Brisbane, CA—Bebe Stores Inc. may have seen its sales decline and margins contract during its holiday season but the retailer’s second quarter loss was actually less than expected. In fact, the women’s specialty retailer saw its shares surge after it gave its earnings report late Thursday afternoon.
For the quarter ended Jan. 4, bebe posted a net loss of $5.5 million, or 7 cents a share, compared with a net loss of $4.8 million, or 6 cents a share. Net revenue fell 4.1% to $130 million.
But analysts’ average estimate had expected a loss of 14 cents a share on sales of $121.3 million.
Similarly, bebe’s comparable store sales were down 1.9%, an improvement of first quarter when comp sales were down 2.8%. “The sequential improvement in sales was driven by improvement in both traffic and conversion,” the company reported.
‘Retail Environment Remains Challenging’
Gross margin narrowed to 33.6% compared to 33.9% in the second quarter last year primarily due to an increase in markdowns to clear through legacy inventory as well as “heightened promotional activities throughout the holiday season.
Selling, general and administrative expense narrowed to $49.3 million, or 37.9% of net sales, compared to $53.4 million, or 39.4% of net sales, a year ago.
“We are encouraged by the sequential improvement we experienced in the second quarter, especially during Black Friday weekend and the month of December,” Steve Birkhold, chief executive. “December continued the sequential improvement with positive comparable store sales, as we saw a favorable response to the new merchandise and an increase in traffic, despite declining mall traffic and an aggressive promotional environment across the industry.”
While Birkhold said the company’s marketing campaigns helped improve traffic and that old inventory was successfully cleared, “the retail environment remains challenging, and we will continue to operate with disciplined inventory management and cost controls.”
For its third quarter, bebe projected flat comp store sales.
“Gross margin is expected to be higher than the prior year. We expect net loss per share for the third quarter to be in the mid-teens range, which is outperforming the third quarter of the prior year,” the company noted.