ANF Abercrombie and Fitch Co

Hot Topic Inc. (HOTT) finally reported positive same-store sales for the month of April following a 5% decline in the sequentially preceding period. Same-store sales in April came in at a robust 10.5% compared with a fall of 12.5% in the year-earlier period, helped by a boost from a late Easter this year.

The positive results came after 23 straight quarters of negative comparables. The company had last registered same-store sales growth of 3.1% way back in April 2009.

Hot Topic also recorded a sharp 9.2% year-over-year increase in total sales for the month, grossing $46.5 million.

April Sales Update

Hot Topic: Segment same-store sales jumped 11.3% in April 2011, improving noticeably from a 15.4% drop in the prior-year period. Total sales, at $33.4 million, increased 8.6% year over year for the month.

Torrid: Torrid registered same-store sales growth of 8.4% compared with a decline of 2.7% in the prior-year period. Sales improved 10.7% year over year to reach $13.1 million in the month.

Spring Break Update

The Spring Break gives an idea of combined same-store sales, at the company, for the months of March and April comprising a nine-week period ended April 30.

The Spring Break in 2011 saw the company recording a same-store sales growth of 1% versus a fall of 9.5% in the prior-year period. Total sales for the period fell marginally by 0.3% to $108.0 million.

The company’s Hot Topic segment delivered a same-store sales decline of 0.7% while sales decreased 2.6% to $78.0 million over the Spring Break. On the other hand, Torrid posted a growth of 6.1% in same-store sales for the period while sales increased 5.9% to $30.0 million.

Preliminary First-Quarter Sales

In the first quarter of fiscal 2011, the company reported a same-store sales growth of 0.2%, reversing the fall of 8.7% in the first quarter of fiscal 2010. Total sales for the period slipped 0.7% to $161.4 million.

Same-store sales at the Hot Topic segment declined 1.3% in the first quarter of fiscal 2011. Though in the red, comparables improved considerably from a drop of 12.3% in the prior-year quarter. Sales for the period decreased 3.1% to $116.1 million.

Torrid: Torrid recorded same-store sales growth of 4.8%, flat with the year-ago quarter. Sales improved 5.5% year over year to reach $45.3 million for the first quarter of fiscal 2011.

Guidance

For the first quarter, the company has slightly improved on its earnings per share guidance to a range of a loss of 2 cents to breakeven, as against the earlier expectation of a wider loss of 4 cents to 1 cent.

We maintain our long-term Neutral recommendation on Hot Topic Inc. The quantitative Zacks #4 Rank (short-term Sell rating) for the company however indicates downward pressure on the stock over the near term.

Headquartered in City of Industry, California, Hot Topic Inc. is a shopping mall-based specialty retailer operating the Hot Topic and Torrid store concepts across the U.S. as well as the e-space music discovery concept, ShockHound. The company competes with Abercrombie & Fitch Co. (ANF).

 
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