Hot Topic’s Profit Plunges

Shares of teenage clothing retailer Hot Topic Inc. tumbled Wednesday after the company reported disappointing second-quarter results and warned that sales and earnings for the rest of the year would be below Wall Street’s expectations.

The City of Industry-based company saw its earnings drop 80% to $893,000, or 2 cents a share, down from a restated $4.5 million, or 9 cents, last year. Sales for the quarter that ended July 30 increased 12% to $152.2 million, up from $136.3 million.

Comparable-store sales -- or sales at stores open at least a year -- fell 3.5% in the quarter.

The trend continued this month. Hot Topic, which operates 728 stores, most of them in malls, reported that comparable-store sales through Tuesday decreased about 8%.

The company, which targets a young crowd with its punk- and alternative-influenced line of clothing and accessories, had little good to say about the fall and holiday shopping season.

Hot Topic expects its third-quarter earnings will be 15 cents to 18 cents a share, based on sales of $192 million to $195 million. Analysts polled by Thomson Financial had estimated earnings of 27 cents a share for the third quarter and sales of $209 million.

For the fourth quarter, Hot Topic forecasts earnings of 30 cents to 38 cents a share; analysts were expecting profit of 43 cents a share.

The results were announced after the stock market closed. Hot Topic’s shares, which dropped 11 cents to $15.81 in regular trading, fell 13% to $13.74 in after-hours activity.

“We were clearly disappointed in our second-quarter results and in our current sales trend,” said Chief Executive Betsy McLaughlin in a conference call to analysts.

Hot Topic’s biggest problem, said analyst Jeffrey Van Sinderen of B. Riley & Co. in Los Angeles, was the continuing popularity of denim, a material used sparingly in the retailer’s fashions. “The company ended up fighting a fashion headwind, and it’s going to take an easing of that for them to turn around,” he said.

Times wire services contributed to this report.