Shares of Bebe Stores Inc. (BEBE) grew 5% in the after-hour trading session yesterday, after the company reported narrower-than-expected first-quarter fiscal 2015 results.
Quarterly loss per share from continuing operations came in at 11 cents, narrower than the Zacks Consensus Estimate of a loss of 19 cents but a penny wider than the prior-year quarter figure. Including one-time charges, the company’s loss for the quarter stood at 14 cents per share.
Net sales of this women’s clothing and accessories designer tanked 6.5% to $102.2 million, and came slightly ahead of the Zacks Consensus Estimate of $101 million. The year-over-year decline was a result of store closures, offset by a 0.7% increase in the company’s quarterly comparable-store sales (comps).
The company’s gross profit slumped 17.2% to roughly $32.8 million from the comparable prior-year quarter, while as a percentage of net sales it contracted 420 basis points (bps) to 32.1%, because of greater promotional activities in order to clear aged inventory.
Selling, general and administrative (SG&A) expenses from continuing operations declined 11.9% to $42.1 million. As a percentage of sales, it contracted 260 bps to 41.2% driven by lower advertising costs and reduction in costs due to corporate restructuring that took place in fourth-quarter fiscal 2014. Consequently, operating loss for the quarter rose to $9.4 million from the year-ago comparable quarter loss of $8.2 million.
Store Update
During the quarter, this multinational retail clothier introduced 2 outlet stores, while it shuttered 2 bebe stores.
Financial Update
The company ended the quarter with cash and cash equivalents of $70.1 million, down 10.1% from the prior-year quarter. Inventories fell 9.6% to $34.7 million while average finished goods inventory per square foot advanced nearly 4.6%. Total shareholder equity was $172.2 million, down 31.6% from last year.
During the quarter, Bebe’s capital expenditure was $6.8 million.
Guidance
For second-quarter fiscal 2015, Bebe forecasts comps to be in a flat to positive low-single digit range. Gross margin is expected to marginally improve year over year, owing to higher effort in margin optimization and lower planned promotional activities. Net loss per share for the quarter is expected to be in the low to mid-single digit range due to continued impact from the maintenance of valuation allowance over deferred tax assets, resulting in 0% effective tax rate.
For fiscal 2015, the company plans to incur about $16 million as capital expenditure. Capital spends will be directed toward the opening and renovation of outlets, and upgrade of information technology systems.
Further, this clothing brand is likely to open 4 Bebe and 2 outlet stores and shut down up to 12 bebe and outlet stores through fiscal 2015, which will decrease its total floor area by nearly 2% from fiscal 2014.
Other Stocks to Consider
At present, Bebe Stores carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Citi Trends Inc. (CTRN), Zumiez Inc. (ZUMZ) and L Brands Inc. (LB), all carrying a Zacks Rank #2 (Buy).
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