Hot Topic ( HOTT) offered a double- dose of bad news on Monday: warning of disappointing earnings due in part to a same-store sales shortfall. Investors responded in kind, selling off the company's stock. In recent after-hours trading, Hot Topic shares were off $1.87, or 12.72%, to $12.83. The teen-clothing retailer now expects to lose 2 cents to 3 cents a share for its second quarter, which ended on Saturday. The company also reported that it tallied $160.4 million in sales for the period. In contrast, analysts polled by Thomson First Call had predicted that Hot Topic would post a break-even bottom line on sales of $165.2 million. In May, the company predicted its bottom line would be about break-even on sales of between $164 million and $169 million. The light sales result was driven by comparable-stores sales results that came in below expectations. The company reported that its comparable-store sales fell 7.2% in July. For the quarter, the company's same-store sales, which compare results at outlets open for more than one year, fell 5.5%. Hot Topic had previously predicted that its same-store sales would fall by the low-single digits in the quarter. In a statement, company CEO Betsy McLaughlin blamed the slow sales on a combination of factors. One-third of the shortfall was due to a disappointing promotional event in Florida that offered customers merchandise without sales taxes, McLauhglin said. Another third was due to the company's own plan to reduce its promotions and markdowns relative to last year, she said. Further weighing on the company's sales was a reduction in store traffic, she said. "We believe our back-to-school assortment, especially our men's and women's fashion statements, are on trend and look better than they have looked in years," McLaughlin said in the statement. "However, we also believe it will take time and traffic for our customers to respond accordingly."
The warning marked the second time the company had sought to rein in expectations for the second quarter. In its first-quarter report, the company lowered its outlook for the second period. It previously had projected its second-quarter bottom line would range from break-even to a profit of 4 cents a share on comparable store sales ranging from flat to up by a single-digit percentage. Shares of Hot Topic closed regular trading up 15 cents, or 1%, to $14.70.