Shares of Bebe Stores Inc. fell almost 10 percent in Nasdaq trading Tuesday after the company warned that its third-quarter loss would be deeper and its sales lower than previously expected.

This story first appeared in the April 23, 2014 issue of WWD. Subscribe Today.

The Brisbane, Calif.-based specialty retailer said in a preliminary report on results for the quarter ended April 4 that sales in the period fell 17.2 percent to $93 million as comparable-store sales fell 5.7 percent with gross margins below year-ago levels. Its loss per share, including non-cash impairment charges, is now expected to land between 29 and 32 cents a diluted share.

When the company reported second-quarter results on Feb. 6, it projected flat comps, higher gross margin and a loss per share in the midteens.

Bebe said that extreme weather in the quarter had precipitated 136 temporary store closures. It operates 226 stores, 176 under the Bebe brand.

The company noted that merchandise margins increased by about 50 basis points during the three months but, due to promotional pressure, were below previous expectations. Gross margin fell as sales decelerated.

Steve Birkhold, chief executive officer, said, “We transitioned fully to spring product early and had much lower levels of excess winter product during the sustained cold weather in the quarter. If we were to use our West region performance, without weather impact, as a proxy, comparable-store sales for Bebe and combined would have been flat for the fiscal third quarter.”

He said the weakness of the results was attributable to the weather and the Easter shift rather than merchandising issues. “We continue to believe that our new product is being well received by our Bebe girl as we saw e-commerce, which was not impacted by weather, achieved positive comparable-store sales and margin in the high teens for the third quarter. We were also encouraged by the sales and margin performance of our March catalogue, which had the best sell-through rate since November 2011.”

Reiterating her “buy” rating based on the signs of improvement highlighted by the ceo, Janney Capital Markets analyst Adrienne Tennant commented in a note to clients, “While clearly the [turnaround] has been pushed out a few quarters, we continue to believe the business is on the right track and are buying based on weakness, particularly under $6.”

Shares closed at $5.80, down 64 cents or 9.9 percent.

Bebe plans to release final results for the quarter on May 8.

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