Bebe Beats Estimate, Declines Y/Y - Analyst Blog
August 24 2012 - 4:30AM
Zacks
Bebe Stores, Inc.
(BEBE) recently reported earnings of 4 cents per share for the
fourth-quarter ended June 30, 2012, surpassing the Zacks Consensus
Estimate by a penny. However, quarterly earnings reflected a
year-over-year decline of 33.3% from 6 cents per share reported in
the prior-year quarter.
Quarter in
Detail
Net sales from continuing
operations for the quarter were $131.5 million, beating the Zacks
Consensus Estimate of $128.0 million. However, net sales inched
down 0.6% from $132.3 million in the prior-year quarter reflecting
a decline of 2.5% in comparable-store-sales.
Gross profit in dollar terms crept
down 2.9% to $52.9 million from $54.4 million in the year-ago
quarter and consequently, gross profit margin contracted 90 basis
points year over year at 40.2% from 41.1% in the year-ago quarter.
The decrease in gross profit and margin was primarily due to higher
cost of goods sold as a percentage of sales because of rise in
other costs inclusive of in-house production.
Lower gross profit and a decline in
comparable-store-sales led to a year-over-year fall of 31.8% in
operating income to $5.4 million compared with $7.8 million in the
fourth-quarter of 2011, resulting in contraction of 180 basis
points in operating margin to 4.1%.
Fiscal 2012
Review
Bebe reported earnings of 14 cents
per share for the fiscal year 2012, which came in line with the
Zacks Consensus Estimate and surged 180% from 5 cents reported in
the prior year. Net sales for the fiscal were $530.8 million
compared with $493.3 million in the prior year, reflecting an
increase of 7.6% and also beating the Zacks Consensus Estimate of
$528.0 million. Comparable-store-sales for the fiscal showed an
improvement of 5.3% compared with 0.6% in fiscal 2011.
Stores
Update
The company markets its products
under the bebe, BEBE SPORT, bbsp, and 2b bebe brand names,
targeting women belonging to the age-group 21–34 years. During the
fourth-quarter, the company opened three 2b bebe stores and shut
down two bebe stores. For the fiscal 2012, the company opened five
bebe stores, eight 2b stores and shut 13 bebe stores (comprising
one conversion of bebe to 2B store).
As of June 30, 2012, it operated
247 retail stores including 200 bebe stores and 47 2b bebe
stores.
Other Financial
Aspects
Bebe, which competes with upper
segment apparel retailers, such as Nordstrom Inc.
(JWN) and Guess’ Inc. (GES), has a debt-free
balance sheet. The company ended the fiscal 2012 with cash and
equivalents of $104.9 million compared to $95.2 million a year ago.
Inventories for the fiscal were $33.3 million. As of June 30, 2012,
the company registered a 2% growth in average inventory per square
foot compared with 1% increase in fiscal 2011.
Strolling through
Guidance
Bebe generated outlook for first
quarter of 2013. The company forecasts comparable-store-sales to
decrease in the mid to high-single digit, following the weak comps
for the fourth quarter 2012. The company anticipates net loss to
fall in the range of 1 - 4 cents for the first quarter 2013
compared with earnings of 3 cents in the prior-year quarter.
Selling, general and administrative expenses are expected to
increase mainly due to increased compensation and promotional
expenses.
For the upcoming quarter, the
company anticipates inventories per square foot to fall in low to
mid-teens, mainly due to expected rise in average per unit costs,
investments in wear-to-work and rise in inventory resulting from
our localization strategy.
Bebe expects to spend $27 million
as capital expenditures for the full fiscal year 2013, which will
help in opening new stores, renovations of old ones, store
expansions, IT system and office developments.
During the fiscal 2013, Bebe
forecasts to open five bebe stores and six 2b stores and expects to
shut down 12 bebe stores and one 2b pop-up store. The company
further anticipates that such openings and closures will not alter
the total square footage compared with the prior-fiscal year.
Conclusion
Bebe’s products include a wide
range of separates, tops, dresses, active wear, and accessories in
career, evening, casual, and active lifestyle categories. The
company is aggressively focusing on developing multi-channel retail
format by enhancing its e-commerce capabilities.
Further, in a drive to expand its
international business, Bebe is aggressively increasing its sales
points in different countries and forecasts that the company’s
international licensees will increase 25 points of sales in the
fiscal 2013.
Following the year over year
decline in the fourth-quarter revenue and profitability, Bebe
carries a Zacks #4 Rank for the next 1-3 months implying short-term
Sell rating. However, we maintain our long-term ‘Neutral’
recommendation on the stock.
BEBE STORES INC (BEBE): Free Stock Analysis Report
GUESS INC (GES): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
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