Bebe Stores Inc. is still losing money, but at least it has narrowed its first-quarter loss.
For the three months ended Oct. 1, the net loss narrowed to $7.8 million, or 10 cents a diluted share, from a net loss of $17.1 million, or 22 cents, a year ago. Net sales fell 9.4 percent to $87.2 million from $96.3 million. The company said that comparable-store sales fell 3.2 percent, on top of a 4.1 percent decline a year ago. The company closed four Bebe stores in the quarter.
Manny Mashouf, chief executive officer, said, “In the first quarter of fiscal 2017, we continue to see sustainable changes in our business. We ended the quarter with our inventory and SG&A below the prior year and increased our gross margin 260 [basis points] as a result of fewer markdowns and improved leverage on our occupancy.”
The company said gross margin as a percentage of sales rose to 31.5 percent from 28.9 percent in the quarter, with the increase in margin primarily due to the “effect of a reduction in markdowns and promotions and leverage on store occupancy cost.”
The ceo said the quarter had “very strong denim and leggings business, which we will continue to invest in, offset by weakness in nonapparel and evening dresses.” He added that the company is “working to take advantage of the casual trend taking place” and that it believes it can continue to grow its bottoms business, while working to improve its tops business.
“While it is important to consistently get the fashion right, we are also finding it a challenge to offset the extremely high levels of markdowns and promotions realized in the prior year. We are committed to protecting the brand image, reducing markdowns and improving inventory turns, and believe both our short-term and long-term success depend on our ability to execute our strategic plan,” Mashouf said.
Bebe said that for the second fiscal quarter, it expects comps to be in the low to midsingle-digit negative range, with gross margin improvement and lower SG&A expense, which is consistent with the fiscal first-quarter results. It explained that the decline in comps is due in part to the reduction in the number and frequency of in-store and on-line promotions and markdowns planned to protect the brand image and improve gross margin. Also for fiscal 2017, Bebe said it does not plan to open any new store locations and that it expects to close up to 28 Bebe and outlet stores.
Bebe in June entered into a joint venture with Bluestar Alliance LLC in which the company contributed its trademarks and related intellectual property to the joint venture, while the brand management firm contributed $35 million. The women’s specialty chain owns slightly over 50 percent of the venture, with Bluestar owning the balance. The public entity whose shares remain publicly traded retained ownership of the operating component — the stores and e-commerce site — of the business.