A continuous drop in share prices over the year along with a
weaker business environment has led
Bebe Stores, Inc.
) to buy back shares worth $30.0 million. Currently, the company
has about 84 million shares outstanding.
Bebe exited the first quarter of fiscal 2013 with cash &
marketable securities of $161.1 million. Hence, it can be stated
that the company's plan to repurchase shares will not only boost
its share prices but will also drive its earnings per share.
Despite meeting the Zacks Consensus Estimates, Bebe reported
dismal financial results for the recently concluded quarter,
where it experienced a decline in revenue as well as a net
Moreover, the company presented a dull outlook for the next
quarter. The company's dismal performances were mainly
attributable to an increase in markdown resulting from mounted
competition from other discount retailers, such as
). Increased occupancy expenses also drags down the company's
Bebe's poor performance is reflected in its recent share price
movements. The company's shares have now dropped to the lowest
level since 2004. Therefore, in order to regain investors' faith
as well as maximize their wealth, the company has opted for a
share buyback program, which will also drive share prices.
At the closing market price of $3.72 on November 21
, the company may buy back approximately 8.1 million shares of
its common stock, which will bring its market cap below the
$300.0 million mark. However, it is yet to be seen how long the
company can retain the investors' faith by means of share
buybacks and dividend payments instead of generating profit from
the business. Therefore, Bebe currently holds a Zacks #4 Rank,
which translates to a short-term Sell rating.
However, we are maintaining a long-term Neutral recommendation
on the stock, since 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 against
falling retail sales.
At the end of fiscal 2012, the company had 110 sales points,
with plans to add 20 more sales points in fiscal 2013 across 21
countries. We anticipate these expansion strategies to help drive
Bebe Stores designs, develops and produces 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
Their broad product offering includes suits, tops, pants,
skirts, dresses, logo and other activewear, outerwear, and
handbags and other accessories. Bebe Stores design and develop
most of the merchandise in-house.
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