Hot Topic (NASDAQ: HOTT) is an American retail chain specializing in music and pop culture-related clothing and accessories, as well as licensed music on CD. As of April 2008, Hot Topic had 688 locations in the United States, six stores in Puerto Rico, and two in Canada. The majority of the stores are located in regional shopping malls.[3] The first Hot Topic store was opened in 1988 by Orv Madden, who retired as CEO in 2000 and was replaced by Betsy McLaughlin, who helmed the company until 2011. Lisa Harper recently assumed the position of CEO in March, 2011. The company went public and began trading on NASDAQ in 1996. In 2006, Hot Topic was placed 53rd on Fortune 500's Top Companies to Work For list.
Hot Topic, Inc., incorporated in 1988, is a mall and Web-based specialty retailer operating the Hot Topic and Torrid concepts, as well as the e-space music concept, ShockHound. It sells a selection of music/pop culture-licensed and music/pop culture-influenced apparel, accessories, music and gift items for young men and women principally between the ages of 12 and 22. At Torrid, the Company sells apparel, lingerie, shoes and accessories for plus-size females principally between the ages of 15 and 29. The Company sells merchandise on its Websites , which reflect the Hot Topic and Torrid store concepts and sells merchandise similar to that sold in the respective stores. At ShockHound, through its Website , the Company sells music merchandise and MP3s. As of December 31, 2009, it operated 680 Hot Topic stores throughout the United States and Puerto Rico, and 156 Torrid stores in 35 states. In March 2011, the Company announced the discontinuation of the ShockHound.com business operations.
Hot Topic Merchandising
The Company’s Hot Topic stores serve as a focal point for music/pop culture-licensed and music/pop culture-influenced apparel, accessories, and music and gift items. Music/pop culture-licensed merchandise includes tee shirts, hats, posters, stickers, patches, books, novelty accessories, compact discs (CDs) and digital versatile discs (DVDs). Music/pop culture-influenced merchandise includes women’s and men’s apparel and accessories, such as woven and knit tops, skirts, pants, shorts, jackets, shoes, costume jewelry, body jewelry, sunglasses, cosmetics, leather accessories and gift items. It offers diverse product, which has 23 distinct merchandise categories or departments. Over 180 different licensed band tee shirts are represented in Hot Topic stores from artists, such as Avenged Sevenfold, Bullet for my Valentine, Chiodos, Disturbed, Dropkick Murphys, Halestorm, Insane Clown Posse, Justin Bieber, Lady Gaga, Owl City, Paramore, Shinedown and Slipknot, to classic rock artists, such as Bob Marley, Led Zeppelin, Metallica, Nirvana, The Ramones and The Rolling Stones.
The Company’s Hot Topic stores have several lines of private label merchandise to complement and supplement its product offerings. Its brands include Morbid Metals (body jewelry), Social Collision and Color Fiend. It monitors sales by merchandise theme, classification, individual items, color and size to determine types and quantities of products to purchase.
The Company competes with Abercrombie & Fitch, Aeropostale, American Eagle Outfitters, Bebe, Inc., Charlotte Russe Holding, Inc., Claire’s Stores, Inc., Gap, Inc., Forever 21, Pacific Sunwear of California, Inc., Spencer Gifts, Inc., H&M, The Buckle, Tweenbrands, Inc., Wet Seal, Inc., Urban Outfitters, Inc., Rue 21 and Zumiez, Inc., Target Corporation, Wal-Mart Stores, Inc., Barnes & Noble, Inc., Best Buy Co., Inc. and Borders Group, Inc.
Torrid Merchandising
The Company’s Torrid stores serve as a destination for trends in fashion apparel and accessories for plus-size young women. Torrid apparel is sized 12-26. Torrid merchandise includes both casual and dressy offerings with particular emphasis on jeans, fashion tops, sweaters, pants, jackets and dresses. It also carries hosiery, shoes, intimate apparel and fashion accessories. The Company’s merchandise is specifically proportioned for plus-size customers. Torrid merchandise is purchased from established branded vendors, as well as private label suppliers.
The Company competes with Alloy, Inc., Charming Shoppes, Inc., Deb Shops, Delia’s Corp. and Forever 21.
ShockHound Merchandising
During 2008, the Company launched ShockHound, its -space music concept. ShockHound encompasses multiple music genres and offers four core elements: music downloads, which is a music merchandise retail store, editorial and video content, and social networking. Its target ShockHound customer is a person of any age who is interested in discovering more about music, new music trends and social networking. It encourages the customers to join in the musical dialogue via a social networking platform.
The Company competes with Apple Inc., Amazon.com Inc., eMusic.com, Inc., LiveNation.com, MySpace, Inc., OldGlory.com and Shop.BravadoUsa.com.
The end of the 1990s saw Hot Topic only increase its sales and location sites, blossoming in just a period of months from a chain of 79 stores, in 1997, to a chain of 128 locations the following year. The company had also continued to expand its inventory, its apparel and novelty items growing into the thousands, and had undertaken the introduction of its own label as well. The company's line, which it called Morbid, produced everything from t-shirts to make-up. The line had sold well from its inception and eventually grew to make up for over 20 percent of company sales.
The majority of Hot Topic's sales consisted of the company's music-inspired products, from t-shirts with band logos to CDs. To keep up with customer demand, Hot Topic developed licensing agreements with such major distributors as Sony Music and Winterland which allowed the company quick access to popular product lines and logos. Particularly popular in 1998 were products featuring the bands Korn, Pantera, Marilyn Manson, and Metallica. That year, Hot Topic's sales were also aided by the huge popularity of the controversial animation sitcom 'South Park.' 'South Park' t-shirts and logos had recently become a staple at Hot Topic locations, and, when the show took off, so did the company's 'South Park' -inspired inventory. The company also continued expanding its general apparel lines, selling juniors, unisex, and men's clothing from small, trendy labels such as Kik Girl, Taffy, Caffeine, Lip Service, and Porn Star. Indeed, increased growth in every segment seemed the only strategy for Hot Topic, a fact reflected in the company's 1998 sales, which were almost 62 percent higher than those of 1997.
By the end of the decade Hot Topic had developed an ordering strategy which helped the company keep current on consumer trends despite the company's rapidly growing size: the buying team never ordered items any more than 60 days ahead of when the items were to be debuted; this way, a product or even an entire line of apparel could almost literally jump from the images of MTV to the consumer's wardrobe. Even though Hot Topic sought aggressively to become a staple in the traditional mall setting, non-traditional, fresh inventory remained the company's primary focus, and it was this mode of operation which attracted a loyal customer following. In a 1997 interview with Chain Store Age, the financial analyst Lauren Cooks Levitan said of Hot Topic that the company 'has won the hearts of its customers by listening to them. The confidence and trust teens have in this company is amazing.'
It was a trust--and loyal customer base--with the potential for a huge financial payoff. At the end of the 1990s it was estimated that the average teenager spent about $3,000 a year on recreation; not a great deal of money at first glance, until one multiplies that sum with the United States' expanding teenage population. Hot Topic aimed at nothing less than gaining the loyalty of every popular-music lover under the age of 25, and it appeared by decade's end that the company had just about succeeded in its aim. By 1999, the company's sales were up another 25 percent, and it had opened almost 200 stores in 35 states.
Principal Competitors: Claire's Stores, Inc.; Gadzooks, Inc.; Pacific Sunwear of California, Inc.; Urban Outfitters, Inc.
OVERALL
Beta: 0.36
Market Cap (Mil.): $346.58
Shares Outstanding (Mil.): 44.78
Annual Dividend: 0.28
Yield (%): 3.62
FINANCIALS
HOTT.O Industry Sector
P/E (TTM): -- 19.09 12.60
EPS (TTM): -169.38 -- --
ROI: -2.92 12.50 1.12
ROE: -3.33 14.13 1.87
Statistics:
Public Company
Incorporated: 1989
Employees: 1,653
Sales: $103.4 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: HOTT
NAIC: 44815 Clothing Accessories Stores; 44819 Other Clothing Stores
Key Dates:
1989: Hot Topic is founded by Orv Madden.
1990: Hot Topic begins to expand.
1996: Hot Topic goes public.
1997: The company introduces its own label.
1999: Hot Topic hits sales of over $100 million
Name Age Since Current Position
Quinnell, Bruce 61 2002 Chairman of the Board
Harper, Lisa 51 2011 Chief Executive Officer, Director
McGinty, James 48 2001 Chief Financial Officer
Cook, Gerald 58 2008 Chief Operating Officer
Kirkpatrick, John 42 2007 Senior Vice President, Chief Music Officer
Wehlitz, George 50 2008 Vice President - Finance
Schuon, Andrew 45 1998 Director
Hedrick, W. Scott 65 2002 Director
D'An, Evelyn 48 2007 Director
Vellios, Thomas 54 2008 Director
Drapkin, Matthew 38 2010 Director
Becker, Steven 44 2010 Director
Address:
18305 East San Jose Avenue
City of Industry, California 91748
U.S.A.
Hot Topic, Inc., incorporated in 1988, is a mall and Web-based specialty retailer operating the Hot Topic and Torrid concepts, as well as the e-space music concept, ShockHound. It sells a selection of music/pop culture-licensed and music/pop culture-influenced apparel, accessories, music and gift items for young men and women principally between the ages of 12 and 22. At Torrid, the Company sells apparel, lingerie, shoes and accessories for plus-size females principally between the ages of 15 and 29. The Company sells merchandise on its Websites , which reflect the Hot Topic and Torrid store concepts and sells merchandise similar to that sold in the respective stores. At ShockHound, through its Website , the Company sells music merchandise and MP3s. As of December 31, 2009, it operated 680 Hot Topic stores throughout the United States and Puerto Rico, and 156 Torrid stores in 35 states. In March 2011, the Company announced the discontinuation of the ShockHound.com business operations.
Hot Topic Merchandising
The Company’s Hot Topic stores serve as a focal point for music/pop culture-licensed and music/pop culture-influenced apparel, accessories, and music and gift items. Music/pop culture-licensed merchandise includes tee shirts, hats, posters, stickers, patches, books, novelty accessories, compact discs (CDs) and digital versatile discs (DVDs). Music/pop culture-influenced merchandise includes women’s and men’s apparel and accessories, such as woven and knit tops, skirts, pants, shorts, jackets, shoes, costume jewelry, body jewelry, sunglasses, cosmetics, leather accessories and gift items. It offers diverse product, which has 23 distinct merchandise categories or departments. Over 180 different licensed band tee shirts are represented in Hot Topic stores from artists, such as Avenged Sevenfold, Bullet for my Valentine, Chiodos, Disturbed, Dropkick Murphys, Halestorm, Insane Clown Posse, Justin Bieber, Lady Gaga, Owl City, Paramore, Shinedown and Slipknot, to classic rock artists, such as Bob Marley, Led Zeppelin, Metallica, Nirvana, The Ramones and The Rolling Stones.
The Company’s Hot Topic stores have several lines of private label merchandise to complement and supplement its product offerings. Its brands include Morbid Metals (body jewelry), Social Collision and Color Fiend. It monitors sales by merchandise theme, classification, individual items, color and size to determine types and quantities of products to purchase.
The Company competes with Abercrombie & Fitch, Aeropostale, American Eagle Outfitters, Bebe, Inc., Charlotte Russe Holding, Inc., Claire’s Stores, Inc., Gap, Inc., Forever 21, Pacific Sunwear of California, Inc., Spencer Gifts, Inc., H&M, The Buckle, Tweenbrands, Inc., Wet Seal, Inc., Urban Outfitters, Inc., Rue 21 and Zumiez, Inc., Target Corporation, Wal-Mart Stores, Inc., Barnes & Noble, Inc., Best Buy Co., Inc. and Borders Group, Inc.
Torrid Merchandising
The Company’s Torrid stores serve as a destination for trends in fashion apparel and accessories for plus-size young women. Torrid apparel is sized 12-26. Torrid merchandise includes both casual and dressy offerings with particular emphasis on jeans, fashion tops, sweaters, pants, jackets and dresses. It also carries hosiery, shoes, intimate apparel and fashion accessories. The Company’s merchandise is specifically proportioned for plus-size customers. Torrid merchandise is purchased from established branded vendors, as well as private label suppliers.
The Company competes with Alloy, Inc., Charming Shoppes, Inc., Deb Shops, Delia’s Corp. and Forever 21.
ShockHound Merchandising
During 2008, the Company launched ShockHound, its -space music concept. ShockHound encompasses multiple music genres and offers four core elements: music downloads, which is a music merchandise retail store, editorial and video content, and social networking. Its target ShockHound customer is a person of any age who is interested in discovering more about music, new music trends and social networking. It encourages the customers to join in the musical dialogue via a social networking platform.
The Company competes with Apple Inc., Amazon.com Inc., eMusic.com, Inc., LiveNation.com, MySpace, Inc., OldGlory.com and Shop.BravadoUsa.com.
The end of the 1990s saw Hot Topic only increase its sales and location sites, blossoming in just a period of months from a chain of 79 stores, in 1997, to a chain of 128 locations the following year. The company had also continued to expand its inventory, its apparel and novelty items growing into the thousands, and had undertaken the introduction of its own label as well. The company's line, which it called Morbid, produced everything from t-shirts to make-up. The line had sold well from its inception and eventually grew to make up for over 20 percent of company sales.
The majority of Hot Topic's sales consisted of the company's music-inspired products, from t-shirts with band logos to CDs. To keep up with customer demand, Hot Topic developed licensing agreements with such major distributors as Sony Music and Winterland which allowed the company quick access to popular product lines and logos. Particularly popular in 1998 were products featuring the bands Korn, Pantera, Marilyn Manson, and Metallica. That year, Hot Topic's sales were also aided by the huge popularity of the controversial animation sitcom 'South Park.' 'South Park' t-shirts and logos had recently become a staple at Hot Topic locations, and, when the show took off, so did the company's 'South Park' -inspired inventory. The company also continued expanding its general apparel lines, selling juniors, unisex, and men's clothing from small, trendy labels such as Kik Girl, Taffy, Caffeine, Lip Service, and Porn Star. Indeed, increased growth in every segment seemed the only strategy for Hot Topic, a fact reflected in the company's 1998 sales, which were almost 62 percent higher than those of 1997.
By the end of the decade Hot Topic had developed an ordering strategy which helped the company keep current on consumer trends despite the company's rapidly growing size: the buying team never ordered items any more than 60 days ahead of when the items were to be debuted; this way, a product or even an entire line of apparel could almost literally jump from the images of MTV to the consumer's wardrobe. Even though Hot Topic sought aggressively to become a staple in the traditional mall setting, non-traditional, fresh inventory remained the company's primary focus, and it was this mode of operation which attracted a loyal customer following. In a 1997 interview with Chain Store Age, the financial analyst Lauren Cooks Levitan said of Hot Topic that the company 'has won the hearts of its customers by listening to them. The confidence and trust teens have in this company is amazing.'
It was a trust--and loyal customer base--with the potential for a huge financial payoff. At the end of the 1990s it was estimated that the average teenager spent about $3,000 a year on recreation; not a great deal of money at first glance, until one multiplies that sum with the United States' expanding teenage population. Hot Topic aimed at nothing less than gaining the loyalty of every popular-music lover under the age of 25, and it appeared by decade's end that the company had just about succeeded in its aim. By 1999, the company's sales were up another 25 percent, and it had opened almost 200 stores in 35 states.
Principal Competitors: Claire's Stores, Inc.; Gadzooks, Inc.; Pacific Sunwear of California, Inc.; Urban Outfitters, Inc.
OVERALL
Beta: 0.36
Market Cap (Mil.): $346.58
Shares Outstanding (Mil.): 44.78
Annual Dividend: 0.28
Yield (%): 3.62
FINANCIALS
HOTT.O Industry Sector
P/E (TTM): -- 19.09 12.60
EPS (TTM): -169.38 -- --
ROI: -2.92 12.50 1.12
ROE: -3.33 14.13 1.87
Statistics:
Public Company
Incorporated: 1989
Employees: 1,653
Sales: $103.4 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: HOTT
NAIC: 44815 Clothing Accessories Stores; 44819 Other Clothing Stores
Key Dates:
1989: Hot Topic is founded by Orv Madden.
1990: Hot Topic begins to expand.
1996: Hot Topic goes public.
1997: The company introduces its own label.
1999: Hot Topic hits sales of over $100 million
Name Age Since Current Position
Quinnell, Bruce 61 2002 Chairman of the Board
Harper, Lisa 51 2011 Chief Executive Officer, Director
McGinty, James 48 2001 Chief Financial Officer
Cook, Gerald 58 2008 Chief Operating Officer
Kirkpatrick, John 42 2007 Senior Vice President, Chief Music Officer
Wehlitz, George 50 2008 Vice President - Finance
Schuon, Andrew 45 1998 Director
Hedrick, W. Scott 65 2002 Director
D'An, Evelyn 48 2007 Director
Vellios, Thomas 54 2008 Director
Drapkin, Matthew 38 2010 Director
Becker, Steven 44 2010 Director
Address:
18305 East San Jose Avenue
City of Industry, California 91748
U.S.A.