EX-99.1 2 hottopic_8kex99-1.txt EXHIBIT 99.1 ** NEWS RELEASE ** HOT TOPIC, INC. REPORTS SECOND QUARTER EPS DECREASES 17% TO $0.10 PER DILUTED SHARE CITY of INDUSTRY, CA, August 18, 2004 -- Hot Topic, Inc. (Nasdaq National Market: HOTT), reported net income for the quarter ended July 31, 2004 decreased to $4.6 million or $0.10 per diluted share, from $5.9 million or $0.12 per diluted share for the same period last fiscal year. Net sales for the second quarter increased 18% to $136.3 million, from $115.7 million for the second quarter of fiscal 2003. As previously reported, comparable store sales decreased 2.1% for the quarter compared to the second quarter of fiscal 2003. At the end of the quarter, the company operated 613 stores, including 59 Torrid stores, compared to 497 stores, including 40 Torrid stores, at the end of the second quarter of fiscal 2003. For the first 26 weeks of fiscal 2004, net income was $10.0 million or $0.20 per diluted share, compared to $10.3 million or $0.21 per diluted share for the comparable period last year, an earnings per share decrease of 5%. The Company previously reported its net sales for the 26 weeks ended July 31, 2004 were $264.4 million, an increase of 22% over net sales of $216.4 million for the first 26 weeks of fiscal 2003, and comparable-store sales increased 0.8%. The Company also announced that it expects to open 90 new Hot Topic stores in 2004, ten more than the previously-announced 80 new Hot Topic stores. The Company expects to end the year operating 77 Torrid stores and 591 Hot Topic stores. 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 800-370-0869, and will be accessible to all interested parties. The conference call will also be webcast at www.companyboardroom.com. A replay will be available at 877-519-4471, pass code 5019549, for approximately 10 days. Hot Topic, Inc. is a national mall-based specialty retailer. Hot Topic offers apparel, accessories and gifts to young men and women principally between the ages of 12 and 22. Torrid, the company's second concept, provides plus-size fashion-forward apparel and accessories that target young women principally between the ages of 15 and 29. The company currently operates 562 Hot Topic stores in 50 states and Puerto Rico, 62 Torrid stores, and Internet stores www.hottopic.com and www.torrid.com. In addition to the historical information contained herein, this news release contains forward-looking statements, which include statements relating to financial results, guidance, 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 in the company's SEC reports, including its Quarterly Report on Form 10-Q for the quarter ended May 1, 2004 and the Annual Report on Form 10-K for the year ended January 31, 2004. The historical results achieved are not necessarily indicative of the future prospects of the company. Contact: Hot Topic, Inc., City of Industry, CA Mr. Jim McGinty, CFO (626) 839-4681 x2675 Mr. Marc Campbell, Director of IR (626) 839-4681 x2419 HOT TOPIC, INC. SUMMARY STATEMENTS OF INCOME (Unaudited) Second Quarter Ended --------------------- July 31, Aug. 2, 2004 2003 -------- -------- (In thousands, except per share amounts) Net sales $136,263 $115,728 Cost of goods sold, including buying, distribution and occupancy costs 89,420 74,087 -------- -------- Gross margin 46,843 41,641 Selling, general and administrative expenses 39,515 32,307 -------- -------- Operating income 7,328 9,334 Interest income-net 204 247 -------- -------- Income before income taxes 7,532 9,581 Provision for income taxes 2,885 3,691 -------- -------- Net income $ 4,647 $ 5,890 ======== ======== Earnings per share Basic $ 0.10 $ 0.12 Diluted $ 0.10 $ 0.12 Weighted average shares outstanding Basic 46,565 47,360 Diluted 48,023 49,127 Six Months Ended --------------------- July 31, Aug. 2, 2004 2003 -------- -------- (In thousands, except per share) Net sales $264,406 $216,386 Cost of goods sold, including buying, distribution and occupancy costs 173,246 139,132 -------- -------- Gross margin 91,160 77,254 Selling, general and administrative expenses 75,500 61,165 -------- -------- Operating income 15,660 16,089 Interest income-net 556 606 -------- -------- Income before income taxes 16,216 16,695 Provision for income taxes 6,211 6,394 -------- -------- Net income $ 10,005 $ 10,301 ======== ======== Earnings per share Basic $ 0.21 $ 0.22 Diluted $ 0.20 $ 0.21 Weighted average shares outstanding Basic 47,242 47,164 Diluted 49,055 48,833 HOT TOPIC, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) July 31, Aug. 2, 2004 2003 -------- -------- Current Assets: Cash, cash equivalents and short-term investments $ 71,635 $ 70,257 Inventory 80,906 63,985 Prepaid expenses and other 11,704 9,636 Deferred tax assets 2,259 2,093 -------- -------- Total current assets 166,504 145,971 Leaseholds, fixtures and equipment - net 103,044 80,949 Deposits and other 204 182 Deferred tax assets -- 683 -------- -------- Total assets $269,752 $227,785 ======== ======== Current Liabilities: Accounts payable $ 47,060 $ 28,547 Accrued liabilities 22,966 18,478 Income taxes payable 1,094 -- -------- -------- Total current liabilities 71,120 47,025 Deferred rent 3,597 2,708 Deferred tax liability 3,316 -- -------- -------- Total liabilities 78,033 49,733 Shareholders' equity 191,719 178,052 -------- -------- Total liabilities and shareholders' equity $269,752 $227,785 ======== ======== HOT TOPIC, INC. OTHER DATA (Dollars in thousands) (Unaudited) Six Months Ended July 31, Aug. 2, 2004 2003 -------- -------- Depreciation and amortization $ 10,440 $ 8,946 Capital expenditures $ 25,338 $ 17,943 Number of stores open at end of period: Hot Topic 554 457 Torrid 59 40 Total store square footage 1,107,000 888,000