NEW YORK — Charges took a bite out of Bebe Stores Inc.’s fourth-quarter profits while the firm also struggled with same-store sales declines.
Earnings for the period dropped 31.6 percent to $4 million, or 15 cents a diluted share, from $5.8 million, or 22 cents, a year ago. The result was 3 cents below analysts’ expectations.
Levied on the quarter were charges of $1.7 million, or 4 cents a share, for the write-off of information-technology projects and new-store development costs.
Sales during the quarter ended June 30 grew by 5.4 percent to $73.5 million from $69.7 million a year ago. Comparable-store sales for the quarter fell 7.9 percent.
Zapping profits, on top of the charges, was a 500 basis-point drop in gross margins to 43.7 percent of sales. The drop off was attributed to reduced merchandise margins and negative occupancy leverage.
Inventory-per-square-foot at the end of the quarter was down 28.2 percent compared to a year ago. Chief financial officer John Kyees noted on a conference call, "Our planning really takes us, in many cases, to somewhat down inventory because a year ago we were a little heavy."
For fall, inventories-per-square-foot are expected to be down about 10 percent.
For the year, earnings dipped 4.8 percent to $26.5 million, or $1.02 a diluted share, from $27.8 million, or $1.08, in the preceding 12 months. Sales fattened 8.8 percent to $316.4 million from $290.8 million last year.
July comps are expected to be down in the high-single digits. Kyees acknowledged, "We did have some late deliveries at the end of the quarter that really weren’t anticipated." These delays were attributed to the initial difficulties some vendors had filling unexpectedly heavy orders of especially intricate merchandise.
Kyees noted that while comps for July are down, so are clearance inventories, therefore Bebe will "pick up part of that gap with better margin performance than a year ago."
Lehman Brothers equity analyst Kimberly Greenberger said, "The late shipments contributed to the decline in inventory. I don’t think that right now inventory is back to where they’d like to be."This fall, Bebe said it will be offering more "sophisticated" merchandise with a Victorian feel. "The company will be very differentiated in the marketplace," said Greenberger. "We’re already seeing signs of that in the stores and that’s very encouraging."
The differentiated product "should help same-store sales turn positive as they work through these inventory and sourcing challenges," said the analyst.
For the year, Bebe is looking for earnings of $1.25 to $1.30 a share.
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