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HOTT’s 2010 Earnings to Be Affected by Weak Comps and High Inventories


Analysts at Citi have downgraded Hot Topic Inc (NASDAQ: HOTT) to “sell,” while reducing their estimates for the company. The target price for HOTT has been reduced from $7 to $5.

Hot Topic reported its 3Q09 EPS at $0.13, meeting the estimates, consensus and guidance. HOTT’s overall comps for the quarter declined by 5%, Citi said. HOTT has projected its EPS for Q4 2009 at $0.23-$0.26, short of the consensus expectations due to a decline in the consolidated HSD comp.

Citi believes that comps in the Hot Topic’s Women’s category would remain weak in 1Q10. According to Citi, high inventories and minimal visibility into catalysts for comp may affect HOTT’s results in 2010. Citi expects HOTT’s EPS to fall on a y/y basis in 2010 as the company may not be able to anniversary New Moon in 2H10 and gross margins may contract.

Citi reduced its EPS estimates for 2010 from $0.50 to $0.20. HOTT’s share price has declined by 13.64% to $5.76 since trade opened in the morning.


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