Hot Topic, Inc. Reports 1st Quarter Loss of $0.03 Per Share; Provides Guidance for the 2nd Quarter of 2008


CITY of INDUSTRY, Calif., May 21, 2008 (PRIME NEWSWIRE) -- Hot Topic, Inc. (Nasdaq:HOTT), today announced that the company incurred a net loss in the first quarter of 2008 (13 weeks ended May 3, 2008) of $1.4 million, or $0.03 per share, compared with a net loss of $0.8 million, or $0.02 per share, in the first quarter of 2007 (13 weeks ended May 5, 2007). The first quarter 2008 results include approximately $0.01 per share of expense related to our online music initiative.

As previously reported, total sales for the first quarter of 2008 increased 1.1% to $159.0 million compared to $157.3 million for the first quarter last year. Total company comparable store sales declined 2.8% for the first quarter of fiscal 2008. A summary of the sales results by division (including internet) is as follows:



                                                  Comparable Store
                                 Net Sales         Sales % Change
                             ------------------  ------------------
                                       % Change                   
                                $      To Last      This     Last
                             Millions    Year       Year     Year
                             --------  ------------------  --------
 FIRST QUARTER:
   Hot Topic                  $121.0    -2.5%       -3.0%    -4.4%

   Torrid                      $38.0    14.6%       -2.0%     7.3%

   Total Co.                  $159.0     1.1%       -2.8%    -2.3%

At the end of the first quarter of fiscal 2008, the company operated 686 Hot Topic stores and 154 Torrid stores compared to 695 Hot Topic stores and 131 Torrid stores at the end of first quarter fiscal 2007. During the first quarter of fiscal 2008, the company opened a total of four Torrid stores and closed four Hot Topic stores and one Torrid store. The company also remodeled or relocated seven Hot Topic stores during the quarter.

The company also announced that it estimates second quarter (ending August 2, 2008) loss per share to be in the range of $0.02 to $0.04, as compared to a loss per share of $0.04 last year, based upon comp sales in the range of flat to a low-single digit decline. Included in the guidance is approximately $0.01 to $0.02 per share of expense related to our online music initiative.

A conference call to discuss first quarter results, business trends, guidance and other matters is scheduled for May 21, 2008 at 4:30 PM (ET). The live conference call number is 888-679-8038, pass code "Hot Topic", and will be accessible to all interested parties. In addition, the conference call will also be webcast on the company's Investor Relations website located 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 57257191. A replay of the conference call will be available at 888-286-8010, pass code 70112586, 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 shopping mall-based specialty retailer operating the Hot Topic and Torrid concepts. Hot Topic offers music/pop culture licensed and influenced apparel, accessories, music and gift items 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, lingerie, shoes and accessories that target young women principally between the ages of 15 and 29. As of May 3, 2008, the company operated 686 Hot Topic stores in all 50 states and Puerto Rico, 154 Torrid stores, and internet stores www.hottopic.com and www.torrid.com.

In addition to historical information, this news release and the aforementioned prerecorded commentary contain forward-looking statements, which may include statements relating to financial results, guidance, store operations, closures, remodels and relocations, projections and other financial performance. These statements involve risks and uncertainties, including risks and uncertainties associated with meeting expected financial results, 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, new concepts, 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 Annual Report on Form 10-K for the year ended February 2, 2008. 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 OPERATIONS
              (In thousands, except per share amounts)
                             (Unaudited)

                                                   First Quarter Ended
                                                   -------------------
                                                    May 3,     May 5,
                                                     2008       2007
                                                   --------   --------

 Net sales                                         $158,978   $157,282
 Cost of goods sold, including buying,
  distribution and occupancy costs                  107,353    105,695
 Gross margin                                        51,625     51,587
 Selling, general & administrative expenses          54,313     53,404
 Loss from operations                                (2,688)    (1,817)
 Interest income-net                                    374        506
 Loss before benefit for income taxes                (2,314)    (1,311)
 Benefit for income taxes                              (908)      (502)
 Net loss                                           $(1,406)     $(809)

 Loss per share:
   Basic                                             $(0.03)    $(0.02)
   Diluted                                           $(0.03)    $(0.02)
 Shares used in computing loss per share:
   Basic                                             43,717     44,245
   Diluted                                           43,717     44,245


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

                                                    May 3,     May 5,
                                                     2008       2007
                                                   --------   --------
 Current Assets:
 Cash, cash equivalents and short-term investments  $41,933    $49,171
 Inventory                                           77,329     75,062
 Prepaid expenses and other                          17,080     13,621
 Deferred tax assets                                  4,298      3,680
 Total current assets                               140,640    141,534

 Property and equipment, net                        168,653    165,970
 Deposits and other                                   1,497        962
 Long-term investments                               10,328         --
 Deferred tax assets                                  6,609      4,059

 Total assets                                      $327,727   $312,525

 Current Liabilities:
 Accounts payable                                   $21,912    $21,587
 Accrued liabilities                                 28,709     27,667
 Income taxes payable                                   984         --
 Total current liabilities                           51,605     49,254

 Deferred rent                                       39,424     40,117
 Deferred compensation liability                      1,281        762
 Income taxes payable                                   844      1,258
 Total liabilities                                   93,154     91,391

 Total shareholders' equity                         234,573    221,134

 Total liabilities and shareholders' equity        $327,727   $312,525


                             OTHER DATA
                       (Dollars in thousands)
                             (Unaudited)

                                                 Three Months Ended
                                              ------------------------
                                              May 3, 2008  May 5, 2007
                                              -----------  -----------
 Depreciation and amortization                    $9,935       $9,930
 Capital expenditures                             $7,456       $9,428

 Total company store square footage            1,589,200    1,542,600
 Hot Topic average store size                      1,755        1,745
 Torrid average store size                         2,503        2,519


            

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