Byline: Thomas J. Ryan

NEW YORK — Bebe Stores, admitting it missed key trends in color and denim, said earnings inched ahead 1.1 percent in the third quarter ended March 31 with same-store sales falling 4.4 percent.
Earnings reached $5.42 million, or 22 cents a share, against $5.36 million, or 21 cents, a year ago. Sales climbed 14.9 percent to $52.9 million due to new stores.
On a conference call, Manny Hashouf, president and chief executive, said sales were hurt by too lean inventories in tops and knits throughout much of the quarter and by the absence of key trends. In bottoms, stores “overemphasized black and failed to bring in enough color,” and Bebe underestimated the demand for denim, he said. Although the stores “had plenty” of leather and suede jackets, they were deficient in denim and cardigan jackets.
Hashouf added, “Our customers have more choices about where to shop than they ever had before, so when we miss opportunities in key categories, the impact is more dramatic than we might have seen in the past.”
The stores now have the proper amount of tops and knits inventory, have substantially increased their position in denim jeans and jackets and expect to benefit this fall from good trends for suits, he said.
“Suits appear to be back with a vengeance for fall, and Bebe is well positioned to capitalize on this opportunity, having previously established itself as a leader in the suit category,” Hashouf said.
Nonetheless, Bebe said same-store sales were running down in high-single digits so far in April, after sliding 10.1 percent in March, and expects gross margins to be under pressure in the near term due to expansion efforts. Twelve stores are being added in the current quarter, and 30 are planned for its year ended June 2001. The Brisbane, Calif.-based chain operated 113 at the quarter’s close.
Hashouf said the firm had conducted interviews for a new merchant to replace Greg Scott, who left in January to become president of merchandising for Laundry by Shelli Segal, but earlier this week was named president of Arden B., a division of Wet Seal. Mashouf noted that Bebe had $76.4 million in cash and no long-term debt on its balance sheet at the quarter’s close.
BBSP, a sports and active store, is meeting plan with a test store at the Mall of America in Minneapolis, and two additional stores will open soon in Chicago and Washington, D.C. Regarding licensing, footwear continues to do well, eyewear will launch late spring and discussions are under way for a swimwear deal.
U.S. Bancorp’s Jeffrey Klinefelter cut his estimate for the fourth quarter by 7 cents to 28 cents, which compares with 30 cents a year ago, and by 12 cents ending June 2001, to $1.50.
“While we do believe the Bebe concept is strong and expect new stores to drive solid growth going forward, we are concerned about the earnings visibility during the next 12 months,” Klinefelter said.
In the nine months, profits advanced 24.9 percent to $25.4 million, or $1.04, from $20.3 million, or 80 cents, a year ago. Sales jumped 27.6 percent to $187.7 million, with same-store sales ahead 6 percent.