Shares of Hot Topic fell more than 10% in after-hours trading on Wednesday. The Goth-inspired retailer slashed its earnings outlook for the fourth quarter due to disappointing sales of music and clothing during the holiday shopping season.
The company said it expects to earn between 20 cents and 22 cents a share for the quarter, down from a previous view of 33 cents to 38 cents a share.
Wall Street analysts, on average, had been expecting earnings of 34 cents a share, according to Reuters Estimates.
Sales at the company's stores open at least a year, a key retail measure known as same-store sales, fell 5.1% in December.
In a statement, Hot Topic said sales were particularly weak during the first half of the month, prompting the chain to offer more discounts than planned.
"We are very disappointed by our consolidated December results and their implications for the quarter," Hot Topic Chief Executive Betsy McLaughlin said.
To clear inventories, the retailer said it is increasing markdowns and expects same-store sales to be down in the mid single digits for the quarter.
Inventories at the end of the quarter are expected to be about flat compared to last year on a per square foot basis, Hot Topic said.
On a positive note, Hot Topic said sales of men's and women's licensed and fashion novelty T-shirts were positive during the month.