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Updated from 5:03 p.m. EDT

Strong sales sent second-quarter earnings per share up 38% at

Hot Topic


, the company reported on Wednesday.

In its quarter ended Aug. 2, the teen-apparel company earned $5.89 million, or 18 cents a share. That compared with the second quarter last year, when Hot Topic earned $4.34 million, or 13 cents a share.

Revenue at the apparel chain increased 25.2% to $115.7 million.

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The company's bottom-line results topped its recently raised guidance and analysts' estimates, although its revenue fell short of Wall Street's projections. Wall Street analysts polled by Thomson First Call were expecting Hot Topic to earn 17 cents a share on $116.07 million in sales.

In a statement earlier this month, Hot Topic raised its second-quarter earnings guidance from 16 cents to 17 cents a share.

Hot Topic estimates it will earn 37 cents a share in the third quarter and 61 cents a share in the fourth quarter. Analysts' estimates gathered by Thomson First Call were for 37 cents in the third quarter and 60 cents in the fourth. The company expects to post same-stores sales growth in both quarters in the low-single digits, percentagewise.

Same-store sales compare the results of like outlets open for more than one year.

In its just-completed second quarter, Hot Topic benefited from same-store sales growth of 5.2%. The number of transactions at stores open for more than one year increased 7%, while the average size of each transaction fell 2%, said Jim McGinty, the company's CFO, during a conference call with investors and analysts.

While sales increased, the company kept expenses in check. Hot Topic's gross margin -- the difference between what it charges for its products and its direct costs of obtaining and selling those products -- increased 52 basis points over the second quarter last year to 35.98% of sales. Lower markdowns and increasing sales at the company's higher margin Torrid chain offset a jump in occupancy and store operating costs in the quarter, McGinty said.

Meanwhile, the company saw its operating expenses decline in the quarter. As a portion of sales, marketing, general and administrative expenses declined 34 basis points to 27.92%. A drop in store payroll as a portion of sales helped drive the overall decline, McGinty said.

Despite the second-quarter earnings surge, Hot Topic shares fell 17 cents, or 0.5%, to $32.75 in recent after-hours trading. Preceding the company's earnings report, Hot Topic shares closed regular trading on Wednesday down 33 cents, or 1%, to $32.92.