Hot Topic Inc. Earnings Cheat Sheet: A Return to Profitability

Falling revenue did not prevent Hot Topic Inc. (NASDAQ:HOTT) from reporting a profit boost in the third quarter. Hot Topic is a mall- and web-based specialty retailer.

Hot Topic Earnings Cheat Sheet for the Third Quarter

Results: Net income for Hot Topic Inc. rose to $3.1 million (7 cents per share) vs. $390,000 (one cent per share) in the same quarter a year earlier. This marks a substantial increase from the year earlier quarter.

Revenue: Fell 4% to $175.8 million from the year earlier quarter.

Actual vs. Wall St. Expectations: HOTT fell in line with the mean analyst estimate of 7 cents per share. Analysts were expecting revenue of $179.2 million.

Key Stats:

The company has now fallen in step with estimates for the last three quarters. It reported a loss of -8 cents in the second quarter, 0 cents in the first quarter and net income of 12 cents in the fourth quarter of the last fiscal year.

The company’s profit in the latest quarter follows losses in the three previous quarters. The company reported a net loss of $6.2 million in the second quarter, a loss of $7.7 million in the first quarter and a loss of $578,000 in the fourth of the last fiscal year.

Margins contracted in the second quarter after expanding the quarter before. Gross margin fell 1.3 percentage points to 33.9% from the year earlier quarter. In the first quarter, the figure rose 1.6 percentage points to 32.2% from the year earlier quarter.

Over the last five quarters, revenue has fallen an average of 1.7% year over year. The biggest drop came in the most recent quarter, when revenue fell 4% from the year earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 20 cents a share to 17 cents over the last thirty days. In th! e past m onth, the average estimate for the fiscal year has fallen from 20 cents per share to 17 cents abs.

Competitors to Watch: Zumiez Inc. (NASDAQ:ZUMZ), Urban Outfitters, Inc. (NASDAQ:URBN), Mecox Lane Limited ADR (NASDAQ:MCOX), Amazon.com, Inc. (NASDAQ:AMZN), dELiA*s, Inc. (NASDAQ:DLIA), American Eagle Outfitters (NYSE:AEO), Aeropostale, Inc. (NYSE:ARO), The Buckle, Inc. (NYSE:BKE), Pacific Sunwear of California, Inc. (NASDAQ:PSUN), and The Wet Seal, Inc. (NASDAQ:WTSLA).

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)