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"The Hunger Games" no game changer for Hot Topic
March 22, 2012 / 10:10 PM / 5 years ago

"The Hunger Games" no game changer for Hot Topic

(Reuters) - Souvenirs of “The Hunger Games” are selling like hot cakes ahead of the potential blockbuster movie’s release on Friday, but the sales boost is unlikely to last for Hot Topic Inc, the company that is selling most of the merchandise.

Retail industry experts are not betting on the post-apocalyptic movie to bring any sustainable growth in sales for the California-based retailer, despite signs of some initial success.

Instead, they see a sequel to the boom-and-bust story Hot Topic experienced in licensing another teen blockbuster, the “Twilight” series.

“The company’s been doing poorly,” said Nikoleta Panteva, senior retail analyst at IBISWorld. “As to how big ‘Hunger Games’ will be, it is still up in the air. It does have more appeal for the male audience, but I don’t think the merchandise will turn the company around at all.”

The movie, based on the book by author Suzanne Collins, is about children forced into a fight to the death and is touted to be one of the year’s biggest hits.

Companies like eBay Inc and Toys R Us Inc are already selling related merchandise too, but Hot Topic, which makes most of its money from such licenses, has the broadest assortment yet.

Hot Topic said sales of merchandise related to the movie have been “brisk,” with many items selling out.

“Bottom line, we’re the destination for the Hunger Games merchandise,” the company said in a statement.

The start of the story, at least, has a familiar ring.

The retailer, known for its band and movie merchandise, got an unprecedented boost in 2009 from selling Twilight merchandise, making it one of the best performers in the teen retail segment.

Hot Topic shares more than doubled in the six months from November to April that year.

But as with Hunger Games, the company did not have exclusive licensing rights for the teen vampire dramas. The company lost its edge when others, including Wal-Mart Stores Inc and Target Corp started selling “Edward”, “Bella” and “Jacob” T-shirts as well.

Exclusive licenses are extremely costly, and companies the size of Hot Topic usually cannot afford them. The retailer had sales of $697.9 million in the fiscal year ended in January.

“In the case of Twilight it gave Hot Topic an injection .... They shot up and then shot down, like someone who got a sugar rush,” said Marshal Cohen, chief industry analyst at market research firm NPD.

“They have to find a way to de-emphasize that this (the Hunger Games license) is their only way to grow. If you do it right, you can then turn these customers loyal. Remember, this is the most fickle of all consumer bases so you have to keep doing something new,” he said.

The company’s shares have fallen more than 20 percent from the highs of 2009, and comparable sales have been laboring under the high expectations set by the Twilight months.

Hot Topic has since made many changes to its team, including bringing in new Chief Executive Lisa Harper.

On a conference call earlier this month, Harper mentioned that strong demand for products related to “The Hunger Games” was driving a mid-single digit percentage rise at Hot Topic’s namesake chain of retail stores in the first five weeks of the current quarter.

The company is being more cautious with the latest fad.

Harper said Hot Topic had overbought movie-inspired merchandise for films like Twilight but had seen a steep drop in demand after the initial weeks of their release.

With Hunger Games, Hot Topic plans to re-stock only after evaluating demand post the release on so that it can avoid getting stuck with merchandise that won’t sell.

But analysts are not holding their breath.

“I think you’re going to see the same thing repeat with ‘The Hunger Games,'” said retail consultant Rahul Sharma of Neev Capital.

“They’ll get a nice little boost from it and in the short term even the stock could reflect it, but once the product becomes more common, they’ll have the same old story,” he said.

Shares of Hot Topic rose 0.7 percent to close at $10.21 on Nasdaq. (Nivedita Bhattacharjee in Chicago, additiobal reporting by Ranjita Ganesan in Bangalore; Editing by Richard Chang)

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