On Feb 6, 2015, Zacks Investment Research upgraded Bebe Stores Inc. (BEBE) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Bebe Stores has come into the spotlight since it reported better-than-expected results for second-quarter fiscal 2015 on Feb 5. Quarterly earnings per share from continuing operations came in at 2 cents, in contrast to the prior-year loss of 6 cents as well as the Zacks Consensus Estimate of a loss of 2 cents.
Net sales of this women’s clothing and accessories designer jumped 4.6% to $128.9 million and came slightly ahead of the Zacks Consensus Estimate of $127 million. The improvement was the result of an 8% increase in the company’s comparable-store sales (comps) versus a 2.6% decline reported in the prior-year quarter.
Comps growth can be primarily attributed to higher average unit retail that followed increased full-price sales of the company’s fall and holiday merchandise in both bebe and outlet businesses. Comps also rose sequentially from a 0.7% increase reported in the first quarter, marking the second consecutive quarter of comps growth for the company.
Furthermore, the company provided encouraging guidance for third-quarter fiscal 2015. Bebe forecasts comps to increase in the low to mid-single digit range for the third-quarter. Gross margin is expected to expand year over year, owing to higher effort in margin optimization and lower planned promotional activities.
However, net loss per share for the quarter is expected to be in the mid-teens range as volumes are usually the lowest in the third-quarter and this could deleverage on fixed costs. The guidance also reflects continued impact from the maintenance of valuation allowance over deferred tax assets, resulting in nearly 0% effective tax rate.
Nevertheless, Bebe Stores remains focused on long term-growth and plans to incur about $18 million as capital expenditure in fiscal 2015. Majority of the capital spend will be directed toward the opening and renovation of stores, and upgrade of information technology systems. Moreover, the company anticipates a mid-teens improvement in the finished goods inventory per square foot at the end of third-quarter fiscal 2015.
Other Stocks to Consider
Other stocks worth considering in the same industry include Stage Stores Inc. (SSI) and Pacific Sunwear of California Inc. (PSUN), with a Zacks Rank #1, as well as L Brands Inc. (LB), carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment