PRINT THIS STORY:

CHANGE TEXT SIZE:

HOT TOPIC STRUGGLES TO REGAIN ITS FORMER ‘COOL’

By Molly Knight

THE TROUBLE WITH HOT TOPIC IS that, of late, it hasn’t been. In November the City of Industry, Calif.-based retailer announced that comparable-store sales for the month were down 4.3 percent year on year. Meanwhile, through the third quarter of fiscal 2006 (the year ends this month), comps were down 7 percent.

The company, which sells music- and pop-culture-licensed apparel, accessories and gift items for the 12-to-22 age group, blamed its troubles on poor sales of women’s novelty tops, dresses and bottoms and of certain men’s garments.

For sure, this is a hard landing from those heady days that followed the 1989 opening of the first Hot Topic store, in Westminster, Calif., by Orv Madden. Back then, the concept was seen as the store for teens looking to dress with a bit of an edge. “For a long time they were the only game in town for kids who wanted to dress like punk rockers,” said Robert Passikoff, president of Brand Keys, a New York City-based retail research firm. “They absolutely had that area of the market cornered, and they expanded greatly as the profits rolled in.”

The company operates 695 Hot Topic stores throughout the U.S. and Puerto Rico. In 2001 it opened its first Torrid store, which offers apparel, lingerie, shoes and accessories for plus-size females between 15 and 29. By the end of last year, Hot Topic was operating 129 Torrid units.

The trouble is that, as many retailers can attest, the trendier the shopper, the quicker that shopper’s tastes will change. The speed with which such trends shift within Hot Topic’s target demographic has become faster still with the advent of the Internet, observers say. “The world is getting smaller because of instant communication,” Passikoff said. “Culture moves so fast, and now Hot Topic is struggling to stay relevant.”

The store that used to offer shocking apparel has become a bit passé with the alternative crowd, say some. “How rebellious is it to shop at a mall chain store? It gets too generic,” said Passikoff. “And as these kids look to make punk fashion statements, they’re probably looking for clothing from more-obscure stores.”

The ways kids learn about cutting-edge bands and rock ’n’ roll clothing trends have changed dramatically in the past 20 years, says Caroline Borolla, a publicist at Advanced Alternative Media, a New York City-based marketing and college-radio promotions company. “Before the Internet, you’d have to buy the CD of a band you liked and read the thank-yous in the album’s liner notes to learn about other cool bands,” said Borolla. “And then that’s how you would know what CDs and cool T-shirts to buy from Hot Topic. But now all a kid has to do is go on Myspace, see what bands their friends are listening to and then go to that band’s Web site or Amazon.com or eBay and order the T-shirt. It’s completely cut stores like Hot Topic out of the process.”

Hot Topic has a Web site of its own, of course: HotTopic.Com. There a black Avenged Sevenfold Skull Bat T-shirt retails for $13.50, a Ramones striped thermal goes for $18, and a Metallica Goons long-sleeved T-shirt sells for $22.50. But consumers are going directly to the artists’ sites, observers say. “If a kid wants to order his favorite band’s T-shirt online, he might not even think to look at Hot Topic,” said Borolla. “He’d probably just search for it on a bigger Web site with more offerings.”

Hot Topic also points to a bad year for record releases to explain its sales woes. Sources say it can be risky to rely too heavily on an unpredictable industry like the music business.

“There were a ton of records released in the second half of 2006, they just weren’t geared towards these kids,” said Borolla. “That being said, the first quarter of 2007 is going to be really, really big for pop-punk bands, which are groups these kids listen to.” Borolla says she expects an outpouring of releases from the likes of Against Me, Alkaline Trio, Avenged Sevenfold and other bands in the punk genre to generate business for Hot Topic. “If Hot Topic gets the T-shirts and the buttons and the patches and stickers for these bands, the kids will snap them up,” said Borolla.

Indeed, Hot Topic is gearing up for the anticipated surge with plans to open 15 Hot Topic stores and 20 Torrid units this year. It also plans to remodel between 60 and 80 Hot Topic stores in 2007. Revamped stores will be lighter and brighter, with no specific musical genre theme, CEO Betsy McLaughlin told investors at a conference in January. “These new prototype stores will focus on fashion with a more urban feel,” she said. “A music section with rock tees and a marquee to announce opening releases in its own area give it a more hang-out feel.” Hot Topic stores have been known to hold in-store listening parties for unreleased albums and to exclusively offer a band’s concert merchandise before it goes on tour.

Sources say that to bounce back, Hot Topic must return to one of its original functions: introducing under-the-radar music groups. “Turning kids on to what’s cool is their bread and butter,” said Passikoff. “They’ve got to be trendsetters, or else they’ll struggle. Hot Topic is much more susceptible to music and trends coming in and out.”

Kids will always be loyal to cool, retail observers say. It’s Hot Topic’s job to stock it.