Hot Topic makes Acquisition to stay “Cool with the kids”

 

I used to shop at Hot Topic a lot when I was younger. When I say younger, I mean the days in which I couldn’t imagine shopping anywhere else. It wasn’t until after college when I finally started getting that look from people when I told them where I bought my shirt that last weekend. You know the look I’m talking about. It’s the look you get when when you get asked the question: “Where did you get that? It’s awesome” and respond with, “Hot Topic.”

 

 

Manson

The growth at Hot Topic has greatly slowed since the early 2000’s when the “cool” kids were going ga-ga over the newly minted goth revolution. Even then, a company smart enough to see pop culture as a moving target and not a static trend, was already looking to be the place  beyond where “posers” went to get clothing. This was, until closer to 2011/2012 when geek culture really started to melt itself in to the general population.


 

If nothing else, the diversification and relative explosion of geek culture with respect to society has been a boon for Hot Topic. In the year 2012 sales were steady showing Y0Y growth of 18% (between Hot Topic and Torrid) as well as an impressive drop in Cost of Goods Sold as more diverse supply options continued to expand. 2012 was also a big year for online sales for Hot Topic showing a roughly equivalent online net revenue increase YoY.

GeekTopic

Recently, despite the success of the ever expanding “Pop” wall in Hot Topic and the continuous release of comic book movies, the sales at Hot Topic has been less than Heroic. According to income statements from 2013, there was only a roughly 6% net income growth between 2012/2013 (2014 numbers have not been released.) As a result, Hot Topic has been making sets of steady acquisitions to remain relevant. Most recently, Hot Topic (NASDAQ:HOTT) has announced the acqusition of online retailer ThinkGeek to add to it’s revolving online sales repertoire. It is hard to say if this will be good or bad for shoppers as most acquisitons of this type involve the merging of online systems and inventory; essentially folding the products and relationships of ThinkGeek in to the business practices of Hot Topic. We may see an uptick in prices and a realignment of product selection as Hot Topic attempts to squeeze out profit but changing the supply chain to suit their current relationships.

 

Only time will tell if we will win or loose as consumers, but with all of the different types of geek apparel competition on the internet as it is, if they don’t do it right they won’t be around for long.

Author: Richard Stanley

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