EX-99.1 3 hottopic_8kex99-1.txt EXHIBIT 99.1 ** NEWS RELEASE ** Contact: Mr. Jim McGinty Chief Financial Officer Hot Topic, Inc. (626) 839-4681 x2675 jmcginty@hottopic.com HOT TOPIC, INC. REPORTS SECOND QUARTER EPS INCREASE OF 38% TO A RECORD $0.18 PER DILUTED SHARE CITY of INDUSTRY, CA, August 20, 2003 -- Hot Topic, Inc.(Nasdaq National Market: HOTT), a mall-based specialty retailer of music-licensed and music-influenced apparel, accessories and gift items for teens, reported company-record results for the second quarter (13 weeks) ended August 2, 2003. Net income in the second quarter increased to $5.9 million or $0.18 per diluted share from $4.3 million or $0.13 per diluted share for the second quarter of the last fiscal year. Net sales for the second quarter increased 25% to $115.7 million from $92.5 million for the second quarter of fiscal 2002. As previously reported, comparable-store sales increased 5.2% for the quarter compared to the second quarter of fiscal 2002. At the end of the quarter, the Company operated 497 stores, including 40 Torrid stores, compared to 415 stores, including 14 Torrid stores, at the end of the second quarter of fiscal 2002. For the first 26 weeks of fiscal 2003, net income was $10.3 million or $0.32 per diluted share, compared to $8.0 million or $0.24 per diluted share for the comparable period last year, an earnings per share increase of 33%. The Company previously reported its net sales for the 26 weeks ended August 2, 2003 were $216.4 million, an increase of 26% over net sales of $172.4 million for the first 26 weeks of fiscal 2002, and comparable-store sales increased 4.0%. The Company also announced that it expects to open 80 new Hot Topic stores in 2003, ten more than the previously announced 70 new Hot Topic stores. The Company expects to end the year operating 52 Torrid stores and 498 Hot Topic stores. On August 12, 2003 the Company announced that its Board of Directors declared a three-for-two split (in the form of a dividend) of its common stock. On the effective date of September 2, 2003, shareholders will receive a dividend of one additional share for every two shares they own at the close of business on the record date of August 21, 2003. All share and per share information presented in this release have not been adjusted to reflect the three-for-two stock split. A conference call to discuss second quarter results, business trends, and other matters will be conducted today at 4:30 PM Eastern time. The conference call number is (888) 868-9080, and will be accessible to all interested parties. It will also be webcast at www.companyboardroom.com. A replay will be available at (973) 341-3080, pass code 3265628, and at www.companyboardroom.com for approximately 10 days. Hot Topic, Inc. is a national mall-based specialty retailer of music-licensed and music-influenced apparel, accessories and gift items for young men and women principally between the ages of 12 and 22. Torrid, the Company's second concept, is a mall-based specialty retailer of plus-sized fashion-forward apparel and accessories that targets young women principally between the ages of 15 and 29. The Company currently operates 463 Hot Topic stores in 49 states throughout the United States and Puerto Rico, 42 Torrid stores and Internet stores www.hottopic.com and www.torrid.com. Except for the historical information contained herein, this news release contains forward-looking statements, including statements relating to financial results, projections and other financial performance, and managing growth. These statements involve risks and uncertainties, including risks and uncertainties associated with meeting expected financial results, management of growth, relationships with mall developers and operators, the risk that available cash or mall space will not be adequate for planned expansion, fluctuations in sales and comparable store sales results, risks and uncertainties with respect to new store openings including risks associated with the Company's new store concepts and Internet stores, music and fashion trends, competition from other retailers, uncertainties generally associated with specialty retailing, the effect of economic conditions, the effect of severe weather or natural disasters, political and/or social changes or events that could negatively impact shopping patterns and/or mall traffic as well as other risks detailed from time to time in the Company's SEC reports, including its Quarterly Report on Form 10-Q for the quarter ended May 3, 2003 and its Annual Report on Form 10-K for the year ended February 1, 2003. The historical results achieved are not necessarily indicative of the future prospects of the Company. HOT TOPIC, INC. SUMMARY STATEMENTS OF INCOME Second Quarter Ended Aug. 2, 2003 Aug. 3, 2002 ------------ ------------ (In thousands, except per share) Net sales $ 115,728 $ 92,473 Cost of goods sold, including buying, distribution and occupancy costs 74,087 59,681 ------------ ------------ Gross margin 41,641 32,792 Selling, general and administrative expenses 32,307 26,134 ------------ ------------ Operating income 9,334 6,658 Interest income-net 247 349 ------------ ------------ Income before income taxes 9,581 7,007 Provision for income taxes 3,691 2,663 ------------ ------------ Net income $ 5,890 $ 4,344 ============ ============ Earnings per share Basic $ 0.19 $ 0.14 Diluted $ 0.18 $ 0.13 Weighted average shares outstanding Basic 31,573 31,712 Diluted 32,751 33,493 Six Months Ended Aug. 2, 2003 Aug. 3, 2002 ------------ ------------ (In thousands, except per share) Net sales $ 216,386 $ 172,382 Cost of goods sold, including buying, distribution and occupancy costs 139,132 111,133 ------------ ------------ Gross margin 77,254 61,249 Selling, general and administrative expenses 61,165 49,061 ------------ ------------ Operating income 16,089 12,188 Interest income-net 606 759 ------------ ------------ Income before income taxes 16,695 12,947 Provision for income taxes 6,394 4,920 ------------ ------------ Net income $ 10,301 $ 8,027 ============ ============ Earnings per share Basic $ 0.33 $ 0.25 Diluted $ 0.32 $ 0.24 Weighted average shares outstanding Basic 31,442 31,593 Diluted 32,555 33,393 HOT TOPIC, INC. BALANCE SHEETS (In thousands) Aug.2, 2003 Aug. 3, 2002 ------------ ------------ Current Assets: Cash and cash equivalents $ 34,082 $ 18,171 Short-term investments 36,175 31,462 Inventory 63,985 50,251 Prepaid expenses and other 9,636 9,593 Deferred tax assets 2,093 1,417 ------------ ------------ Total current assets 145,971 110,894 Leaseholds, fixtures and equipment - net 80,949 69,880 Deposits and other 182 187 Deferred tax assets 683 847 ------------ ------------ Total assets $ 227,785 $ 181,808 ============ ============ Current Liabilities: Accounts payable $ 28,547 $ 22,453 Accrued liabilities 18,376 12,646 Current portion of obligations under capital leases 19 26 ------------ ------------ Total current liabilities 46,942 35,125 Deferred rent 2,708 2,022 Capital lease obligations, less current portion 83 139 ------------ ------------ Total liabilities 49,733 37,286 Shareholders' equity 178,052 144,522 ------------ ------------ Total liabilities and shareholders' equity $ 227,785 $ 181,808 ============ ============ HOT TOPIC, INC. OTHER DATA (Dollars in thousands) Six Months Ended Aug. 2, 3003 Aug. 3, 2002 ------------ ------------ Depreciation and amortization $ 8,946 $ 6,954 Capital expenditures $ 17,943 $ 23,079 Number of stores open at end of period: Hot Topic 457 401 Torrid 40 14 Total store square footage 888,000 716,400