Hot Topic, Inc. Reports 4th Quarter Financial Results

Hot Topic, Inc. (Nasdaq Global Select Market: HOTT) reported results for its fiscal fourth quarter and fiscal year of 2012 (14 weeks and 53 weeks, respectively) ended February 2, 2013.

The company reported net income in the fourth quarter of $12.1 million, or $0.29 per share, compared to net income of $9.0 million, or $0.21 per share, for the fourth quarter of fiscal year 2011 (13 weeks). Total sales for the fourth quarter of fiscal 2012 increased 11.0% to $233.0 million compared to $209.9 million for the fourth quarter of fiscal year 2011. Total company comparable sales increased 2.6% for the fourth quarter of fiscal 2012. Due to the 53rd week in fiscal 2012, fourth quarter comparable sales are compared to the corresponding 14 week period ended February 4, 2012. Additionally, during the first quarter of fiscal 2012, the company began including Internet sales in the computation of comparable sales. All prior year comparable sales results have been adjusted to reflect this change. A summary of the sales results by division was included in the fourth quarter sales release.

For the fiscal year of 2012, the company reported net income of $19.5 million, or $0.46 per share, compared to a net loss of $1.8 million, or $0.04 per share, for fiscal year 2011 (52 weeks). The results for fiscal year 2011 include a charge of $16.6 million for the implementation of the strategic business changes and cost reduction plan. On a non-GAAP basis, which excludes the charges for the strategic business changes and the cost reduction plan, fiscal year 2011 net income was $0.19 per share. (Refer to GAAP to non-GAAP reconciliation.)

At the end of the fourth quarter of fiscal 2012, the company operated 618 Hot Topic stores, 190 Torrid stores and five Blackheart stores compared to 628 Hot Topic stores and 148 Torrid stores at the end of fourth quarter of fiscal 2011. During the fourth quarter of fiscal 2012, the company opened five Torrid stores and five Blackheart stores, and closed two Hot Topic stores and one Torrid store. The company also remodeled one Hot Topic store during the quarter.

A conference call to discuss fourth quarter results is scheduled for March 13, 2013 at 4:30 PM (ET). The conference call number is 866-700-6067, pass code “Hot Topic”, and will be accessible to all interested parties. It will also be webcast on the company’s Investor Relations website located at http://investorrelations.hottopic.com. A replay of the conference call will be available at 888-286-8010, pass code 41187953, for approximately two weeks. In addition, a webcast replay of the conference call will be available on the company’s Investor Relations website for approximately two weeks.

Hot Topic, Inc. is a mall and web based specialty retailer operating the Hot Topic and Torrid concepts, as well as a new test retail concept, Blackheart. Hot Topic offers music/pop culture-licensed and music/pop culture-influenced apparel, accessories, music and gift items for young men and women. Torrid retails on-trend fashion apparel, lingerie and accessories inspired by and designed to fit the young, voluptuous woman who wears size 12 and up. Blackheart offers an expanded collection of dark, edgy, sexy lingerie, accessories and beauty products. As of February 2, 2013, the company operated 618 Hot Topic stores in all 50 states, Puerto Rico and Canada, 190 Torrid stores, five Blackheart stores, and Internet stores hottopic.com, torrid.com and blackheartlingerie.com.

This news release and the aforementioned conference call contain forward-looking statements, which may include statements relating to financial results, guidance, store and online operations (including closures, remodels and relocations), projections, financial performance including cost reductions and changes in business operations, and related matters. These statements involve risks and uncertainties, including risks and uncertainties associated with meeting expected financial results, fluctuations in sales and comparable sales results, music, license and fashion trends, competition from other retailers, uncertainties generally associated with specialty retailing, technology and other risks associated with Internet sales, the effect of negative conditions in the economic environment (including global capital and credit markets), 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, relationships with mall developers and operators, relationships with our vendors, litigation proceedings and contingent liabilities, as well as other risks detailed in the company’s SEC reports including its Annual Report on Form 10-K for the year ended January 28, 2012, and its Quarterly Reports on Form 10-Q. 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.

NON-GAAP PERFORMANCE MEASURES – Hot Topic, Inc. reports its financial results in accordance with generally accepted accounting principles (GAAP). However, management believes that non-GAAP performance measures, which exclude certain items that the Company does not consider part of its ongoing operating results when assessing the performance of the Company, present the operating results of the Company on a basis consistent with those used in managing the Company's business, and provide users of the Company's financial information with a more meaningful report on the condition of the Company's business. Non-GAAP performance measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.

Within this release, the Company has excluded the following items from its non-GAAP performance measures:

Fiscal Year (year ended Jan. 28, 2012) - $16.6 million of charges consist of the following items:
– $17.2 million of charges, comprising of $6.2 million in cost of goods sold and $11.0 million in selling, general and administrative expenses, related to the strategic business changes previously announced on March 28, 2011.
– $0.6 million net recovery of charges, comprising of $0.8 million recovery in cost of goods sold and $0.2 million charge in selling, general and administrative expenses, related to the implementation of the cost reduction plan previously announced on November 16, 2010.