EX-99.1 2 hottopic_8kex99-1.txt EXHIBIT 99.1 ** NEWS RELEASE ** HOT TOPIC, INC. REPORTS THIRD QUARTER EPS DECREASES 13% TO $0.27 PER DILUTED SHARE CITY of INDUSTRY, CA, November 17, 2004 -- Hot Topic, Inc. (Nasdaq National Market: HOTT) reported net income for its third quarter ended October 30, 2004 decreased to $12.6 million or $0.27 per diluted share, from $15.3 million or $0.31 per diluted share for the same period last fiscal year. Net sales for the quarter increased 12% to $180.8 million, from $161.5 million for the third quarter of fiscal 2003. As previously reported, comparable store sales decreased 4.2% for the quarter compared to the third quarter of fiscal 2003. At the end of the quarter, the company operated 649 stores, including 69 Torrid stores, compared to 540 stores, including 49 Torrid stores, at the end of the third quarter of fiscal 2003. For the first 39 weeks of fiscal 2004, net income was $22.6 million or $0.47 per diluted share, compared to $25.6 million or $0.52 per diluted share for the comparable period last year, an earnings per share decrease of 10%. Net sales for the 39 weeks ended October 30, 2004 were $445.2 million, an increase of 18% over net sales of $377.9 million for the first 39 weeks of fiscal 2003, and comparable store sales decreased 1.3%. The company also announced that it still expects to open 115 new stores in 2004. This includes an estimated 91 new Hot Topic stores, one more than the previously-announced 90 Hot Topic stores, and an estimated 24 new Torrid stores, one less than the previously-announced 25 Torrid stores. The company expects to end the year operating 76 Torrid stores and 592 Hot Topic stores. A conference call to discuss third quarter results, business trends and other matters is scheduled for today at 4:30 PM (ET). The conference call number is 800-370-0869, and will be accessible to all interested parties. It will also be webcast at www.companyboardroom.com. A replay will be available at 877-519-4471, pass code 5294345, 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 589 Hot Topic stores in all 50 states and Puerto Rico, 75 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 Reports on Form 10-Q and its Annual Report on Form 10-K for the year ended January 31, 2004. Historical results achieved are not necessarily indicative of the future prospects of the company, and actual results or circumstances could differ materially from the forward-looking statements. 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 2 HOT TOPIC, INC. SUMMARY STATEMENTS OF INCOME (Unaudited) Third Quarter Ended --------------------------------- Oct. 30, 2004 Nov. 1, 2003 ------------- ------------ (In thousands, except per share amounts) Net sales $180,808 $161,546 Cost of goods sold, including buying, distribution and occupancy costs 116,054 98,503 Gross margin 64,754 63,043 Selling, general and administrative expenses 44,553 38,626 Operating income 20,201 24,417 Interest income-net 188 333 Income before income taxes 20,389 24,750 Provision for income taxes 7,809 9,479 Net income $ 12,580 $ 15,271 Earnings per share Basic $0.27 $0.32 Diluted $0.27 $0.31 Weighted average shares outstanding Basic 46,086 47,656 Diluted 47,202 49,917 Nine Months Ended --------------------------------- Oct. 30, 2004 Nov. 1, 2003 ------------- ------------ (In thousands, except per share amounts) Net sales $445,214 $377,931 Cost of goods sold, including buying, distribution and occupancy costs 289,300 237,643 Gross margin 155,914 140,288 Selling, general and administrative expenses 120,053 99,782 Operating income 35,861 40,506 Interest income-net 744 939 Income before income taxes 36,605 41,445 Provision for income taxes 14,020 15,873 Net income $ 22,585 $ 25,572 Earnings per share Basic $ 0.48 $ 0.54 Diluted $ 0.47 $ 0.52 Weighted average shares outstanding Basic 46,857 47,328 Diluted 48,468 49,263
3 HOT TOPIC, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) Oct. 30, 2004 Nov. 1, 2003 ------------- ------------ Current Assets: Cash, cash equivalents and short-term investments $ 41,704 $ 96,506 Inventory 78,814 63,295 Prepaid expenses and other 14,953 11,318 Deferred tax assets 2,259 2,093 Total current assets 137,730 173,212 Leaseholds, fixtures and equipment - net 110,120 85,035 Deposits and other 242 189 Deferred tax assets - 683 Total assets $ 248,092 $ 259,119 Current Liabilities: Accounts payable $ 16,498 $ 26,335 Accrued liabilities 28,185 26,040 Income taxes payable 8,322 7,050 Total current liabilities 53,005 59,425 Deferred rent 3,829 2,921 Deferred tax liability 3,316 - Total liabilities 60,150 62,346 Shareholders' equity 187,942 196,773 Total liabilities and shareholders' equity $ 248,092 $ 259,119 HOT TOPIC, INC. OTHER DATA (Dollars in thousands) (Unaudited) Nine Months Ended --------------- ----------------- Oct. 30, 2004 Nov. 1, 2003 ------------- ------------ Depreciation and amortization $ 16,198 $ 13,820 Capital expenditures $ 38,311 $ 26,952 Number of stores open at end of period: Hot Topic 580 491 Torrid 69 49 Total store square footage 1,177,000 971,000
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