never a good start.
Longtime Fool contributor Rick Munarriz enjoys the mall -- even the food court. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.