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Hot Topic Reports Record Fourth Quarter Profit

Hot Topic, Inc., a mall-based specialty retailer of music-licensed and music-influenced apparel, accessories and gift items for teens, reported company-record results for both the fourth quarter (13 weeks) and the 2001 fiscal year (52 weeks) ended February 2, 2002. All references to shares and per share amounts reflect a 3-for-2 stock split effected on February 7, 2002.

Net income in the fourth quarter (13 weeks) increased 20% to $12,467,000 or $0.38 per diluted share from $10,364,000 or $0.32 per diluted share for the fourth quarter of the last fiscal year (a 14 week quarter). Net sales for the fourth quarter increased 23% to $109,142,000 from $88,428,000 for the fourth quarter of fiscal 2000.

As previously reported, comparable store sales increased 3.8% for the fourth quarter over last year’s fourth quarter.

For the fiscal year (52 weeks) ended February 2, 2002, net income increased 23% to $28,600,000 or $0.86 per diluted share from $23,245,000 or $0.72 per diluted share for fiscal 2000 (a 53 week year). Net sales for fiscal 2001 were $336,093,000, an increase of 31% from net sales of $257,187,000 for fiscal 2000.

As previously reported, comparable-store sales increased 3.9% for the year. At the end of fiscal 2001, the Company operated 352 stores, including six Torrid stores, compared to 274 stores at the end of fiscal 2000.

Betsy McLaughlin, President and Chief Executive Officer, said, “We are pleased with our performance for fiscal 2001. We increased net sales by 31%, net income by 23% and EPS by 19% with each quarter producing positive comparable store sales. We opened 73 new Hot Topic stores, successfully launched our new concept, Torrid, and added to our senior management team. We are proud that in fiscal 2001, as in each of our prior years, all Hot Topic stores were profitable. Our average Hot Topic store produced over $1 million in sales and generated $642 per square foot. Our strong balance sheet remains debt free and was further strengthened, with cash increasing 39% to $71.3 million and shareholder equity up 36% to $135.4 million.”

McLaughlin continued, “For fiscal 2002, we plan to open 70 Hot Topic stores and 15 Torrid stores. We expect comparable store sales to increase 2% to 4%, total net sales to increase approximately 27% and diluted earnings per share of approximately $1.03, a 20% increase over the fiscal 2001 results.

“We enter fiscal 2002 with our ongoing commitment to continue listening to our customers and focus on a differentiated assortment. We are confident of our ability to expand and grow Hot Topic in 2002 and over the long-term,” added McLaughlin.

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