Why Hot Topic Isn't So Hot Anymore -- And How They Could Heat Up Again

Longtime Goth-teen store fave Hot Topic (HOTT) rocked right through the first year of the downturn. Then, fickle teens turned on the 650-store chain, shrinking its sales for a year straight, including an 11 percent sales drop at Hot Topic stores in March. It's the only major teen-focused apparel chain still reporting negative numbers.

The company is afflicted with a plague that comes to all teen-focused chains in time: It's fallen out of touch with the notoriously fast-changing teen mindset. CEO Betsy McLaughlin has been lauded in the past for thinking young and having her finger on the pulse of teen trends, but Hot Topic has "gone more mainstream" in recent months, offering less of the out-there Goth duds that once made the store wildly popular with kids too cool for Old Navy and the Gap (GPS). Now it's more about band-related gear, which you can buy everywhere, including for cheap at Target (TGT) and Walmart (WMT). The chain lost its uniqueness and is paying the price.

Hot Topic has made some headway differentiating itself and building ties to rock bands with music sales through its new site Shockhound. But clothing is way down, and heavily dependent on movie tie-ins, which can pay off big (Twilight) or flop (New Moon). Lately, it's been mostly fizzle.

With the waning of the '90s teen-apparel trends that made this chain, the company could learn from its success with its other chain, Torrid. Sales at Hot Topic's plus-sized teen lingerie chain have shown solid growth this year. Floundering Hot Topic stores that don't share a mall with Torrid units could be changed over to the Torrid brand -- and maybe apparel buyers at Torrid could have a sit-down with the Hot Topic team and help them rediscover what teens are into.

Photo via Flickr user D.C.Atty