EX-99.1 3 hottopic_8kex99-1.txt EXHIBIT 99.1 ** NEWS RELEASE ** Contact: Mr. Jim McGinty Chief Financial Officer Hot Topic, Inc. (626) 839-4681 x2675 jmcginty@hottopic.com HOT TOPIC, INC. REPORTS THIRD QUARTER EPS INCREASE OF 48% TO $0.31 PER DILUTED SHARE CITY of INDUSTRY, CA, November 19, 2003 -- Hot Topic, Inc.(Nasdaq National Market: HOTT), a mall-based specialty retailer of music-licensed and music-influenced apparel, accessories and gift items for teens, reported record results for the third quarter (13 weeks) ended November 1, 2003. All references to shares and per share amounts reflect a 3-for-2 stock split effected on September 2, 2003. Net income in the third quarter increased to $15.3 million or $0.31 per diluted share from $10.0 million or $0.21 per diluted share for the third quarter of the last fiscal year. Net sales for the third quarter increased 32% to $161.5 million from $122.6 million for the third quarter of fiscal 2002. As previously reported, comparable store sales increased 10.8% for the quarter compared to the third quarter of fiscal 2002. At the end of the quarter, the Company operated 540 stores, including 49 Torrid stores, compared to 437 stores, including 23 Torrid stores, at the end of the third quarter of fiscal 2002. For the first 39 weeks of fiscal 2003, net income was $25.6 million or $0.52 per diluted share, compared to $18.1 million or $0.37 per diluted share for the comparable period last year, an earnings per share increase of 41%. The Company previously reported its net sales for the 39 weeks ended November 1, 2003 were $377.9 million, an increase of 28% over net sales of $295.0 million for the first 39 weeks of fiscal 2002, and comparable store sales increased 6.8%. The Company also announced that it expects to open 105 new stores in 2004, 80 new Hot Topic stores, and 25 new Torrid stores. A conference call to discuss third quarter results, business trends, and other matters will be conducted today at 4:30 PM Eastern time. The conference call number is (888) 868-9080, and will be accessible to all interested parties. It will also be webcast at www.companyboardroom.com. A replay will be available at (973) 341-3080, pass code 3265628, and at www.companyboardroom.com for approximately 10 days. 1 Hot Topic, Inc. is a national mall-based specialty retailer of music-licensed and music-influenced apparel, accessories and gift items for young men and women principally between the ages of 12 and 22. Torrid, the Company's second concept, is a mall-based specialty retailer of plus-sized fashion-forward apparel and accessories that targets young women principally between the ages of 15 and 29. The Company currently operates 501 Hot Topic stores in 49 states throughout the United States and Puerto Rico, 52 Torrid stores, and Internet stores www.hottopic.com and www.torrid.com. Except for the historical information contained herein, this news release contains forward-looking statements, including statements relating to financial results, projections and other financial performance, and managing growth. These statements involve risks and uncertainties, including risks and uncertainties associated with meeting expected financial results, management of growth, relationships with mall developers and operators, the risk that available cash or mall space will not be adequate for planned expansion, fluctuations in sales and comparable store sales results, risks and uncertainties with respect to new store openings including risks associated with the Company's new store concepts and Internet stores, music and fashion trends, competition from other retailers, uncertainties generally associated with specialty retailing, the effect of economic conditions, 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 as well as other risks detailed from time to time in the Company's SEC reports, including its Quarterly Reports on Form 10-Q for the quarters ended May 3, 2003 and August 2, 2003 and its Annual Report on Form 10-K for the year ended February 1, 2003. The historical results achieved are not necessarily indicative of the future prospects of the Company. 2 HOT TOPIC, INC. SUMMARY STATEMENTS OF INCOME Third Quarter Ended ------------------- Nov. 1, 2003 Nov. 2, 2002 ------------ ------------ (In thousands, except per share amounts) Net sales $161,546 $122,590 Cost of goods sold, including buying, distribution and occupancy costs 98,503 75,830 Gross margin 63,043 46,760 Selling, general and administrative expenses 38,626 30,852 Operating income 24,417 15,908 Interest income-net 333 298 Income before income taxes 24,750 16,206 Provision for income taxes 9,479 6,158 Net income $ 15,271 $ 10,048 Earnings per share Basic $ 0.32 $ 0.22 Diluted $ 0.31 $ 0.21 Weighted average shares outstanding Basic 47,656 46,691 Diluted 49,917 48,390 Nine Months Ended ----------------- Nov. 1, 2003 Nov. 2, 2002 ------------ ------------ (In thousands, except per share amounts) Net sales $377,931 $294,972 Cost of goods sold, including buying, distribution and occupancy costs 237,643 186,963 Gross margin 140,288 108,009 Selling, general and administrative expenses 99,782 79,913 Operating income 40,506 28,096 Interest income-net 939 1,057 Income before income taxes 41,445 29,153 Provision for income taxes 15,873 11,078 Net income $ 25,572 $ 18,075 Earnings per share Basic $ 0.54 $ 0.38 Diluted $ 0.52 $ 0.37 Weighted average shares outstanding Basic 47,328 47,155 Diluted 49,263 49,286 3 HOT TOPIC, INC. BALANCE SHEETS (In thousands) Nov. 1, 2003 Nov. 2, 2002 ------------ ------------ Current Assets: Cash and cash equivalents $ 40,385 $ 25,876 Short-term investments 56,121 23,970 Inventory 63,295 46,401 Prepaid expenses and other 11,318 9,021 Deferred tax assets 2,093 1,417 --------- --------- Total current assets 173,212 106,685 Leaseholds, fixtures and equipment - net 85,035 72,418 Deposits and other 189 188 Deferred tax assets 683 847 --------- --------- Total assets $259,119 $180,138 Current Liabilities: Accounts payable $ 26,335 $ 15,654 Accrued liabilities 32,995 21,012 Current portion of obligations under capital leases 13 24 --------- --------- Total current liabilities 59,343 36,690 Deferred rent 2,921 2,188 Capital lease obligations, less current portion 82 136 --------- --------- Total liabilities 62,346 39,014 Shareholders' equity 196,773 141,124 --------- --------- Total liabilities and shareholders' equity $259,119 $180,138 HOT TOPIC, INC. OTHER DATA (Dollars in thousands) Nine Months Ended ----------------- Nov. 1, 2003 Nov. 2, 2002 ------------ ------------ Depreciation and amortization $ 13,820 $ 11,043 Capital expenditures $ 26,952 $ 29,764 Number of stores open at end of period: Hot Topic 491 414 Torrid 49 23 Total store square footage 968,000 763,900 4