What's the Hot Topic? "Everything About the Music," according to this teen-focused retailer. Hot Topic's 625 mall-based stores in the US, Puerto Rico, and Canada sell rock-inspired clothing and accessories in settings resembling the industrial clubs where kids (ages 12 to 22) rock out. It also runs more than 165 Torrid shops offering apparel and accessories for plus-sized females (as old as 29!). Though focused on selling licensed concert apparel from current and classic rockers including Iron Maiden, Nirvana, and Metallica, Hot Topic also sells tees celebrating pop culture and trendy apparel that appeals to various musical subcultures. Hot Topic is owned by private equity firm Sycamore Partners.
Change in Company Type
In 2013 Hot Topic sold itself to Sycamore Partners private equity firm for about $600 million. Sycamore, which last year bought struggling Talbots, paid Hot Topic shareholders $14 per share.
The company recently began opening Hot Topic store in Canada. Currently, there are no Torrid shops there.
The company's net sales continued to decline -- although not as steeply -- in fiscal 2012 (ends January), falling more than 1% vs. the prior year. Indeed, the retailer's sales have decreased by more than 8% since fiscal 2009 and the company lost money in each of the last two years. While some of the lost sales can be attributed to store closings, same-store sales at the chain's stores were essentially flat (up less than 1%) in fiscal 2012 after logging negative annual comparisons in 2011 and 2010. Of the two chains, Torrid has been the stronger performer, posting a same-store sales gain of 2.5% in fiscal 2012 vs. just 0.1% for Hot Topic. Internet sales have been a ray of hope for the struggling company as both of its retail chains have seen strong online sales growth: up 34% and 19% for Hot Topic and Torrid, respectively, since fiscal 2010. Indeed, Torrid's online sales have grown to account for 23% of its total.
After several years of shrinking its retail footprint, the company plans to begin aggressively growing its stronger-performing Torrid chain in fiscal 2013. About 50 new Torrid shops are slated to open in the coming year, while its larger sister-chain Hot Topic will continue to shrink by about a dozen locations. Torrid fills a niche not covered by many other plus-size apparel retailers, offering pop culture-inspired fashion forward apparel and accessories for larger girls and young women. The relative lack to head-to-head competition helps to explain Torrid's better performance compared with Hot Topic, which trades in a more crowded market. The company is looking to Lisa Harper -- its new CEO who joined the company in 2011-- and other recent hires to reverse its long sales slump. Their strategy is to return the Hot Topic brand to its "edgy, dark and sexy core," while upping the fashion quotient at Torrid. To control its costs amid falling sales, Hot Topic cut jobs at its headquarters and in its field management staff by about 15% in late 2010.
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