May 21, 2008 / 8:58 PM / 10 years ago

UPDATE 1-Hot Topic posts narrower-than-expected Q1 loss

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May 21 (Reuters) - Teen-clothing retailer Hot Topic Inc HOTT.O posted a narrower-than-expected first-quarter loss as higher sales at its Torrid plus-size chain helped offset a fall in revenue at the company’s namesake stores.

Hot Topic, which sells rock n’ roll-inspired apparel and accessories as well as music, posted a quarterly net loss of $1.4 million, or 3 cents a share, compared with $0.8 million, or 2 cents a share, a year earlier.

The first quarter includes an expense of 1 cent a share related to Hot Topic’s online music venture.

Analysts, on average, had expected the mall-based retailer to post a loss of 4 cents, before special items, according to Reuters Estimates.

Sales at the company’s Torrid stores grew about 15 percent, while sales at its Hot Topic stores fell 2.5 percent.

The company, which also operates the Torrid plus-size chain for young women, said total sales rose 1.1 percent to $159.0 million. Wall Street analysts had expected revenue of $158.4 million.

Hot Topic, which has been upgrading stores and merchandise in an attempt to reverse a lingering slump, has avoided excessive discounts that eat into profit margins, and scaled back on promotional activity during non-peak traffic periods.

However, the company, whose rivals include Abercrombie & Fitch (ANF.N), American Eagle Outfitters Inc (AEO.N) and Wet Seal WTSLA.O, saw sales at its stores open at least a year drop about 3 percent in the quarter.

The company, which opened a total of four Torrid stores and closed four Hot Topic stores and one Torrid store in the first quarter of fiscal 2008, forecast a second-quarter loss of 2 cents to 4 cents a share.

Analysts on average had expected a loss of 3 cents a share, before special items, for the quarter.

The second-quarter outlook includes an expense of about 1 cent to 2 cents a share related to its online music initiative.

The company, which also produces private-label Morbid-brand products including Morbid Threads and Morbid Metals, expects same-store sales to be flat or fall by a low single digit in the second quarter.

Shares of California-based Hot Topic closed at $4.84 Wednesday on Nasdaq. (Reporting by Dhanya Skariachan in Bangalore; Editing by Amitha Rajan)

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