Aug 5, 2010
Reading time
3 minutes
Download the article
Click here to print
Text size
aA+ aA-

Zumiez July same-store sales beat, Hot Topic misses

Aug 5, 2010

BANGALORE, Aug 4 (Reuters) - Teen apparel retailer Zumiez Inc's (ZUMZ.O) July same-store sales topped estimates, while that of Hot Topic Inc (HOTT.O) fell short of analysts' expectations as it sold fewer higher-ticket items and increased promotional spending.


Zumiez, which sells clothing and equipment for skaters, snowboarders and the like, saw robust sales for its accessories, footwear and at its men's and boy's categories, the company said on a pre-recorded call.

Warmer weather also helped drive more traffic to Zumiez stores, but a boost from the crucial back-to-school shopping season will only be seen in August, Wedbush Securities analyst Betty Chen said.

U.S. consumers are expected to delay back-to-school shopping into August this year as well in the hopes of finding good bargains, which could hurt July numbers for a lot of other teen apparel retailers that are slated to report comparable sales on Thursday.

"(The hot weather) drove a little bit more of mall traffic and compelled people to buy some wear-now clothes -- like T-shirts and shorts, especially since a lot of these items were on sale," Chen added.

Same-store sales rose 9.4 percent in July, compared with analysts' estimate of an increase of 8.5 percent, according to Thomson Reuters Data.
Total July sales at Zumiez jumped 15 percent, prompting the company to raise its second-quarter outlook.

Zumiez now sees a quarterly loss in the range of 2 cents a share to 3 cents a share, up from its previous expectation of a loss of between 7 cents a share and 10 cents a share.

Bundling promotions -- where consumers get a discount for purchasing a specific number of units from a designated category -- also lifted July same-store sales at Zumiez, MKM Partners analyst Linda Tsai said. But Zumiez's bundling promotions, a major business driver till now, could be pressured with other retailers raising the bar on their promotional offers, Wedbush analyst Chen said.

The Thomson Reuters Same-Store Sales Index is expected to post a 3.1 percent rise in July 2010 comparable sales, reversing last year's fall of 5.1 percent, and making July the 11th straight month of improving sales.

However, Hot Topic failed to live up to expectations, posting a 9 percent drop in same-store sales, much wider than analysts' estimate of a 2.6 percent fall.

Citing lower-than-expected sales, the retailer also forecast a loss of 14 cents a share for the second quarter.

On a pre-recorded call, the company said sales for accessories and fashion apparel slumped 9 percent and 24 percent respectively in July.

Comparable sales at its Torrid stores fell 7.2 percent.

Hot Topic continues to expect consolidated inventory to be down in the low single digit percentage range at the end of this quarter, the company said on the call.

The company, which sells rock 'n' roll-inspired apparel and accessories, was a great success last year when it began selling "Twilight" related merchandise.

However, as the movie gained popularity, other retailers have done the same, eating into Hot Topic's exclusivity, and with time, the unique-quotient has died down.

Hot Topic shares were down at $5.04 in trading after the bell, while Zumiez shares were down slightly at $17.84 Wednesday on Nasdaq.

(Reporting by Shradhha Sharma and Nivedita Bhattacharjee in Bangalore; Editing by Roshni Menon)

© Thomson Reuters 2023 All rights reserved.