Bebe Rises on Narrower-than-Expected Q2 Loss; Sales Beat

Shares of Bebe Stores, Inc. BEBE have jumped 5.7% since it reported better-than-expected top- and bottom-line results for the second quarter of fiscal 2016.

Also, Bebe's Founder/Board Chairman assumed a more active role in the company's operations in Sep 2015, with special focus on products. Consequent to such strategic developments, management decided to refrain from offering any guidance until it gets a clearer picture of the business.  

Bebe's adjusted loss per share from continuing operations of 5 cents came a penny ahead of the Zacks Consensus Estimate. The company had recorded earnings of 1 cent per share in the year-ago period. Results were impacted by a decline in the top line and a tough retail environment.

On a GAAP basis, the company posted a loss per share of 7 cents compared with breakeven results in the prior-year quarter.

Battered by soft comparable-store sales (comps) and store closures, net sales declined about 5% to $122.4 million during the quarter. However, the figure surpassed the Zacks Consensus Estimate of $111 million. Comps for the quarter dropped 2.5% owing to a fall in traffic and conversion, with average unit retail remaining flat.  

This woman's clothing and accessories designer's gross profit plunged about 13% to $41.7 million, with the gross margin contracting 320 basis points (bps) to 34%. The margin contraction was due to heightened promotional activity and lower store leverage on weak sales.

Selling, general and administrative (SG&A) expenses dipped 1.5% to nearly $47.1 million, though as a percentage of sales, the same expanded 140 bps to 38.5%. The lower SG&A expenditure was backed by a decrease in compensation and advertising costs, partly offset by higher store impairment charges and expenses related to store closures.

Store Update

During the reported quarter, this multinational retail clothier introduced one Bebe store and three outlet stores, alongside shutting down two Bebe stores.

Financial Update

The company ended the quarter with cash and cash equivalents of $43.4 million, net inventories of $28.3 million, and total shareholders' equity of $128.6 million. Moreover, Bebe allocated about $3.4 million toward capital expenditures during the first half of the fiscal.

Zacks Rank

Bebe currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Abercrombie & Fitch Co. ANF, Express Inc. EXPR, each carrying a Zacks Rank #1 (Strong Buy) and Foot Locker, Inc. FL, with a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ABERCROMBIE ANF: Free Stock Analysis Report
 
FOOT LOCKER INC FL: Free Stock Analysis Report
 
BEBE STORES INC BEBE: Free Stock Analysis Report
 
EXPRESS INC EXPR: Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research