Shares of Bebe Stores Inc. leaped more than 14 percent Friday after the Brisbane, Calif.-based specialty retailer delivered a smaller-than-expected second-quarter loss and projected improved gross margins and same-store sales in the current three-month period.

For the quarter ended Jan. 4, the specialty retailer incurred a net loss of $5.5 million, or 7 cents a diluted share, against a loss of $4.8 million, or 6 cents, in the year-ago period. Analysts, on average, expected a 14-cent loss in the quarter.

Revenues were down 4.1 percent to $130 million from $135.5 million, and comparable-store sales were down 1.9 percent. Gross margin receded to 33.6 percent of sales from 33.9 percent in the second quarter of the prior year as the company worked through its inventories of older product and adjusted to the promotional tenure of the holiday season.

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Finished goods inventory per square foot declined 6.8 percent.

Steve Birkhold, chief executive officer, said the firm experienced improvement as the quarter progressed and comps turned positive. “We saw a favorable response to the new merchandise and an increase in traffic despite declining mall traffic and an aggressive promotional environment across the industry,” he remarked.
“We believe that the strong messaging in our marketing campaigns connected with our customer and contributed to the improvement in traffic.”

Bebe launched a campaign under the “No Resolutions, No Regret” banner, both online and offline, directed at New Year’s celebrants that “drove a tremendous amount of traffic in a pretty focused time period going back to our evening going-out-dress occasion,” Birkhold told analysts on a conference call.

For the third quarter, the company expects further reductions in inventory per square foot, a loss per share in the midteens, flat comps and improved gross margin.

Janney Capital Markets analyst Adrienne Tennant noted the decline in comps for the second quarter was smaller than the 3.4 percent decrease projected by Retail Metrics and that a 3 percent increase in December comps reflected “favorable response to new merchandise and an increase in traffic.”

Shares rose 69 cents, or 14.6 percent, to close Friday at $5.42.

Birkhold said that a new store prototype, which “more effectively represents our new sexy, edgier look,” will begin rolling out in April at the company’s store at The Mall at Short Hills in New Jersey. The new design should provide “improved store flow and [incorporate] better visual merchandising, including window displays and live-streaming of content on in-store screens that highlight newness.”

The ceo noted, “We have four planned and then we’re going to measure the [return on investment] prior, obviously, to a large rollout.”

The company also is converting its 32 outlet stores from its 2b brand to the Bebe moniker, he said.

Birkhold joined Bebe as ceo in January 2013 after serving as ceo of Lacoste North America and Diesel USA.

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