In Turnaround Mode, Bebe Stores Q1 Loss Widens

bebeBrisbane, CA—Despite reporting a widened first quarter loss on Thursday afternoon, Bebe Stores maintained that it has had a favorable response to its new merchandise strategy.

“Fiscal first quarter 2014 marks the beginning of our turnaround journey,” said Steve Birkhold, chief executive. “We saw a favorable response to our new merchandising strategy while we continued to clear through legacy merchandise during the quarter. While the retail environment remains difficult, we continue to focus on our turnaround initiatives and remain confident that we are taking the right strategic direction.”

Net loss for the quarter was $9.2 million, or 12 cents a share compared with a loss of $2.6 million, 3 cents a share, a year earlier. Still, the loss was less than the 15 cents a share analysts had expected.

Net sales fell 2.6% to $117.1 million while comparable store sales decreased 2.8% (compared to an 8.7% decline in first quarter 2012 and a 7.1% decline in its fourth quarter). “The sequential improvement in sales was driven by slight improvement in both traffic and conversion,” the company noted.

Gross margin narrowed to 35.6% compared to 36.1% in the first quarter a year ago, primarily due to the increase in markdowns to clear through legacy merchandise. Selling, general and administrative expenses increased to $50.1 million, or 43.8% of net sales, attributable to earlier timing of marketing events and internal sales conference expenses.

Bebe expects its second quarter comparable store sales to be in the “negative mid-single digit range considering the challenging and highly promotional retail environment.” Gross margin is also expected to be lower due to higher markdowns on legacy inventory, higher promotional activity and certain fixed costs.

Net loss per share is expected to be in the low to mid-teens.


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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology.