<SUBMISSION>
<ACCESSION-NUMBER>0001193125-08-057469
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>20080312
<ITEMS>2.02
<ITEMS>9.01
<FILING-DATE>20080314
<DATE-OF-FILING-DATE-CHANGE>20080314
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>HOT TOPIC INC /CA/
<CIK>0001017712
<ASSIGNED-SIC>5600
<IRS-NUMBER>770198182
<STATE-OF-INCORPORATION>CA
<FISCAL-YEAR-END>0130
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>000-28784
<FILM-NUMBER>08689977
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>18305 EAST SAN JOSE AVENUE
<CITY>CITY OF INDUSTRY
<STATE>CA
<ZIP>91748
<PHONE>6268394681
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>18305 EAST SAN JOSE AVENUE
<CITY>CITY OF INDUSTRY
<STATE>CA
<ZIP>91768
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d8k.htm
<DESCRIPTION>FORM 8-K
<TEXT>
<HTML><HEAD>
<TITLE>Form 8-K</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:3px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>UNITED STATES </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="3"><B>Washington, D.C. 20549 </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>Form&nbsp;8-K </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>CURRENT REPORT </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>Pursuant to Section&nbsp;13 or 15(d) of </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="3"><B>The Securities Exchange Act of 1934 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><B>Date of Report (Date of earliest event reported): March&nbsp;12, 2008 </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="6"><B>Hot Topic, Inc.
</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Exact name of registrant as specified in its charter) </B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="32%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="32%"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>California</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>0-28784</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>77-0198182</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(State or other jurisdiction</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="1"><B>of incorporation)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Commission File Number)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(I.R.S. Employer</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="1"><B>Identification No.)</B></FONT></P></TD></TR>
</TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="50%"></TD>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>18305 E. San Jose Avenue,</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>City of Industry, California</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>91748</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Address of principal executive offices)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Zip Code)</B></FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Registrant&#146;s telephone number, including area code:&nbsp;(626)&nbsp;839-4681
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Not Applicable. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="1"><B>(Former name or former address, if changed since last report.) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </FONT></TD></TR></TABLE> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </FONT></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>

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<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>Item&nbsp;2.02</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>Results of Operations and Financial Condition. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">On
March&nbsp;12, 2008, we held a conference call to discuss, among other things, our results for the fourth quarter and fiscal year ended February&nbsp;2, 2008. A transcript of the conference call is attached hereto as Exhibit 99.1 and incorporated
herein by reference. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The information in this Item&nbsp;2.02 and the corresponding exhibit are being furnished and shall not be deemed
&#147;filed&#148; for the purposes of Section&nbsp;18 of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>Item&nbsp;9.01</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>Financial Statements and Exhibits. </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(d) Exhibits.
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="91%"></TD></TR>
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<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:39pt"><FONT FACE="Times New Roman" SIZE="1"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT FACE="Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">99.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Transcript of March 12, 2008 Conference Call</FONT></TD></TR>
</TABLE>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>SIGNATURE </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>HOT TOPIC, INC.</B></FONT></P></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ JAMES MCGINTY</FONT></P></TD></TR>
<TR>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">James McGinty</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><I>Chief Financial Officer</I></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD></TR>
</TABLE></DIV> <P STYLE="margin-top:12px;margin-bottom:0px; margin-left:2%; text-indent:-2%"><FONT FACE="Times New Roman" SIZE="2">Date: March 14, 2008 </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>INDEX TO EXHIBITS </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

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<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:39pt"><FONT FACE="Times New Roman" SIZE="1"><B>Exhibit&nbsp;No.</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT FACE="Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">99.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Transcript of March&nbsp;12, 2008 Conference Call</FONT></TD></TR>
</TABLE>
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<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>dex991.htm
<DESCRIPTION>TRANSCRIPT OF MARCH 12, 2008 CONFERENCE CALL
<TEXT>
<HTML><HEAD>
<TITLE>Transcript of March 12, 2008 Conference Call</TITLE>
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 99.1 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>HOT TOPIC, INC. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>FOURTH QUARTER 2007 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Conference Call Transcript dated March&nbsp;12, 2008 </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Good afternoon, ladies and gentlemen, and welcome to the Hot Topic fourth quarter 2007 earnings release conference call. At this time, all participates have been placed
on a listen-only mode, and the floor will be open for your questions following the presentation. This call will be limited to one hour. Before we begin I would like to remind you that during the course of the conference call, the company will be
making certain forward-looking statements. Such statements relating to financial results, guidance and future financial performance, merchandise assortment, new initiatives and related matters, and statements relating to key personnel and
operational issues. These statements as well as related information posted on the Hot Topic investor relations website involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking
statements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">These risks and uncertainties are discussed from time to time by the company in our more fully set forth in the periodic report that Hot Topic
files with the Securities&nbsp;&amp; Exchange Commission. Including its most recent annual report on Form 10-K and quarterly report on Form 10-Q, and as will be updated by our upcoming annual report on Form 10-K for fiscal 2007. All forward-looking
statements made on this call speak only as of the time they are made. And Hot Topic undertakes no obligation to update these statements to reflect subsequent events or circumstances. To more effectively disseminate the information discussed this
afternoon, this call is being webcast on the company&#146;s investor relations website at http://investorrelations.hottopic.com. And a replay will be available on that site. A replay will also be available at 1-888-286-8010, pass code 19194201 for
approximately two weeks. Now I&#146;ll turn the call over to Hot Topic&#146;s Chief Financial Officer, Jim McGinty. Please proceed. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Jim McGinty &#151;</B><B><I>Hot Topic, Inc.&#151;CFO</I></B><B>
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Hi, this is Jim, and welcome to the call. While on hold you have been listening to &#147;Heading for the Disco&#148; from the HorrorPops new album
which was released this past February. My partners on the call today are: Betsy McLaughlin, Jerry Cook, and Chris Daniel. For competitive reasons we will not be discussing any specific forward-looking product information during this call. I will
begin by discussing the fourth quarter results and then comment on the balance sheet and cash flow. Following these details, I will turn it over to Betsy who will provide you additional color on the quarter followed by first quarter guidance. First,
the results of the fourth </FONT>
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<FONT FACE="Times New Roman" SIZE="2">quarter. Our fiscal 2007 fourth quarter net sales and earnings results reflect the 13 weeks ended February&nbsp;2nd, 2008. This compares to the fiscal 2006
fourth quarter, which spanned 14 weeks and ended on February&nbsp;3rd, 2007. All comparisons discussed reflect these time periods unless otherwise noted. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Hot Topic, Inc.&#146;s, fourth quarter net sales were $220.7 million, a decrease of 8.2% over the fourth quarter last year. Comparable store sales were down 6.3% for the quarter as compared to the corresponding 13-week period from the
previous fiscal year. By division Hot Topic&#146;s comps were down 7.2% while Torrid&#146;s comps were down .4%. Overall total company net sales during the quarter decreased by $19.8 million due to a $13.2 million sales loss related to one less week
in this fiscal year&#146;s fourth quarter as compared to last year, a $12.8 million sales loss from the total company comparable store sales decline, a $600,000 loss from closed stores and noncomparable Hot Topic stores, partially offset by volume
from new Hot Topic stores. These losses were offset in part by $2.8 million sales gain from the internet sales and a $4 million sales gain from new and noncomparable Torrid stores. For the quarter, total company comp decline which was the result of
a 5% decrease in the average number of transactions in comparable stores and a 1% decrease in the consolidated average transaction value. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">At Hot Topic,
apparel was 59% of total sales in the fourth quarter, versus 55% in the corresponding period last year, as a result of the relative weakness in the accessories categories. At Torrid, apparel was 77% of the total sales in the fourth quarter versus
74% in the corresponding period last year. Gross margin was 36.4% of sales, compared to 34% last year. The 240 basis point improvement breaks down into the following categories: merchandise margin increased 390 basis points due to significantly
reduced markdowns, lower shrinkage and higher vendor allowances; store occupancy and depreciation expenses increased 190 basis points due to the related store remodel program and also due to the deleveraging of store expenses on a lower volume. As a
percent of sales buying costs were flat to last year. Distribution costs improved by 40 basis points due to lower freight out, lower outside temp personnel expenses as a result of improvements in productivity as well as lower real estate taxes.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">In the fourth quarter, selling, general, and administrative expenses were 27.9% of net sales, similar to last year. SG&amp;A expenses in the fourth
quarter of fiscal 2007 include a $600,000 nonrecurring charge primarily related to store impairment. In addition, SG&amp;A expenses in the fourth quarter of fiscal 2006 included $3.1 million in nonrecurring charges, including a $3.8 million expense
related to store impairment, lease termination and asset write-off charges for underperforming stores, partially offset by $700,000 benefit related to other one-time items. Excluding these nonrecurring charges both this year and last year, SG&amp;A
expenses were 27.6% of net sales compared to 26.6% last year. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">This 100 basis point increase breaks down into the following categories: store payroll as a percentage of sales was up 50
basis points as a result of higher minimum wages, higher medical expenses, and the deleveraging of payroll costs on the lower average store sales volume, store payroll cost per average store were down by 3%. Marketing expenses increased 30 basis
points due to higher photographic artwork expenses and magazine print ads at Torrid. Preopening expenses increased by 10 basis points, due to the timing of store openings. Store other expenses increased by 10 basis points due to the deleveraging on
the lower average store sales base. Lastly, other G&amp;A expenses were flat including savings in performance-based bonus offset by higher stock option expense, consulting and computer support costs, accounting fees and higher sales tax expense.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">The fourth quarter operating income increased by $4.5 million to $19 million. Operating margin for the fourth quarter was 8.6% of sales, versus 6.0% last
year. Interest income was $.5 million, or .2% of sales. Our effective tax rate was 38.9% for the fourth quarter versus 40.9% last year. The rate improvement was due to higher tax exempt interest income and a favorable comparison to a higher than
typical tax rate a year ago, partially a result of the tax implications related to the adoption of expensing stock options. We reported fourth quarter earnings per diluted share of $0.27 compared to $0.20 a year ago, a 35% increase year-over-year.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">During the quarter we opened total of five new Torrid stores and closed five Hot Topic stores and one Torrid store. We also remodeled or relocated 12 Hot
Topic stores during the quarter, bringing our total number of remodeled or relocated stores during 2007 to 70. We currently have a total of 94 Hot Topic stores in our new format. Cash, cash equivalents and short-term investments declined 4%
year-over-year to $53 million, in part a result of the $7.2 million spend on our share repurchase program during the third quarter. Within the $53 million were $21 million in AAA-rated auction rate securities at year end. Since the end of January,
we have liquidated approximately $8 million of these investments. All of the remaining auction rate securities are highly rated in fact primarily with federally insured student loans. Total inventory cost was just over $80 million. On a per square
foot basis inventory was up 5.5% at the end of the fourth quarter due to better than anticipated physical inventory results and increased January receipts for a specific product designated to establish a higher in-stock position. Inventory at retail
was up slightly on a per square foot basis, flat at Hot Topic at up mid-single digits at Torrid. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Capital expenditures were $8.6 million in the quarter,
primarily related to the five new stores and 12 Hot Topic remodels and relocations during the fourth quarter and the additional stores were scheduled to be opened or remodeled and relocated in the first quarter of 2008 as well as expenditures for
system development. Depreciation and amortization expense for the fourth quarter was $10.3 million versus $10.5 million last year. Now I&#146;ll turn the call over to Betsy. </FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy
McLaughlin &#151;</B><B><I>Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">While our EPS improved over last year for both fourth quarter and the year, we remain
dissatisfied with the extended negative comp trend in the financial performance. We did however accomplish much in term of the execution of our business strategy. I&#146;ll start with a few comments on the fourth quarter, and then review the
progress we have made on this business strategy. As the fourth quarter was challenging on the top line, I&#146;ll start with our most difficult category: accessories. The accessory category was down 16% for the quarter on top of an 8% decline last
year. In fourth quarter our biggest challenge was in licensed accessories that comped down almost 30%. Lack of focus and poor execution were the causes of this dismal performance. License accessories represents close to 30% of the overall accessory
business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">On a positive note, fashion accessories began showing sales recovery during the last 10 days of December, and while this improvement was not
enough to impact the quarter, fashion accessories has maintained a definite trend improvement since late December. It is our expectation that the additional focus on accessories, the investment in better inventory positions and items, and the staff
changes that have been made to the buying team will position accessories to make considerable improvement as we progress through the first half of 2008. The music category comped up 1% against significant promotions during the holiday period of last
year. We began 2007 with a negative double-digit comp trend and through the efforts of our merchandising and marketing teams, have seen steady improvement throughout the past year in men&#146;s rock tees, junior rock tees and CDs, which produced
double-digit positive comps. We are pleased that our customers are validating our strategy to focus on new music, and we will continue to implement initiatives that shift our dependence away from major releases and establish strong relationships
with emerging and mid-tier bands. In addition, the accessories portion of the music assortment has opportunity during 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">The women&#146;s business
produced a flat comp for the quarter. Women&#146;s bottoms generated a solid double-digit comp as a result of a very strong and focused item presentation. Women&#146;s novelty tees also performed well, upper mid-single-digit comp driven by several
key licenses. Offsetting the strong performances in novelty tees and bottoms were fashion tops and dresses, both of which had difficult promotional comparisons to [LY]. In addition, both of these areas were planned down in sales and inventory during
the quarter to support our move away from assortments and into items. Men&#146;s comped down 5%, primarily the result of more difficult comparisons associated with the high level of promotional activity last year. As with women&#146;s fashion,
we&#146;ve scaled back the inventory levels in assortment with both men&#146;s fashion tops and bottoms in order to support items. While men&#146;s novelty tees also suffered from the promotional comparisons we see opportunity and better receipt
flow and buying execution. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">On our previous earning calls I have outlined key strategies to improve the Hot Topic business results. The following is an
update on </FONT>
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<FONT FACE="Times New Roman" SIZE="2">each of our major initiatives. First, our return to a fundamentally regularly-priced business has allowed us to reestablish pricing credibility with our
customers. Beginning in mid-February of 2007, we scaled back on all promotional activity during nonpeak traffic periods. Despite the temptation to drive short-term comps with incremental promotions during this past quarter, we remained committed to
our strategy. We estimate that on an annual basis, the cost to our comp line in 2007 was approximately 3.5 percentage points. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Our next objective was to
reestablish Hot Topic has an item designation with the primary focus on the T-shirt business. During the fourth quarter total tees, including rock tees, novelty tees, and fashion tees increased their penetration to the total mix as planned and
comped up low single digits. In addition all merchandise classifications were evaluated and planned as item businesses versus widely coordinated assortments. Our third initiative has been the management of inventories. We continue to closely manage
our inventories to levels appropriate to the demand for each category. For the fourth quarter receipts were 24% lower than last year. Although inventories ended the quarter up on a per foot basis, we operated with lower inventories throughout the
quarter enabling us to generate a significantly higher merchandise margin. In terms of inventory management going forward, we continue to be selective with our investments and categories and items that are trending or opportunistic. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Next, we met our commitment of remodeling or relocating 70 of our existing Hot Topic stores into the new design. We continue to believe that the new look is consistent
with our rebranding efforts and that these stores better represent the ever widening teen music preferences. The group of remodeled stores includes both stores whose leases were due to expire and stores that are located in high volume, high exposure
malls. As we mentioned on our third quarter earnings call, the sales left of these remodeled stores is not enough to offset the increased occupancy costs and/or any accelerated depreciation write-off. As such in 2008, stores converted into the new
design will be almost exclusively those whose leases are within three years of expiration. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Our top priority has been and will continue to be the evolution
of our customer&#146;s music experience. We laid out our new music strategy early in 2007 as music is the heart of Hot Topic and crucial to our positioning and differentiation. By mid-2007 we had begun implementation of the first phase of this
multi-year strategy that focused on the in-store music experience. Through assortment repositioning and dedicated marketing and touring events, we have become less dependent on major artists and now focus our dollars and time to support mid-tier and
small bands. As a direct result our music category improved from a double-digit decline in the first half of &#145;07 to positive comps in the second half of the year. As we move through 2008, we will continue to evolve the assortment and invest in
our in-store music presence. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">On previous calls we have also mentioned that to remain credible and authentic we need to nurture, evolve and innovate
the music experience both in store and online. Music is the differentiating inspiration for the Hot Topic brand. We are everything about the music, and more specifically we have repositioned ourselves as everything about new music. There has never
been a question that we needed to incorporate digital music into our music strategy. The challenge to present a differentiated experience along with the appropriate timing partnership and investment had been in discussion for several years. We are
now prepared to have a stronger online presence as the next phase of our music evolution. This new experience in music discovery will be called ShockHound. That&#146;s one word, ShockHound. ShockHound as a strategy will allow Hot Topic to enter the
digital music age. New and emerging artists will be in the spotlight. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">A maverick point of view is desperately needed amongst the overpopulated universe of
music sites. ShockHound.com will offer music merchandise including apparel and accessories, DRM free music, original content, and a community experience presented to our customers in a cohesive way that embraces the passion for music that all of us
at Hot Topic share with our customers. In a nutshell, we are positioning ShockHound as the go-to place for experience in rock music discovery. We have targeted a launch date late in the second quarter and we&#146;ll keep you posted on our progress.
We are committed to adhering to these initiatives, which we believe are correct for the long term despite the short-term comp and earnings pressure. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Now
on to Torrid. Torrid was approximately flat in comp stores during the fourth quarter on top of a double-digit comp in the fourth quarter of 2007 &#151; or 2006. We continue to generate increases in the average dollar transaction size and gross
margin rate. Apparel continues to perform very well, lead by a strong tops business. Torrid.com also generated a solid increases up almost 40% over the comparable 13-week period last year. This site continues to show significant traffic growth with
divastyle members leading the way in terms of average dollar purchase. In terms of divastyle, as of the end of the year we have well over one million Torrid customers signed up and approximately 135,000 full-fledged members. During the quarter we
experienced favorable results from the direct mail events and we continue to view this loyal base of customers as critical to our future success and growth. In terms of overall sales productivity, Torrid stores generated productivity of
approximately $350 per foot. It continues to be our goal and expectation to reach $400 per foot to achieve the levels of profitability that will make Torrid a true specialty retail success story. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">As to the overall consolidated business, all functional areas of the company continue to develop specific initiatives to improve gross margin and lower departmental
operating costs. Jim will now provide guidance for the first quarter of fiscal 2008. </FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Jim McGinty
&#151;</B><B><I>Hot Topic, Inc.</I></B><B>&#151;</B><B><I>CFO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Our first quarter of fiscal 2008 guidance is for a loss in the range of $0.03
to $0.06 per diluted share, based on a comparable store sales decline in the low single-digit percentage range. As a reminder, the guidance includes approximately $0.02 of charges related to the cost of our online music initiative. As mentioned in
the last earnings call we expect a similar charge in the second quarter of 2008. We are expecting in-store inventory at the end of the first quarter to be up in the low single-digit percentage range on a per square foot basis this year. Our guidance
assumes approximately 44&nbsp;million shares outstanding for the first quarter. At this time we will take questions relating to the results and outlook. Please hold while we contact the conference operator who will give you further instructions.
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">(OPERATOR INSTRUCTIONS) And your first question comes from the line of Lauren Levitan. Please proceed.
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Lauren Levitan &#151;</B><B><I>SG Cowen</I></B><B>&#151;</B><B><I>Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thanks. Good afternoon. Betsy,
two questions for you. First, I&#146;m wondering if with respect to the online music initiatives, I know you said that ShockHound is intended to be a destination for rock music. I&#146;m curious if there is opportunities or thoughts to take what you
are doing there beyond that genre? And then second, you, on the February sales release, were very helpful in giving us regular price comp trends to help us understand the impact that the reduced produced promotional cadence is having on the
business. As you are now anniversarying the beginning of eliminating those promotions, can you give us some reconciliation between the comp guidance you just gave us for Q1 and the regular price trends that you have been seeing, and how we should
think about when there might be really no difference between the two comp numbers as reported? Thanks. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic,
Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. First, well, let&#146;s talk about the regular price comp trend for Q1. As we recorded our message in January on the
call and also February, we started to see regular price business versus clearance business, regular price business turn positive as we moved through January and in to February, which was very encouraging for us. Last year we had an extraordinary
amount of clearance inventory due to the markdowns that we took in January, and so we felt it important to separate the two just so that we could get certainly an understanding of whether we were continuing to make progress with regular price.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Also, as we move through the back half of February, the promotional comparisons stopped, as mid-February last year was when we decided that everything
would be regular price during nonpeak periods. So our intention and what we hope is that our regular-price </FONT>
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<FONT FACE="Times New Roman" SIZE="2">portion of our assortment will be positive for the first quarter. We certainly have seen encouraging results to that end. The clearance business, though,
continues to be substantially negative, just because we do not have the inventory that we had last year. As we move through March and through April, we&#146;ll see less of an impact and by the time we get to the end of the first quarter, clearance
should not be an issue. So our guidance which is down a low single-digit comp, does include an assumption that regular price would be positive, and that clearance would continue in it&#146;s either low to mid-double-digit negative. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Lauren Levitan &#151;</B><B><I>SG Cowen&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">That&#146;s helpful. And by Q2 you wouldn&#146;t expect a differential
between those two trends? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">That&#146;s correct. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Lauren Levitan &#151;</B><B><I>SG Cowen&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay.
Thank you. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">And actually I would say the middle of April,
because we have the Easter shift this year, so the calendar is compounding our ability to forecast. I don&#146;t think any retailer is sure what this very early Easter is going to do to March and April. We said to ourselves we&#146;ll truly get an
apples-to-apples comparison in the back half of April. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Lauren Levitan &#151;</B><B><I>SG Cowen&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Great. Thank you. And then on the music side. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Yes, as far as ShockHound is concerned, we&#146;re going to start with where we have the most expertise, which is certainly rock music. The reason why we&#146;re calling it ShockHound versus just making it a part of hottopic.com was because
we felt there is a wider universe of rock music out there available. The Hot Topic brand has been very much about alternative rock music and with the 1,800 square feet and how we have positioned the brand, it&#146;s a narrower experience in our
stores. What we want to do online with ShockHound is broaden the entire rock experience to include quite a bit of classic rock, indie rock, cross-over rock, so our </FONT>
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<FONT FACE="Times New Roman" SIZE="2">initial foray will certainly be rock related. As to whether over the years this could expand to have alternative genres of music, alternative teams that are
experts at those genres of music, that&#146;s absolutely a possibility, but for right now our investment and our focus is purely on rock. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Lauren Levitan &#151;</B><B><I>SG Cowen&#151;Analyst</I></B><B>
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Great. Thank you and good luck. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin </B><B><I>&#151;Hot Topic,
Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thank you. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Your next question comes from the line of Stephanie Wissink with Piper Jaffray. Please proceed. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Stephanie Wissink &#151;</B><B><I>Piper Jaffray&nbsp;&amp; Co.&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thank you. We appreciate all of the extra detail
Jim gave on the remarks. Thanks for that. Just a couple of questions, the first is on the music category &#151; I&#146;m not sure if you have broken this out in the past, but what percentage is the rock tees of that category? </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Betsy McLaughlin </B><B><I>&#151;Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">We have not broken it out, but rock tees is the majority of the
category. When you add men&#146;s rock tees and junior rock tees, it&#146;s a significant percentage of the total. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Stephanie Wissink </B><B><I>&#151;Piper Jaffray&nbsp;&amp;
Co.&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. And then secondly, Betsy, if you could characterize what you are seeing out there in terms of the licensing
pipeline, whether it&#146;s coming from entertainment or from music? How would you categorize it? Getting better? Similar? Some sense of how you feel? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic,
Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Well, yes, we&#146;ll split music and licensing, because it&#146;s a two different animals. I think on the music side of the
business we&#146;re seeing &#151; I don&#146;t know whether it is because of our focus or the nature of the world, but we&#146;re certainly seeing increased attention being paid to new bands and certainly this artistic explosion. YouTube has helped
that. If you&#146;re in a band and you have got a camera, you can </FONT>
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<FONT FACE="Times New Roman" SIZE="2">go into your garage and upload it on YouTube and get a few million hits, and create the demand for yourself. So technology certainly has helped with the buzz
around new music. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">I also think that the state of the world helps, as most historians will tell you, the greatest music and art comes out of tough periods,
and whether that&#146;s globally or whether that&#146;s nationally, we certainly have seen a great menu and landscape out there for new music. So I think we feel very good about that, and as we have rotated our focus to pay attention more so to
those bands and our &#151; actually as you look at our rock tees assortment, and our music assortment, we have got close to 80% now dedicated to the mid-tier and the small-tier bands, versus where we were last year, which was half of that. So
it&#146;s been very, very encouraging. On the license side, the license pipeline is not as healthy as we would like it to be. There certainly are &#151; within the women&#146;s world there seems to be some good things happening. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">On the men&#146;s side of it we&#146;re working hard. There&#146;s a mix between music properties, not music &#151; gaming properties, movie properties, cartoon
properties. So it&#146;s much smaller. We don&#146;t see any big key license, as one that will create a substantial percent of the business. It&#146;s probably healthier for us to go at it that way. As we move to the back half of the second quarter
we&#146;re up against Harry Potter, which was a large license for us last year, so we&#146;re trying to offset that business that really started in the beginning of the second quarter with some smaller licenses. But I think we&#146;re lukewarm on
the licensing pipeline, and we&#146;re very encouraged by what is in the music pipeline. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Stephanie Wissink &#151;</B><B><I> Piper Jaffray&nbsp;&amp;
Co.&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. And then my last one is, just on the first quarter guidance, when I looked last year, you had a very similar low
single-digit negative comp and a relatively similar sales base, so is the variance in the guidance just that $0.02 of increased spend on the e-commerce business? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Jim McGinty &#151;</B><B><I> Hot Topic, Inc.&#151;CFO</I></B><B>
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Well, it&#146;s that on top of the fact that we would be running a negative comp on top of what we ran last year, and those lower productivity levels.
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Stephanie Wissink </B><B><I>&#151; Piper Jaffray&nbsp;&amp; Co.&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. Thank you. </FONT></P>


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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Operator </B>
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Your next question comes from the line of Kimberly Greenberger with Citi. Please proceed. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Kimberly Greenberger &#151;</B><B><I>Citigroup&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Great. Thanks. Good afternoon, Betsy other than the big Harry Potter
license in the second quarter that you need to anniversary, are there any other big licenses to anniversary in &#145;07? And I&#146;m not looking for guidance on comps beyond the first quarter, but just as you feel the movement in the business and
you get more to a regular full-priced business, do you think that we could move into positive comps as we progress through the year? Thanks. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic,
Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. I&#146;ll answer your first piece of that Kimberley. On the licenses, we had a couple of strong licenses last year in
Transformers, and that number was really second quarter, third quarter, and on the men&#146;s side. Hello Kitty was also strong on the women&#146;s side, but I think we have enough to &#151; we have Skelanimals right now and we have got some other
things in the works. The one thing also is that &#145;The Nightmare Before Christmas,&#146; which has always been a strong property for us in the back half of the third quarter and fourth quarter, we actually could have done more business this past
year. We tapered it down thinking that we weren&#146;t going to have the same kind of demand, and I think we left quite a bit on the table with customers. Certainly the demand was there. We sold out of a lot of products. I think there&#146;s the
opposite effect, where even though NBC was strong last year, we can beat it this year by finding a happy medium on the assortment levels. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">And as far as
the guidance is concerned, I think the most encouraging piece of this &#151; we all believe in the music piece of the business, obviously, and are seeing those results. We have been waiting for a long time for fashion accessories to finally turn the
corner. And we have some great leadership in fashion accessories and a strong buying team. And in addition to the margin benefit that we get when our mix shifts to fashion accessories, I think we can continue on the path of fashion accessories as
now, I think it looks good for us. That said, licensing is still a big piece of our business. We have got to get licensed accessories turned around, and we said we were targeting that for the back half of the year, and a stabilization of the novelty
tee business from a consistency standpoint. But I think that anchored by the fashion group, which has done a very, very good job concentrating on items and seems to have hit their cadence, and the build in fashion accessories, I think we are
encouraged as we get out of these big clearance comparisons. </FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Kimberly
Greenberger &#151;</B><B><I>Citigroup&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Great. Jim, I just have one follow-up for you. Gross margin last year was really up
nicely in every quarter, I think other than the second quarter. What sort of opportunity do you have to continue to take that gross margin higher here in &#145;08 in the absence of positive comps? </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Jim McGinty </B><B><I>&#151;Hot Topic, Inc.&#151;CFO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Well, I think in &#145;08, we&#146;ll have anniversaried a lot of that
&#151; the changes that we made, the higher IMU, the &#151; some of the vendor policy changes that enabled us to generate some allowances. So I would expect that we&#146;ll continue to make more incremental gains through control of markdowns,
control of inventories, and maybe slightly better markups, but they certainly won&#146;t be to the extent of what you saw a year ago. In addition, I would say that any quarter that we have a negative comp, that that&#146;s where you get into the
deleverages of your fixed occupancy and depreciation expenses, and that has a tendency to mitigate any gains you make on the merchant margin side. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Kimberly Greenberger
</B><B><I>&#151;Citigroup&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thanks, Jim. That&#146;s helpful. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Your next question comes from the line of Jeff Van Sinderen with B. Riley. Please proceed. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Jeff Van Sinderen </B><B><I>&#151;B. Riley&nbsp;&amp; Co.&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Hi, Betsy and Jim. So fashion accessories is starting to
improve for your guys, but on the licensed accessories front, just wondering if you can share anything in terms of thoughts directionally, what changes might be to licensed accessories, nothing too specific obviously, but just any more color maybe
you can give us there in terms of changes you are considering? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P>
<P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin </B><B><I>&#151;Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Sure. Well we have a new buying group that is looking at licensed accessories and some fresh new eyes to give it some attention. So I certainly think that is going to be helpful as we have noticed, and all of us who have been in this
business for a long time, know that an expert looking at the business tends to help. So I think we are happy so far, certainly, with the changes that we have made to the team. Maria is directly involved with the licensing group now, and is working
with them, and with &#151; on the strategy and the execution, so licensing &#151; the license gift piece of the business has a longer lead time because so much of it is imported. And so that&#146;s </FONT>
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<FONT FACE="Times New Roman" SIZE="2">why we can&#146;t really impact the business, we might see some of it in late second quarter, but we have really targeted Q3 and Q4 to &#151; where we start
to see improvement. That&#146;s about all I can tell you at without giving you specifics. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Jeff Van Sinderen &#151;</B><B><I>B. Riley&nbsp;&amp;
Co.&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. Fair enough. And then let me ask you in terms of the new remodels &#151; or the remodeled stores, what difference are
you seeing in performance there versus the older Hot Topic stores? And would it make any sense at this point to expand or accelerate the remodel program for the Hot Topic stores? </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">We see a bump when the store first opens, and part of that, I think,
is because there&#146;s pent up demand from the store being closed, or if the store has been in a temp space, temp spaces are certainly not as attractive as the permanent spaces. So we see a bit of a honeymoon as the store opens, but within about 90
days it migrates back to the company comp trend. And we have not really seen a difference in the sales mix in the store as far as music versus apparel and accessories, so that pretty much floats back as well. The customers all think it&#146;s a new
assortment, I&#146;ll tell you that. So there seems to be this perception that it&#146;s bigger. And we&#146;re getting incremental customers in, whether they&#146;re buying or not, obviously we&#146;re not seeing that in the numbers. But we
certainly anecdotally have had responses, and certainly all of us feel that it is a better representation of our brand. I think at this point as we go in and we remodel or relocate a store, it causes us to have to renegotiate the leases with the
developer. And as intuitively you would believe that with so many people cutting back on their new stores or exiting the malls, that there would be a bit more of a competitive environment out there, and perhaps better power in the hands of the
retailers to negotiate. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">That is not true, at least yet. So as we have gone through and done the analysis and said, okay, if we do expedite it because we
do think it&#146;s a better representation of a brand and is not a genre specific, and not as exclusionary, if we do do that what kind of comps do we have to achieve to offset the accelerated depreciation write-off as well as the renegotiated terms?
And we can&#146;t make the numbers work. I mean it&#146;s high double digits to be able to offset what these increased expenses are. So we feel that especially given the uncertainty in the environment, and conservation of our cash and our balance
sheet and remaining healthy, that the prudent thing to do is to remodel these stores as they come close to the end of their lease. After seven years most of the leasehold improvements have been written off, and it makes financial sense for us as we
renegotiate naturally to remodel the stores. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Jeff Van Sinderen &#151;</B><B><I>B. Riley&nbsp;&amp; Co.&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">Okay. Well, it sounds like you have thought that through pretty extensively. Thanks very much, and good luck this quarter. </FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy
McLaughlin &#151;</B><B><I>Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thanks. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Your next question comes from the line of Holly Guthrie. Please proceed. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Holly Guthrie &#151;</B><B><I>Janney Montgomery Scott&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Yes, good afternoon. I have two questions on the remodeled
stores and then one on ShockHound. First, the remodeled stores, I was wondering if there&#146;s any categories, items, or price points that are comping differently? And is there anything that you can learn from any of those differences? And then on
to ShockHound, can you give us some additional color on how revenues will be generated? And then the costs to start up the business, is it just the website cost or are you buying library music, or are you buying any rights? So that&#146;s it.
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay, Holly. Yes, as I just answered on
Jeff&#146;s question, there is no difference by category in our remodeled stores. It&#146;s very similar to the nonremodeled stores. So it does allow us a little bit more room to do some things, and certainly from a testing standpoint we can
experiment a bit more, but nothing that&#146;s of any kind of significance that would cause us to think the business is different. As far as ShockHound is concerned, we&#146;re not giving a lot of specifics on purpose, certainly prior to the launch,
but yes, the model is based on sales revenue, and those sales are generated from products on the site, whether it&#146;s apparel, accessories, gifts, whatever the products are, as well as sales of digital music. You could say the top line revenue is
driven by both and the bottom line profit is driven by the sales of product, not sales of music, as we all know the margins are very low on that, but it is a driver to the site. And in launching a site, yes, there there is web development that has
to happen. There certainly is the acquisition or the ingestion of music from both major and independent labels, and there&#146;s a fee attached to that, so those fees have been included in our calculation of start-up costs. And then, of course
there&#146;s the marketing piece of it pre-launch, and then the six months after launch that are also included that are reflected in the $0.02 costs for first and second quarter. </FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Holly Guthrie</B><B><I> &#151;Janney Montgomery Scott&#151;Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. Thank you. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">(OPERATOR INSTRUCTIONS) And the following question comes from the line of Brad Stephens of Morgan Keegan. Please proceed. Please
proceed, Mr.&nbsp;Stephens. Next question comes from the line of [Nick Pye]. Please proceed. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Nick Pye Analyst </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Hi. Considering that when you adjust for the cash that you spent to buy in shares, the company actually has more cash at the end of &#145;07 than they did in &#145;06,
and the stock is setting up at 1.5 times EBITDA. Why not buy in some shares? What stopped you during the fourth quarter? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Jim McGinty &#151;</B><B><I>Hot Topic, Inc.&#151;CFO</I></B><B>
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Actually in terms of cash and cash equivalents and short-term investments, we actually have a little bit less cash than we had at the end of the year
last year. We also are looking at the long-term future of our business, and we want to be very prudent with our capital resources in terms of how we utilize them, and we&#146;re always discussing with our Board the opportunities, strategic
alternatives, and whether share repurchase is appropriate or not appropriate. At this point in time in the current environment, we feel like the preservation of our cash should be our key concern. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Nick Pye</B><B><I> Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Got it. Can you give some more detail on Torrid, whether the stores are getting close to be
operationally profitable, where &#151; what time do you think they&#146;ll get there? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Jim McGinty</B><B><I> &#151;Hot Topic,
Inc.&#151;CFO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Well, as we talked about in the third quarter call, we talked about the economics of store profitability and the level of
contribution, and the fact that an average Torrid store takes about three years to pay back on a cash basis. So, from a store contribution basis, they are currently profitable, but we haven&#146;t broken it out down to the net income line as of yet.
</FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Nick Pye</B><B><I> Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Any sense of when you might do that? How big do you need to go before you break it out?
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Jim McGinty</B><B><I> &#151;Hot Topic, Inc.&#151;CFO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Well, it&#146;s something we are constantly
reviewing. And we certainly over the past year have disclosed more additional information about Torrid than we ever have in the past, so I would expect in the future that trend will continue. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Nick Pye</B><B><I> Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Got it. Thank you. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Your next question comes from the line of Lee &#151; Liz Pierce with Roth Capital. Please proceed. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Liz Pierce</B><B><I> &#151;Roth Capital&#151;Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">I presume that&#146;s me. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Betsy McLaughlin</B><B><I> &#151;Hot Topic, Inc.&#151;CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Yes, Liz, I think that&#146;s you. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Liz Pierce</B><B><I> &#151;Roth Capital&#151;Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. I figured it &#151; all right. At &#151; Jim, in your remarks
about guidance and closings or openings, did you mention closings for &#145;08? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Jim McGinty</B><B><I> &#151;Hot Topic,
Inc.&#151;CFO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">We didn&#146;t today, but we&#146;ve covered some of that in the third quarter call, and we talked about 20 closings over the course
of 2008 for Hot Topic and a handful for Torrid, more opportunistic in that regard. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Liz Pierce</B><B><I> &#151;Roth
Capital&#151;Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">No update from that? </FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Jim McGinty</B><B><I> &#151;Hot Topic, Inc.&#151;CFO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">No update from that at this point. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Liz Pierce</B><B><I> &#151;Roth Capital&#151;Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">And then Betsy your comment &#151; or your goal on Torrid to get to
$400 sales per square foot. What &#151; kind of initiatives do you have do you &#151; I mean, is it going to be to drive the bottom portion of the business, or do you think this is a one or two-year process, or is this an evolution of the brand or
all of the above? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Betsy McLaughlin</B><B><I> &#151;Hot Topic, Inc.&#151;CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Well, I think we want to be at $400 a foot over the next couple over years. I mean that is the goal. And it&#146;s more than just the merchandise assortment. I think that we continue, the evolution of the brand has seen gains, and positive
gains as far as the assortment is concerned. There is the marketing and branding piece of it. How do you reach out to more customers? We still think there&#146;s great opportunity in getting more percent share of those target customers, many of them
don&#146;t even know we&#146;re there, even though we have been there for several years in their local mall. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">So there&#146;s the branding piece of it. The
divastyle piece of it. We&#146;ve acquired names over the past several years, really being able to mine that information and individually target those customers with promotions and events that they feel are targeted to them specifically, I think is
another huge opportunity. Every time we invest in divastyle we get the return. And as I said I think in my commentary in &#151; during the fourth quarter we continued to see that. So, there&#146;s that piece of it on the top line, which drives the
sales per square foot. Within the Torrid P&amp;L model, there certainly is opportunity on the design standpoint, and product development and Chris is investing time and money this year into amping up the direct sourcing. So, there&#146;s different
&#151; there&#146;s components across the board, but as far as driving that top line, it&#146;s really about getting more feet into each location. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Liz Pierce</B><B><I> &#151;Roth
Capital&#151;Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">So it really does sound more like the evolution versus just a product specific, like we need to change the mix or change the
balance. This is just kind of the maturation phase? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Betsy McLaughlin</B><B><I> &#151;Hot Topic, Inc.&#151;CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Absolutely, that&#146;s correct. </FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Liz Pierce </B><B><I>&#151;Roth Capital&#151;Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">I was just trying to clarify. And then kind of a bigger picture
question and you somewhat alluded to the general environment, one would think the ball would be back in to the retailers court in terms of having a little bit of leverage, but as you look at the landscape and how many people are closing stores and
the number of stores that you guys have, are you comfortable that this is still a good number for you, putting aside every year there will be a handful that you probably close? If you had to think about five years from now &#151; is this &#151; what
is it 700 or something? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Betsy McLaughlin</B><B><I> &#151;Hot Topic, Inc.&#151;CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">680. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Liz Pierce</B><B><I> &#151;Roth Capital&#151;Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">680. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Betsy McLaughlin</B><B><I> &#151;Hot Topic, Inc.&#151;CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Right. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I></I></B><B>Liz Pierce</B><B><I> &#151;Roth Capital&#151;Analyst </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">For Hot Topic. Is that a number you can live with but maybe prune
every year a little bit? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I></I></B><B>Betsy McLaughlin</B><B><I> &#151;Hot Topic, Inc.&#151;CEO </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">We are lucky with the expansion in business between 1996 and 2003, because we were so productive and the growth in productivity during the period really put us in a position with our high sales per square foot that our fleet is very
profitable, and I think that as we went through,because it&#146;s a very good question to ask, especially as you have successive years of comps, and have you cannibalized stores, and are you overpenetrated? And what is the right number? And we saw
for so many years specialty stores, 800, 900, 1,000, 1,200, and then the retrenching back in closer to 800. I think as we have looked at our store base, we believe 650 is about the right number. When we look at all of our stores and &#151; and
stores that are cash flow positive, we have about a dozen that are not cash flow positive, and we&#146;re very lucky to be in that position, and all &#151; most of those stores have either lease expirations over the next few years or kickouts. So,
we have a healthy fleet. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">We would like the entire fleet to rise, because we would like our productivity &#151; our sales productivity to be higher, but at
the end of the day we have done some very careful analysis over the past two to three months and extrapolating out, what if it is another tough year and what does that mean to our store base, and we keep coming back though same number which is about
650 for Hot Topic. </FONT>
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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Liz Pierce
&#151;</B><B><I>Roth Capital&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">That&#146;s good news. All right. That&#146;s all I have. Best of luck. Thanks. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thanks, Liz. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Your next question comes from the line of Sharon Zackfia with William Blair. Please proceed. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Sharon Zackfia &#151;</B><B><I>William Blair&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Hi, I have two questions. First on merchandise margins, you have seen
some nice improvement over the past couple of years, and I guess I&#146;m wondering if you expect to see similar improvement in &#145;08? And then I guess secondarily on ShockHound, it just intuitively feels like a little late to get into online
music. There are a lot of sites out there. Can you give us a better feel for how this might be different than other sites that we might be more familiar with? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Jim McGinty &#151;</B><B><I>Hot Topic, Inc.&#151;CFO</I></B><B>
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Well, in terms of your first question on merchandise margin expansion. I think somebody talked to that earlier, but the answer was, about 2007, we had
a lot of nice increases in IMU, we were able to manage inventories betters, and see a much improved merchandise margin. I think the opportunity in 2008 will be one of incremental improvement as we continue to manage inventories, continue to improve
mark-up, but they will be much narrower than they were this past year, where we had a real big opportunity. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic,
Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">And as far as ShockHound is concerned. Intuitively, you would think it would be late, although nobody is doing it. I think
what has happened with the labels and the state of the music business has created an opening. If you look at what has happened out there, yes, there&#146;s online music. Is it DRM free? Some of it is ,most of it is not. It is just now starting to
have labels that are partnering and </FONT>
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<FONT FACE="Times New Roman" SIZE="2">allowing music to be able to be DRM free in MP3 format rather than being proprietary. So that&#146;s part of the reason for our timing in this launch, is we
know from our customers and our research that our customers do not want proprietary downloads. They want to be able to buy those downloads and use them on any device that they so choose to do so. So that is part of it. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">In addition to that, as you look at ShockHound and how we position ourselves, the big guys out there, whether it&#146;s iTunes or eMusic or Yahoo or Amazon, they are
kind of warehouses of music, they&#146;re all the Wal-Marts of music. And there is not a lot of original content, there isn&#146;t a point of view, it is more in terms of, okay, if you know the music that you want, come to the site, search for it
and you can get it. And one of the ways that we&#146;re going differentiate ourselves, in the same way that we&#146;ve differentiated our in-store experience, is that we want to have a point of view, and we want to be able to direct those customers
of ours who truly are into the rock genres of music to learn about new music and to have some direction. And we have heard from many customers that there&#146;s so much music out there they just don&#146;t even know to where to find new music, and
who&#146;s the authentic, credible voice for that, and with our position at Hot Topic and the fact that we still believe our brand represents authenticity and credibility within the rock music world. We think this is the perfect time to be able to
launch, and to be able to give our customers, not only that unique experience of discovery via content and community and the connection to each other, but also given where the labels are right now and their willingness to start offering DRM-free
downloads that our timing is right where it needs to be. I do not think we could have done it earlier. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Sharon Zackfia &#151;</B><B><I>William
Blair&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. Thanks. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Your next question comes from the line of Brad Stephens with Morgan Keegan. Please proceed </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Brad Stephens &#151;</B><B><I>Morgan Keegan&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Hi. Can you hear me this time? </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">We can hear you now. </FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Brad Stephens
&#151;</B><B><I>Morgan Keegan&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thank you. Sorry about that. Jim, if I take out ShockHound how do I think about SG&amp;A leverage
points throughout the year? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Jim McGinty &#151;</B><B><I>Hot Topic, Inc.&#151;CFO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Well,
I think in terms of overall SG&amp;A we would have to have at least a very low single-digit comp to get any kind of leverage at this point. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Brad Stephens &#151;</B><B><I>Morgan
Keegan&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Okay. Thanks. Good luck. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">And your next question comes from the line of Crystal Kallik with Davidson. Please proceed. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Crystal Kallik &#151;</B><B><I>D. A. Davidson&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Good afternoon. Betsy, I was just going to ask another viewpoint
question. Certainly the past two or three years have been different than prior years, and overall how has that changed your viewpoint on the positioning of Hot Topic? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin </B><B><I>&#151;Hot Topic,
Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Over the last several years? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Crystal Kallik &#151;</B><B><I>D. A.
Davidson&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Over the last &#151; well, really, the last two to three years specifically. How have you changed your viewpoint on
really where Hot Topic fits in the grand scheme of things, and how you&#146;re evolving the brand? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin &#151;</B><B><I>Hot Topic,
Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Well, I think for the first several years, and we have gone through four years of tough business, and I think for the first
year, we weren&#146;t really sure what it was. By the second year, we started to have a feeling that the &#151; that music was changing, the availability of music had changed what our customer preferences were, that no longer were our customers in
line with only one genre of music, and we felt that certainly through all of 2005. And as we moved into &#145;06 and saw more of that we knew we had to alter our strategy. That it wasn&#146;t just about having whatever the hottest band was out there
and providing product for that band in the stores. And, </FONT>
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<FONT FACE="Times New Roman" SIZE="2">oh, by the way those customers liked all different genres of bands. So, no longer could we assort to just appeal to music genre. So the gothic kids were
buying goth, and the punk kids were buying punk, and the rockabilly guys were buying rockabilly. Guys and girls. So I think we have shifted quite a bit on how Hot Topic plays, not only in how we offer the assortment, but also how do we make it about
the music experience and specifically new music. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">I think prior to this we were also about new music from big artists. And now we&#146;re really about new
music from new artists, and that is very different in not only the branding piece of it, and where we spend our share of mind, but also in how we support marketing, and what types of tours we support, and how we align ourselves with the bands. We
had not had a music strategy prior to a year and a half ago that really addressed where do we want to position ourselves to our customers. To our internal team as employees, we have got 8,000, 9,000 very passionate music fans out there who have
incredible intelligence about what is happening in their area. How do we mine that information and get that information and use that to our advantage? How do we put ourselves at the forefront of bands and become their launch partner? Not just their
third party merch partner, but how do we become their launch partner and gain them exposure? And then for the labels who are in a state of disarray as they try to figure out their model is, how do we work with the labels to be a part of that
platform of distribution and exposure? </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">So we have really looked at all pieces of music and said, okay, this is where we want to position ourselves.
We&#146;re not just out there selling stuff. We&#146;re out there to create this music experience. And as we have implemented more of those pieces of the puzzle, we certainly are seeing some traction. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Crystal Kallik </B><B><I>&#151;D. A. Davidson&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Great. And I guess this is a tough question to answer, but looking at
the music business, how far along are you as far as getting to where you would like to be now? </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin </B><B><I>&#151;Hot Topic,
Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">It&#146;s &#151; it will probably take us three to four years. And where are we now, we certainly have addressed those areas
that we feel will get us the quickest short-term comps, which are rock tees and CDs and positioning that in-store music experience. As far as the overall music strategy, it is a multi-year strategy, so I would say we&#146;re probably 25%, 30% of the
way there. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Crystal Kallik &#151;</B><B><I>D. A. Davidson&#151;Analyst</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thank you so much, and good luck. </FONT></P>

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 <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy
McLaughlin </B><B><I>&#151;Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thanks. </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Operator </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">At this time, we do not have anymore questions in queue. And I would like to turn the presentation back to Ms.&nbsp;McLaughlin for
closing remarks. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Betsy McLaughlin </B><B><I>&#151;Hot Topic, Inc.&#151;CEO</I></B><B> </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Thanks for joining our call. Have a good rest of the day. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P
STYLE="line-height:1px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000">&nbsp;</P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Operator </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Thank you, very much, for your participation in today&#146;s conference. This concludes the presentation, and you may now disconnect. Good day. </FONT></P>
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