Bebe Stores Inc.
) reported third-quarter fiscal 2014 loss per share of 27 cents,
narrower than the Zacks Consensus Estimate of a loss of 30 cents
and the comparable prior-year quarter loss of 62 cents. Including
impairment charges, the company's loss for the quarter stood at 31
cents per share.
The narrower year over year loss primarily reflects the effects of
a valuation account being maintained against deferred tax assets,
leading to an effective tax rate of nearly 0%.
Net sales of this women's clothing and accessories designer fell
17.2% to $93.5 million from $112.9 million last year. However, the
top line results were almost in line with the Zacks Consensus
Estimate of $93 million. Comparable store sales (comps) for the
quarter ended Apr 5, 2014, descended nearly 5.7%.
Sales were disappointing owing to the loss of a retail week in
January 2014, along with the shutdown of 19 non-performing stores,
during the same period last year. Notably, excluding weather impact
in the western region, the company estimates that comps for the
quarter would have been flat compared to last year.
Results were also greatly impacted by adverse winter weather, which
led to nearly 136 transitory store closures, triggering soft sales.
Moreover, the shift of Easter into late April had a significant
impact on the company's third quarter sales.
The company's gross profit fell 24.3% to $25.3 million from the
comparable prior-year quarter, while as a percentage of net sales
it contracted 260 basis points (bps) to 27.1%. The decline in gross
margin is mainly due to the soft sales in the quarter.
Although merchandise margins during the quarter climbed nearly 50
bps from the comparable previous-year quarter, it came below
expectations owing to the intense promotional headwinds prevailing
in the retail environment.
Selling, general and administrative (SG&A) expenses declined
4.8% to $49.7 million. As a percentage of sales, it expanded 690
bps to 53.1%. Consequently, operating loss for the quarter rose to
$24.4 million from the year-ago comparable quarter loss of $18.6
This multinational retail clothier shuttered 6 Bebe stores in the
reported quarter, thereby reducing the total store count to 226.
The company ended the quarter with cash and cash equivalents of
$115.9 million, up 41.7% from last year. Inventories fell 11.4% to
$31.9 million while average finished goods inventory per square
foot declined 1.7%. Total shareholder equity was $219.3 million,
down 21.9% from the comparable quarter last year.
During the nine months of fiscal 2014, Bebe spent $11.8 million
toward capital expenditure.
For the fourth quarter, Bebe forecasts same store sales to be flat.
Gross margin is expected to improve sequentially, while net loss
for the quarter is expected to be in the mid-teens per share range
due to continued impact from the maintenance of valuation accounts
as discussed above.
In fiscal 2014, the company plans to spend about $25 million toward
capital expenditures. Capital spends will be directed toward the
opening of outlets, renovation, office enhancements, outlet
expansions and the upgrade of information technology systems.
The inventory for finished goods at the end of fourth-quarter
fiscal 2014, measured on per square foot basis, is projected to
decrease in the low to mid-single digit range.
Further, this clothing brand is likely to open 1 Bebe store and
close 1 2b bebe store through the rest of fiscal 2014, which will
decrease its total floor area by nearly 8% from fiscal 2013.
Other Stocks to Consider
At present, Bebe Stores carries a Zacks Rank #5 (Strong Sell). Some
better-ranked stocks in the retail apparel and shoe sector include
American Apparel Inc.
Kate Spade & Company
), all of which carry a Zacks Rank #2 (Buy).
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