Byline: Jennifer Weitzman

NEW YORK — Sales shortfalls due to lower inventories and a shift toward casual appeal dragged down Bebe Stores’ third-quarter earnings and comparable-store sales.
For the quarter ended March 31, the Brisbane, Calif.-based specialty retailer said net income declined 12.2 percent, to $3.8 million, or 8 cents a diluted share, from $4.3 million, or 17 cents, in the year-ago quarter. The company said it also incurred a one-time charge associated with the write-off of fabric, which impacted earnings by a penny.
Sales moved ahead 6.7 percent, to $70.6 million from $66.2 million, but revenues declined 8.2 percent on a comp basis. Inventories at the end of March were $19.9 million down from $24.6 million last year, representing a 19.2 percent decrease.
“We got more casual,” Bebe’s president and chief operating officer John Parros said of the disappointing financial results. “We aggressively pursued a different lifestyle this spring where we went casual even more.”
In addition, he cautioned that April and fourth-quarter comps should be down in the high-single digit range due to Bebe’s casual focus.
But Bebe executives on a conference call Monday said that, after a difficult summer, they hope for better results by fall, as inventories move back to more normalized levels and the assortment returns to higher-priced career and club wear.
That note resonated with investors, who sent Bebe shares up $2.70, or 12.6 percent, to close at $24.20 in Nasdaq trading, halfway between their high and low during the past year. The broader markets were down for the day, with the Nasdaq dropping 38.19, or 2.1 percent, to 1,758.64 and the Dow Jones Industrial Average falling 120.68, or 1.2 percent, to 10,136.
For the nine months, income inched up 2.3 percent to $22.5 million, or 87 cents a diluted share, compared to year-ago earnings of $22 million, or 86 cents. Net sales were $243 million, up 9.9 from $221.1 million reported for the same period of the prior year.

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