Hot Topic, Inc. (HOTT)

Hot Topic buyers will not likely be able to procreate, so HOTT will eventually return to the casket.

I tend to be a market contrarian and even though I generally keep a mile away from anything retail, I've decided to green thumb Hot Topic based on the insane amount of red thumbers and short sellers who seem completely oblivious on this stock. Hot Topic's performance has actually been fairly impressive, especially when you consider the current recessionary environment. Earnings are strong and operating cash flows are even stronger. As the company enters into its mature stage and slows down CapEx, free cash flows should improve, as well.

HOTT appears to be significantly undervalued even after the run-up over the past few months. Looks like it should be selling closer to $18 from my analysis.

For a more detailed write-up on the company, see my Seeking Alpha article, "Hot Topic: Turning Shorters Into Goth Kids":

http://seekingalpha.com/article/136852-why-hot-topic-is-a-dangerous-short

Look at their Web site. Seriously. Just click over there. C'mon, just take's a minute. I'll even give you a link:

http://www.hottopic.com

There. Saw it? Good. You'll understand, then. End of story.

Underperform.

Eventually kids won't want to be vampires any more. Sorry, all I know about Hot Topic I learned from South Park.

wtF?

Mmm...emo clothing...

People are giving up too fast on Hot Topic. This is a good time to get in on decent share prices as the shares are near their 52 week low. Yes, it is mostly kids that want to buy products from Hot Topic, but adults shop there too. Don't be fooled. Hot Topic is here to stay.

that scene is about being underground. Not rugby shirts w/ a skull on it. Now spiderman stuff? Lost focus

I've walked through my local Mall HOTT and never understood why this store had ANY allure, as it clearly has an EXTREMELY LIMITED target audience...Not just young, but one that caters to an old rock, goth style fashion.

It has very limited appeal, let alone, quality.

Black T-shirts with ironed-on rockers, along with outdated posters is out. Especially in this economic climate.

DIVE...DIVE...DIVE!

the cash and properties of this company is equivalent to about $5,45/share.

even in this economy the company will make about $0.5/share for the year.

NO DEPT

A previous pitch implied that this chain would be hard hit because teens had no income nowadays. Since the previous poster didn't bother to substantiate this statement I decided to see for myself what kind of exposure Hot Topic had to the unemployment issue. I went and took a store count by state and compared it to state unemployment rates, this metric showed that Hot Topic is underexposed to the job weakness we are seeing in the U.S. This was quite a surprise to me as HOTT had expanded heavily in the CA and FL markets where the unemployment rate is running at 12.5% and 11.2% respectively. It turns out this chain has done a remarkable job of targetting those regions of the country where the economy has been over-performing the nation.

Also, as anyone with half a brain knows, quite a few teens leech off their parents in this day and age. I was interested in seeing if the population demographics continue to support this behavior on a nationwide basis. I went with the 2000 Census data and looked at the following. The 5-9 age group will be 15-19 in 2010 and their parents should be on average 25 years older and be fairly represented by the 30-34 age group on the 2000 census. If we had an inverted pyramid between these 2 age groups than as a general trend you would be able to support lazy teenagers. If the Hot Topics markets had a normal pyramid between these 2 age groups than lazy teenagers would no longer be in vogue with parents anymore. Using these assumptions on the top 80% of retail stores (I did not run numbers for states with fewer than 10 stores) I found that the Hot Topic markets as a whole had an inverted population pyramid. This chain will continue to benefit from the trend of the past 10 years where lazy teenagers have been spoiled by their parents. This population distribution is not as pronounced as it has been in the past 10 years but savvy retailers should still be able to exploit this demographic for some time.

I will also add that this company is fundamentally solid and attractively valued at these levels with the huge sell-off it has seen in its stock.

No debt, decent sales, close to annual lows.

HOTT is Hot

I've been writing about this company for quite a long time, but here are a few of my thoughts on this retailer.

Recent thoughts: http://www.fool.com/investing/small-cap/2008/07/16/hot-gossip-at-hot-topic.aspx

Not so recent, but one of my personal favorites: http://www.fool.com/investing/general/2007/03/16/hot-topic-gets-goth-served.aspx

I guess in a nutshell, it's one thing to be a niche retailer but you've got to not only do it well but also be authentic to your target customers. Hot Topic could have been a super cool retailer if it really was truly serving subculture, but as far as I have been able to tell it's about trend/fashion and nothing more real than that (back in my long-ago youth, that was called being a "poseur"). I've long thought maybe Hot Topic should have just been a private company and never have had any pressure to expand. This is the long story of why I have it marked as an "underperform" here. (Plus, it's never looked cheap to me by glancing at its multiples, either, so end of story.)

Management is feeling good about its latest efforts in the women's categories, while men's continues to struggle. But with comps down again in the latest quarter, this time dropping 5.5% it is obvious the retailer still has plenty of work cut out for itself.

As long as Hot Topic continues in its Goth ways, the company will continue to underperform -- really, how many Goth wearers are out there? One positive sign is that management is finally recognizing this and is trying to introduce more fashion friendly items. Now it is a matter of them getting the word out.

Until proven otherwise, this stock belongs in my permanent "dog" status.

Wall Street is burning to the ground, and yet this company has a PE of 22?!

Small Retail Shops will not survive the after Christmas Downturn.

This Retailer continues to cruise down the road of profits. Hot Topic is a trippy little chain for those who like to dress funky. Some how the Vato's in management have seem to come to grips with this nasty repression, I mean recession and address their cost structure. Holmes Good Luck Vato's and Rukas!

good store