bebe stores inc. (BEBE) is slated to report its fourth-quarter fiscal 2014 results on Sep 4, 2014. In the last quarter, it posted a negative surprise of 30.0%. Let’s see how things are shaping up for this announcement.
Factors Influencing the Upcoming Quarter
This women’s clothing and accessories designer has been posting disappointing results for the past seven quarters. Of late, the company has been reporting loss due to weak top-line performance and higher operating expenses.
Moreover, the company recently announced strategic plans that focus on exiting the loss making 2b business and cutting jobs across some departments. The company intends to fully exit from its 2b business by the end of fourth-quarter fiscal 2014 which will include closure of 16 mall-based and e-commerce services. The company anticipates recording a charge of nearly $5–$6 million in relation to asset write-offs, inventory liquidation, lease termination and employee lay off costs in fiscal 2014. Moreover, bebe expects to book a pre-tax loss of $5–$6 million associated with the 2b business in fiscal 2014.
In connection with the job cuts, the company anticipates recording a pre-tax severance cost of approximately $3 million in fiscal 2014. However, this will benefit BEBE by saving costs of about $4 million in fiscal 2015.
Further, the company had lowered its comparable-store sales (comps) guidance for the fourth quarter of fiscal 2014 to a negative low-single-digit range as against the earlier forecast of flat. Despite this, BEBE has reiterated its bottom-line outlook of loss in the range of mid-teens. Thus, we remain apprehensive about the company’s performance in the upcoming quarter.
Earnings Whispers?
Our proven model does not conclusively show that bebe stores is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.
Zacks ESP: bebe stores currently has an Earnings ESP of +5.00%. This is because the Most Accurate estimate stands at a loss of 19 cents per share, while the Zacks Consensus Estimate is pegged at a loss of 20 cents.
Zacks Rank: bebe stores’ Zacks Rank #5 (Strong Sell) when combined with a positive ESP of 5.00% makes surprise prediction difficult. We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
Limoneira Company (LMNR) has an Earnings ESP of +12.50% and a Zacks Rank #2 (Buy).
Zumiez Inc. (ZUMZ) with an Earnings ESP of +4.55% and a Zacks Rank #2.
Calavo Growers Inc. (CVGW) has an Earnings ESP of +8.70% and a Zacks Rank #3 (Hold).
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