bebe stores, inc. Announces First Quarter Fiscal Year 2017 Financial Results

First quarter comparable store sales decreased 3.2%

First quarter gross margin increased 260 bps

First quarter loss per share was $0.10

BRISBANE, Calif.–(BUSINESS WIRE)–bebe stores, inc. (NASDAQ:BEBE) today announced financial results for
the fiscal first quarter ended October 1, 2016.

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 bps as a result of fewer markdowns and
improved leverage on our occupancy. We had a very strong denim and
leggings business which we will continue to invest in offset by weakness
in non-apparel and evening dresses. We are working to take advantage of
the casual trend taking place and believe we can continue to grow our
bottoms business while working to improve our tops business as this is
where we believe the fashion direction is taking us. 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.”

For the first quarter of fiscal 2017:

Net sales were $87.2 million, a decrease of 9.4% from $96.3 million
reported for the first quarter a year ago. Comparable store sales for
the quarter ended October 1, 2016, decreased 3.2% compared to a decrease
of 4.1% in the comparable period of the prior year.

Gross margin as a percentage of net sales increased to 31.5% compared to
28.9% in the first quarter of fiscal 2016. The increase in margin was
primarily the effect of a reduction in markdowns and promotions and
leverage on store occupancy cost.

SG&A expenses were $35.7 million, or 40.9% of net sales, compared to
$44.9 million, or 46.6% of net sales, for the same period in the prior
year. The prior year includes charges for asset impairment severance and
other of $4.3 million or 4.3% of sales. The decrease in SG&A expenses
was primarily attributable to a reduction in compensation expense
reflecting the effects of savings from restructuring activities offset
by $0.8 million in asset impairment cost related to stores.

Net loss for the first quarter of fiscal 2017 was $7.8 million, or $0.10
per share, on 80.1 million diluted shares outstanding, compared to a
loss of $17.1 million, or $0.22 per share, on 79.7 million diluted
shares outstanding for the same period of the prior year.

During the quarter ended October 1, 2016, the Company closed 4 bebe
stores.

Balance sheet summary:

Cash and investments at October 1, 2016 were $47.3 million.

As of October 1, 2016, average finished goods inventory per square foot
decreased 16.5% compared to the prior year.

Capital expenditures for the fiscal quarter were approximately $0.2
million, and depreciation expense was approximately $4.3 million.

Fiscal 2017 guidance:

For the second fiscal quarter the Company believes comparable store
sales will be in the low to mid-single digit negative range with gross
margin improvement and lower SG&A expense which is consistent with the
fiscal first quarter results. Contributing to the comparable store sales
decrease is a reduction in the number and frequency of in-store and
on-line promotions and markdowns which is consistent with our strategic
initiative to protect the brand image and improve gross margin. We
currently anticipate the reduction in promotions to be consistent
throughout the fiscal year.

Finished goods inventory per square foot is anticipated to decrease in
the mid-teens for the remained of the fiscal year compared to the prior
year as we implement the strategic plan discussed in the fiscal 2016
year ended earnings release.

Total capital expenditures for the year are anticipated to be
approximately $6 million for relocation, remodels and information
technology systems. Depreciation for the year is anticipated to be
approximately $17 million.

For fiscal year 2017, the Company does not plan to open any new store
locations and to close up to 28 bebe and outlet stores, which will
result in a decrease in total store square footage of approximately 16%
from the end of fiscal year 2016.

Forward-Looking Statements

Certain statements in this release are “forward-looking statements” made
pursuant to the safe-harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements reflect
the Company’s current expectations or beliefs concerning future events
and are subject to various risks and uncertainties that may cause actual
results to differ materially from those that we expected. The statements
in this news release, other than the historical financial information,
contain forward-looking statements that involve risks and uncertainties
that could cause actual results to differ from anticipated results.
Wherever used, the words “expect,” “plan,” “anticipate,” “believe” and
similar expressions identify forward-looking statements. Any such
forward-looking statements are subject to risks and uncertainties and
the company’s future results of operations could differ materially from
historical results or current expectations. Some of these risks include,
without limitation, miscalculation of the demand for our products,
effective management of our growth, decline in comparable store sales
performance, ongoing competitive pressures in the apparel industry,
changes in the level of consumer spending or preferences in apparel,
loss of key personnel, difficulties in manufacturing, disruption of
supply, adverse economic conditions, and/or other factors that may be
described in the Company’s annual report on Form 10-K and/or other
filings with the Securities and Exchange Commission. Future economic and
industry trends that could potentially impact revenues and profitability
are difficult to predict. We undertake no obligation to publicly update
or revise any forward-looking statement. Financial schedules are
attached to this release. Additionally, we cannot provide any assurances
as to if, or when, Mr. Mashouf or his affiliates may choose to sell
shares of the Company’s common stock.

About bebe

Unique, sophisticated and timelessly sexy, bebe emerged as the first
contemporary fashion destination in 1976. Today bebe continues to define
next-generation chic while staying true to its assertive, provocative
origins. Inspired by Shakespeare’s immortal words “To be, or not to be,”
the brand is, at its essence, about living, standing out and truly
existing. As a global specialty retailer that designs, develops and
produces a unique line of women’s apparel and accessories, bebe
currently operates 143 retail stores, 38 outlet stores and www.bebe.com.
In addition to its store locations in the United States, Puerto Rico and
Canada, bebe also distributes and sells bebe branded product in
approximately 100 doors through its licensees in more than 20 countries.

bebe stores, inc.
SELECTED BALANCE SHEET DATA
(UNAUDITED)

(Dollars in thousands)

     
October 1, 2016 October 3, 2015
Assets
 
Cash and equivalents $ 47,278

 

$ 26,542
Available for sale securities 15,454
Inventories, net 28,321 34,931
Total current assets 96,048 97,108
Available for sale securities 5,290
Property and equipment, net 67,516 89,804
Total assets 167,012 196,063
 
Liabilities and Shareholders’ Equity
 
Total current liabilities $ 28,769 $ 39,524
Total liabilities 45,781 61,906
Total shareholders’ equity 121,231 134,157
Total liabilities and shareholders’ equity 167,012 196,063
 
bebe stores, inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(Amounts in thousands except per share data and store statistics)

 
For the Three Months Ended
October 1,     October 3,  
2016 % 2015 %
 
Net sales $ 87,238 100.0 % $ 96,283 100.0 %
Cost of sales, including production and occupancy   59,743   68.5 %   68,420   71.1 %
 
Gross margin 27,495 31.5 % 27,863 28.9 %
Selling, general and administrative expenses   35,720   40.9 %   44,890   46.6 %
 
Operating loss (8,225 ) -9.4 % (17,027 ) -17.7 %
Interest and other income, net   14   0.0 %   (87 ) -0.1 %
 
Loss before tax provision and earnings from equity investment (8,211 ) -9.4 % (17,114 ) -17.8 %
Income tax provision 17 0.0 % 27 0.0 %
Earnings in equity method investment   450   0.5 %     0.0 %
Net loss $ (7,778 ) -8.9 % $ (17,141 ) -17.8 %
 
Earnings per share amounts:
Basic $ (0.10 ) $ (0.22 )
Diluted $ (0.10 ) $ (0.22 )
 
Basic weighted average shares outstanding 80,068 79,722
Diluted weighted average shares outstanding 80,068 79,722
 
Number of stores open at beginning of period 186 201
Number of stores opened during period 1
Number of stores closed during period 4 1
Number of stores open at end of period 182 201
 
Number of stores expanded/relocated during period
 
Total square footage at end of period (000’s) 710 787

Contacts

bebe stores, inc.
Walter Parks, 415-715-3900
President, Chief
Operating Officer and Interim Chief Financial Officer