High markdowns and fashion missteps contributed to an unexpected second-quarter loss at Bebe Stores Inc. and are likely to lead to a larger-than-anticipated third-quarter loss as well.


In the quarter ended Jan. 1, Bebe registered a net loss of $2.7 million, or 3 cents a diluted share, compared with net income of $2.4 million, or 3 cents a share, in the year-ago period. Net sales edged up 3.3 percent to $136.2 million from $131.9 million in the 2010 quarter.


Analysts were looking for EPS of 2 cents on sales of $136.5 million. 


Same-store sales for the quarter were flat versus a 22.5 percent drop a year earlier, as gross margin, hurt by increased markdowns in December, fell to 37.1 percent of sales from 40.9 percent.


The company, which recently shuttered its PH8 concept, called out improvements in dresses, tops, knits, sweaters and its logo assortment, but analysts said that Bebe’s turnaround was taking too long.


“Bebe’s recovery process has been slow and painful to watch, but there are many opportunities once the merchandise is turned around,” said Jennifer Black of Jennifer Black & Associates. “However, the timing of the turnaround will face bumps with upcoming sourcing pressures that will place further pressure on the gross margins and IMUs [initial mark-up].


Those pressures, in concert with the retailer’s high inventory load set to filter through the third quarter, also raised some red flags.


Bebe said inventories are anticipated to grow in the mid- to high-teen percentage range at the end of third-quarter versus a 5.4 percent decline last year.   


On the company conference call, Walter Parks, chief operating officer and chief financial officer said, “When we bought that [third] quarter, we looked out four months and we arrived at what we felt, in the fiscal third quarter, was the appropriate level of receipts to give ourselves an opportunity to be successful…. If the sales end up better, we’ll have less inventory at the quarter, and if the sales are not as good as our expectations, we’ll do what we did last quarter — we’ll be aggressive with promotions and we’ll live to fight another day in Q4.”


The retailer projected same-store sales to decline by a midsingle-digit percentage in the third quarter, and for its quarterly net loss to range from 2 cents to 6 cents a share.


Analysts projected a loss of 2 cents a share.


Shares of Bebe closed Friday at $5.70, down 1 cents or 0.3 percent.

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