Hot Topic, Inc. Reports 4th Quarter Earnings of $0.27 Per Diluted Share; Provides Guidance for the 1st Quarter of 2008


CITY OF INDUSTRY, Calif., March 12, 2008 (PRIME NEWSWIRE) -- Hot Topic, Inc. (Nasdaq:HOTT) reported results for its fiscal fourth quarter and the fiscal year of 2007 (13 weeks and 52 weeks, respectively, ended February 2, 2008).

The company reported net income for the fiscal fourth quarter of 2007 of $11.9 million, or $0.27 per diluted share, compared to $8.9 million, or $0.20 per diluted share, last year. For the fiscal year of 2007, the company reported net income of $16.0 million, or $0.36 per diluted share, compared to $13.6 million, or $0.30 per diluted share, last year.

As previously reported, total sales for the 13 weeks ended February 2, 2008 decreased 8% to $220.7 million compared to $240.5 million for the 14 week period ended February 3, 2007. Comparable store sales declined 6.3% for the fourth quarter of fiscal 2007. In addition, total sales for the 52 weeks ended February 2, 2008 decreased 3% to $728.1 million compared to $751.6 million for the 53 week period ended February 3, 2007. Comparable store sales declined 4.4% for the full year fiscal 2007. A summary of the sales results by division (including internet) is as follows:



                         Net Sales (1)
                      --------------------
                                % Change
                         $          to         Comparable Store
                      Millions   Last Year     Sales % Change (2)
                                               ------------------
 FOURTH QUARTER:
  Hot Topic            $183.6      -11.3%             -7.2%

  Torrid                $37.1       10.6%             -0.4%

  Total Co.            $220.7       -8.2%             -6.3%

 FISCAL YEAR:
  Hot Topic            $590.5       -6.2%             -5.7%

  Torrid               $137.6       12.6%              2.5%

  Total Co.            $728.1       -3.1%             -4.4%

 (1) Each of the current periods includes one less week as
     compared to last year. Fiscal 2007 was a 52 week year, compared
     to a 53 week year in fiscal 2006. The net sales % change to last
     year compares the current fiscal periods to last year's reported
     fiscal periods, ended February 3, 2007.
 (2) Compares the current fiscal periods to the corresponding periods
     from the previous fiscal year.

At the end of the fourth quarter of fiscal 2007, the company operated 690 Hot Topic stores and 151 Torrid stores compared to 694 Hot Topic stores and 131 Torrid stores at the end of fourth quarter fiscal 2006. During the fourth quarter of fiscal 2007, the company opened a total of five Torrid stores and closed five Hot Topic stores and one Torrid store. The company also remodeled or relocated 12 Hot Topic stores during the quarter, bringing the total number of remodeled or relocated stores during fiscal 2007 to 70.

During the fourth quarter of fiscal 2007, the company did not repurchase any shares of its common stock. The company's stock repurchase program, originally authorized by the Board of Directors' on August 13, 2007 to repurchase up to an aggregate of $40,000,000 of its common stock, expired on February 2, 2008. During the third quarter of fiscal 2007, the company acquired 870,470 shares of its common stock at an average cost of $8.23, reflecting a total investment of approximately $7.2 million.

The company issued first quarter (13 weeks ending May 3, 2008) guidance of a net loss in the range of $0.03 to $0.06 per share based upon a comparable store sales decline in the low-single digit percentage range.

A conference call to discuss fourth quarter and fiscal year end results, business trends, guidance and other matters is scheduled for March 12, 2008 at 4:30 PM (ET). The live conference call number is 888-679-8034, pass code "Hot Topic", and will be accessible to all interested parties. It will also be webcast on the company's Investor Relations website at http://investorrelations.hottopic.com. Participants who would like to pre-register for the conference call may do so by accessing the company's Event Calendar on the Investor Relations website and using the pass code 46886742 (or the numeric touchtone spelling of "Hot Topic"). A replay of the conference call will be available at 888-286-8010, pass code 19194201, for approximately two weeks. In addition, a webcast replay of the conference call will be available on the company's Investor Relations website.

Hot Topic, Inc. is a national mall-based specialty retailer. Hot Topic offers apparel, accessories and gifts to young men and women principally between the ages of 12 and 22. Torrid, the company's second concept, provides plus-size fashion-forward apparel and accessories that target young women principally between the ages of 15 and 29. As of March 1, 2008 the company operated 690 Hot Topic stores in all 50 states and Puerto Rico, 152 Torrid stores, and internet stores www.hottopic.com and www.torrid.com.

In addition to historical information, this news release and the aforementioned conference call contain forward-looking statements, which include statements relating to financial results, guidance, store operations, closures, remodels and relocations, projections and other financial performance and managing growth. These statements involve risks and uncertainties, including risks and uncertainties associated with meeting expected financial results, management of growth, relationships with mall developers and operators, the risk that available cash or mall space will not be adequate for planned expansion, fluctuations in sales and comparable store sales results, risks and uncertainties with respect to new store openings including risks associated with the company's new store concepts and internet stores, music and fashion trends, competition from other retailers, uncertainties generally associated with specialty retailing, the effect of economic conditions, the effect of severe weather or natural disasters, political and/or social changes or events that could negatively impact shopping patterns and/or mall traffic, litigation proceedings and contingent liabilities, as well as other risks detailed in the company's SEC reports including its Quarterly Reports on Form 10-Q and its Annual Report on Form 10-K for the year ended February 3, 2007. Historical results achieved are not necessarily indicative of the future prospects of the company, and actual results or circumstances could differ materially from the forward-looking statements.



                          HOT TOPIC, INC.
                  CONSOLIDATED STATEMENTS OF INCOME
               (In thousands, except per share amounts)
                            (Unaudited)

                                              Fourth Quarter Ended
                                          --------------------------
                                          Feb. 2, 2008  Feb. 3, 2007
                                          ------------  ------------

 Net sales                                    $220,694      $240,500
 Cost of goods sold, including buying,
  distribution and occupancy costs             140,261       158,842
 Gross margin                                   80,433        81,658
 Selling, general & administrative expenses     61,469        67,192
 Income from operations                         18,964        14,466
 Interest income, net                              460           530
 Income before income taxes                     19,424        14,996
 Provision for income taxes                      7,549         6,128
 Net income                                    $11,875        $8,868

 Earnings per share:
  Basic                                          $0.27         $0.20
  Diluted                                        $0.27         $0.20
 Weighted average shares outstanding
  Basic                                         43,638        44,218
  Diluted                                       43,820        44,775

                                              Twelve Months Ended
                                          --------------------------
                                          Feb. 2, 2008  Feb. 3, 2007
                                          ------------  ------------


 Net sales                                    $728,121      $751,558
 Cost of goods sold, including buying,
  distribution and occupancy costs             476,677       502,408
 Gross margin                                  251,444       249,150
 Selling, general & administrative expenses    227,147       227,580
 Income from operations                         24,297        21,570
 Interest income, net                            1,934         1,450
 Income before income taxes                     26,231        23,020
 Provision for income taxes                     10,219         9,394
 Net income                                    $16,012       $13,626

 Earnings per share:
  Basic                                          $0.36         $0.31
  Diluted                                        $0.36         $0.30
 Weighted average shares outstanding
  Basic                                         44,005        44,167
  Diluted                                       44,132        44,752

                         HOT TOPIC, INC.
               CONDENSED CONSOLIDATED BALANCE SHEETS
                         (In thousands)
                          (Unaudited)

                                         Feb. 2, 2008   Feb. 3, 2007
                                         ------------   ------------
 Current Assets:
 Cash, cash equivalents and short-term
  investments                                 $53,281        $55,490
 Inventory                                     80,305         73,868
 Prepaid expenses and other                    14,698         14,435
 Deferred tax assets                            3,970          3,258
 Total current assets                         152,254        147,051
 Property and equipment, net                  171,931        166,726
 Deposits and other                             1,368            588
 Deferred tax assets                            6,548          3,906
 Total assets                                $332,101       $318,271

 Current Liabilities:
 Accounts payable                             $18,168        $15,862
 Accrued liabilities                           35,123         34,332
 Income taxes payable                           1,167          5,590
 Total current liabilities                     54,458         55,784
 Deferred rent                                 40,548         40,674
 Deferred compensation liability                1,105            356
 Income taxes payable                             837             --
 Total liabilities                             96,948         96,814
 Total shareholders' equity                   235,153        221,457
 Total liabilities and shareholders'
  equity                                     $332,101       $318,271


                           HOT TOPIC, INC.
                             OTHER DATA
                        (Dollars in thousands)
                            (Unaudited)

                                              Twelve Months Ended
                                         ----------------------------
                                         Feb. 2, 2008   Feb. 3, 2007
                                         ------------   ------------
 Depreciation and amortization                $41,583        $38,941
 Capital expenditures                         $48,841        $38,617

 Total company store square footage         1,587,600      1,541,300
 Hot Topic average store size                   1,753          1,745
 Torrid average store size                      2,505          2,520


            

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