Hot Topic Earnings Preview

Before you go, we thought you'd like these...
Before you go close icon

If Hot Topic (NAS: HOTT) hits analysts estimates, it will be the fourth consecutive quarter it has hit the number on the nose. The company will unveil its latest earnings Wednesday. Hot Topic is a mall- and Web-based specialty retailer operating the Hot Topic and Torrid concepts, as well as the e-space music discovery concept, ShockHound.

What analysts say:

  • Buy, sell, or hold?: Analysts think investors should stand pat on Hot Topic with five of nine analysts rating it hold. Analysts like Hot Topic better than competitor Pacific Sunwear of California overall. Two out of 16 analysts rate Pacific Sunwear of California a buy compared with three of nine for Hot Topic. Analysts still rate the stock a hold, but they are a bit more wary about it compared with three months ago.
  • Revenue Forecasts: On average, analysts predict $149.1 million in revenue this quarter. That would represent a decline of 0.6% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is a loss of $0.08 per share.

What our community says:
Most CAPS All-Stars are skeptical of Hot Topic's prospects, with 58.7% awarding it an "underperform" rating. The community is divided on the stock with 55% Fools giving it an "outperform" rating and 45% an "underperform" rating. Fools are bearish on Hot Topic and haven't been shy with their opinions lately, logging 259 posts in the past 30 days. Hot Topic's bearish CAPS rating of one out of five stars falls short of the Fool community sentiment.

Management:
Revenue has fallen for the past three quarters. The company's gross margin shrank by 2.2 percentage points in the last quarter. Revenue fell 0.8% while cost of sales rose 2.5% to $110.9 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q1

Q4

Q3

Q2

Gross Margin

31.3%

32.2%

35.2%

30.7%

Operating Margin

(7.7%)

(0.3%)

0.2%

(6.9%)

Net Margin

(4.8%)

(0.3%)

0.2%

(4.2%)

We can help you keep tabs on your companies with My Watchlist, our free, personalized service. Add Hot Topic now.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

At the time this article was published

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners