Battered by promotional headwinds and a tough retail environment, shares of Bebe Stores Inc. (BEBE) slipped 2.8% in the after hour trading session yesterday, after the company reported dismal fourth-quarter fiscal 2014 results.
Quarterly loss per share from continuing operations came in at 30 cents, wider than both the prior-year quarter figure and the Zacks Consensus Estimate of a loss of 20 cents. Including one-time charges, the company’s loss for the quarter stood at 18 cents per share.
Net sales of this women’s clothing and accessories designer tanked 8.7% to $103.6 million, also falling short of the Zacks Consensus Estimate of $106 million. The decline was a result of store closures leading to slow traffic, coupled with a 1.9% decline in the company’s quarterly comparable store sales (comps).
The company’s gross profit slumped 10.3% to roughly $32 million from the comparable prior-year quarter, while as a percentage of net sales it contracted 50 basis points (bps) to 30.9%, reflecting greater promotional activities. However, this was partly compensated by occupancy leverage.
Selling, general and administrative (SG&A) expenses from continuing operations rose 7.5% to $56.1 million. As a percentage of sales, it expanded 820 bps to 54.2%. The increase in SG&A is accounted by higher advertising costs and costs associated with corporate restructuring, including costs incurred on store closures, impairment and CEO transition. Consequently, operating loss for the quarter rose to $24.1 million from the year-ago comparable quarter loss of $16.5 million.
Fiscal 2014
During fiscal 2014, the company’s loss from continuing operations came in at 75 cents a share, narrower than a loss of 84 cents reported last year. Net sales for the year dropped 8.2% to $452.1 million. Comps slipped 3.2% during the year, after exhibiting a 9.6% fall last year.
Store Update
During the quarter, this multinational retail clothier introduced one outlet store, while it shuttered 17 2b mall stores, 2b bebe stores and 2b online stores.
Financial Update
The company ended the year with cash and cash equivalents of $94.3 million, up 8.5% from last year. Inventories fell 6.4% to $31.7 million while average finished goods inventory per square foot advanced nearly 8.6%. Total shareholder equity was $185.5 million, down 28.5% from last year.
During the year, Bebe spent $23 million toward capital expenditure.
Encouraging Fallouts
During the fourth quarter, the company closed its 2b division completely, as the brand was a financial burden for the company. Bebe also undertook several initiatives to develop its brand, deliver operational efficiencies and save cash in order to enhance shareholder value.
Going forward, the company aims to maintain its focus on re-constructing its brand and widening its array of products in order to augment customer value. Further, it plans to remain committed towards efficient inventory management, cost cutting and making investments in projects which require less capital and generate more revenues. With these efforts underway, Bebe intends to remain focused on boosting sales and enhancing margins.
Guidance
For first-quarter fiscal 2015, Bebe forecasts comps to be in a negative low single digit to flat range. Gross margin is expected to decelerate year over year, owing to higher expected markdowns and deleverage of fixed expenses. Net loss for the quarter is expected to be in the high-teens per share range due to continued impact from the maintenance of valuation accounts.
For fiscal 2015, the company plans to spend about $16 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.
Also, for fiscal 2015, Bebe envisions dividend payments to be 40% below the fiscal 2014 level, amounting to nearly $4.7 million.
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 #4 (Sell). Some better-ranked stocks in the same industry include Citi Trends, Inc. (CTRN), with a Zacks Rank #1 (Strong Buy), Zumiez, Inc. (ZUMZ) and Foot Locker, Inc. (FL), each carrying a Zacks Rank #2 (Buy).
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