Teen retailer Hot Topic Inc. said Wednesday that its revenue jumped 36% during the holiday season and predicted better-than-expected fourth-quarter earnings.
Analysts were expecting the City of Industry company to outshine most of its competitors. But they were surprised that sales in stores open at least a year rose a hefty 11% in December, a disappointing month for many retailers.
Overall sales for the five weeks ended Jan. 4 jumped to $87.4 million, compared with $64.1 million in the comparable period last year.
“I looked at that and went, ‘Wow,’ ” said Jennifer Black, an analyst with Wells Fargo Securities, who added that she would raise her earnings estimate for the retailer to at least 48 cents a share, compared with her current forecast of 46 cents.
Hot Topic raised its fourth-quarter earnings expectations to 47 cents to 48 cents a share, which would be 25% higher than last year. A consensus of analysts from Thomson First Call was expecting profit of 46 cents a share.
Analysts say Hot Topic, which has 420 stores, has set itself apart from the retail pack by offering products unlike those found elsewhere in the mall, particularly music-themed apparel, accessories and gifts. The company also operates a smaller chain of Torrid stores, which sells trendy clothes and accessories to plus-size teens and young women.
A gift card program introduced in July helped boost December’s sales. Gift card sales soared 72% between Thanksgiving and Christmas, compared with the sale of gift certificates in the same period last year, the company said.
With promotional activity “at a relatively low level, merchandise margins are slightly better than last year,” Chief Financial Officer Jim McGinty said in a recorded statement.
Hot Topic’s stock closed Wednesday at $24.67, up 19 cents, in Nasdaq trading. The sales results were released after the market closed.