Star Wars Episode III: Revenge of the Sith has hit the big screen. And no doubt, some eager fans of the classic series will be flocking into Hot Topic (NASDAQ:HOTT) to purchase the latest Star Wars-themed apparel.
But if you root for Yoda and the good guys, be sure to arm yourself with a light saber before entering -- the dark side is strong with this one. By dark, I mean Darth Vader, Nine Inch Nails, System of a Down... if it's dark and rocks, then Hot Topic has it.
Do black tees equal greenbacks? If they do, then Hot Topic should be sitting pretty, with George Lucas' latest film, Nine Inch Nails' With Teeth album, and System of a Down's Mezmerize all bombarding the youth market. So how has the dark side treated Hot Topic lately?
Net sales for the first quarter were higher by 16.9% to $149.8 million. However, comparable same-store sales must have been beaten down by a bunch of hairy wookies, as its 0.9% increase is well off the 4% figure from a year ago.
Its comps weren't all that got pummeled. Hot Topic's operating profit margins were squeezed by a Vader-like grip. This time last year, operating margin was 6.4%. In the latest period, operating profits declined to $7.8 million -- an operating margin of 5.2%.
The pressure on its margins resulted in a decline in net income. Hot Topic's earnings were $5 million, compared to $5.3 million from a year ago. However, since the company reduced its outstanding share count, it was able to earn $0.11 per share, equal to last year's mark.
So Hot Topic is making a little less green than it was a year ago. Perhaps when Darth Vader, the father of Goth attire, looms large on the silver screen, the company will begin to reel in more cash. But attracting teens into the door is no easy feat when you consider the competition includes the likes of The Buckle (NYSE:BKE), Urban Outfitters (NASDAQ:URBN), and PacificSunwear (NASDAQ:PSUN).
Speaking of the competition:
Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.
