Let's lay down a background score to Hot Topic's
- "This Scene Is Dead," by We Are Scientists
- "My Own Worst Enemy," by Lit
- "Sugar, We're Goin' Down" by Fall Out Boy
- "It's Not a Fashion Statement, It's a Deathwish" by My Chemical Romance
All queued up? Good. Let's begin.
Wednesday night, the specialty retailer posted a 0.7% dip in comps for the quarter ended in January. It was a dud, but it actually helped prop up same-store sales for the quarter to a decline of just 3.8%. That's stacked atop -- or, rather, below -- a steep 6% slide during the previous year's final fiscal quarter. In other words, this is the telltale quarter for any worthy retailer, and Hot Topic's performance at the store level is 9.6% off where it was two years ago.
Wall Street didn't see it that way, though. They were Goths to the end, expecting an even bleaker January at Hot Topic. That's why Wednesday night's news was a celebrated event; the stock shot up 8% in after-hours trading. With comp declines narrowing, it's easy to start seeing Hot Topic as a potential turnaround situation during the next fiscal year.
It might be. Just smarten up to previous examples elsewhere. Remember Gap
Comps -- assuming that they aren't being peppered with cutthroat margin clearances -- are the lifeblood of a retail establishment. It's a gauge of popularity, and the bottom line often follows. If you've been burned by companies like Hot Topic and Gap, consider chains that have been hitting it out of the park consistently; Urban Outfitters
I have nothing against Hot Topic. Even though I sometimes feel like I'm the only person there older than 20, I've shopped there before. I just want to see material upticks in comps -- above and beyond where the company was three years ago -- before I scrap my playlist and start singing a new tune.
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.