BANGALORE, Jan 6 (Reuters) - Teen clothing retailer Hot Topic Inc (HOTT.O) posted a bigger-than-expected 10.9 percent drop in December sales at stores open at least a year and cut its fourth-quarter earnings outlook, sending its shares down 7 percent.

Photo: www.hottopic.com

Analysts on average were expecting a drop of 8.6 percent at the retailer, which sells rock 'n' roll-inspired clothing, as well as music and accessories, according to Thomson Reuters data.

Wall Street Strategies analyst Brian Sozzi said in an email that Hot Topic's miss could be partly attributed to its New Moon merchandise facing stiffer competiton compared with last year.

The company's New Moon-branded merchandise is based on the movie sequel to teen vampire romance "Twilight."

Also, William Blair analyst Sharon Zackfia told Reuters that Hot Topic's sales were hurt as Twilight merchandise had become more widespread among mass retailers.

"Like it or not, Hot Topic seems to be driven more by hot licenses right now than by fashion," Zackfia said.

Wall Street Strategies' Sozzi agreed that there was a lack of traction in the company's core, non-licensed apparel.

Total sales for the month -- which included the crucial holiday season -- fell 9.8 percent to $119 million.

The mall-based specialty retailer cut its fourth-quarter earnings outlook to 18 cents to 20 cents a share, down from its previous view of 23 cents to 26 cents a share.

On a pre-recorded call, the company said it expects inventory at the end of the fourth quarter, excluding its Internet businesses, to be down in the mid-single-digit range on a per-square-foot basis.

Shares of the California-based company were down 40 cents at $5.56 after the bell. They closed at $5.96 Wednesday 6 January on Nasdaq. (Editing by Anil D'Silva)