BEBE Bebe Stores Inc (PK)

The weak sales and same-store sales trend continues for Bebe Stores Inc. (BEBE), as the company posted weaker-than-expected retail sales results for the second quarter of fiscal 2013 ended December 29, 2012. The company will announce further details with the second-quarter earnings release on January 31.

Total retail sales of $124.6 million for the quarter declined 11.7% from $141.1 million in the prior-year quarter. Comps declined 10.5% for the quarter compared with an increase of 9.6% in the year-ago period. Last quarter, the company’s total retail sales were down 9.4%, while comps declined 8.7%.

Year-to-date, Bebe’s total retail sales dipped 10.7% to $229.7 million from $257.1 million reported in the prior-year period. Moreover, during the period, the company registered a 9.7% decline in its comps compared with a rise of 8.4% achieved in the year-ago period.

The decline in retail sales and comps were primarily due to 15% decline in traffic at the company’s stores, especially in December. Additionally, the shift of the New Year’s Eve into fiscal January coupled with the impact of Hurricane Sandy weighed on the company’s same-store sales, inducing a 2% contraction.

As of December 29, 2012, the company registered 27.5% growth in average inventory per square foot. The increase was mainly due to the shift of New Year’s Eve into the next fiscal quarter, rise in average unit costs for important products, supplementary spring returns and other localization plans.

Based on the preliminary sales results, the company now expects net loss for the quarter to be at or below the lower end of its former guidance of 1 cent per share, which excludes one-time expenses related to store impairment and write-off, recruiting expenses and probable settlement costs.

Bebe competes with other upper segment apparel retailers, such as Nordstrom Inc. (JWN) and Guess’ Inc. (GES). Currently, the company has a Zacks #3 Rank that translates to a short-term ‘Hold’ rating.

We are maintaining a long-term ‘Neutral’ recommendation on the stock as we believe that the company’s sustained focus on the development of a multi-channel retail format through the enhancement of its e-commerce capabilities, along with expanding international business, will certainly help it fight waning retail sales.

Bebe Stores design, develop and produce a distinctive line of contemporary women's apparel and accessories. They market their products under the bebe, bebe moda and bbsp brand names through their retail stores located in Canada and the United Kingdom.

 
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