Hot Topic’s Same-Store Sales Fall 4.2%

Teen retailer Hot Topic Inc., usually a magnet for Halloween shoppers, got tricked instead of treated last month as sales slid.

The Commerce-based company said total sales at stores open at least a year fell 4.2% -- and sales of Halloween merchandise tumbled 10% -- in the quarter that ended Oct. 30.

As a result, Hot Topic lowered third-quarter earnings expectations to 27 cents a share. A consensus of analysts polled by Thomson First Call had put per-share profit at 30 cents.

“Ouch,” said Elizabeth Pierce, an analyst with Sanders Morris Harris. “Clearly a miss. The stock’s been having a nice little run, so it wouldn’t be surprising [today] if it’s going to be under pressure.”

The sales results were released after the market closed. Hot Topic’s shares rose 52 cents to $20.83 in regular trading on Nasdaq. They fell sharply in after-hours trading, dropping as much as 13%, before regaining almost all of the lost ground.

After a five-year hot streak, the retailer has struggled for much of 2004 as its edgy apparel, often in dark shades, clashed with brightly colored preppy trends. Analysts said Hot Topic had been trying to spark sales with some trendier products -- pink T-shirts, for example -- without alienating core customers who gravitate to its not-exactly-cheery gothic offerings.

“Frankly, their customer doesn’t want them to sell out,” Pierce said. “The typical mall rat isn’t going to think of Hot Topic as their go-to store for preppy. It’s just not going to happen. And that’s not what the company wants to be.”

Analysts were hoping that October would give Hot Topic a boost. Although music-licensed products sold well, the men’s category plummeted 20% compared with the prior October. Overall, non-Halloween products were off about 2%. The firm didn’t offer a reason for the drop in Halloween sales, and executives didn’t return phone calls.

In a statement, the retailer said it expected fourth-quarter profit to be at the lower end of its previous estimate of 49 to 52 cents a share. For the year, it expects earnings of 95 to 98 cents a share. Analysts were expecting profit of 50 cents a share in the fourth quarter and 99 cents for the year.

Third-quarter earnings will be released Nov. 17.