bebe stores, inc. Announces Third Quarter 2016 Financial Results

Third quarter comparable store sales from continuing operations decreased 8.1%

Third quarter loss was $30.0 million or $0.37 per share

BRISBANE, Calif.--()--bebe stores, inc. (NASDAQ:BEBE) today announced unaudited financial results for the third quarter ended April 2, 2016.

Manny Mashouf, Chief Executive Officer said, “During the third quarter, we took significant steps to restructure our operations which included headcount reductions, and the closure of non-productive stores. Our third quarter results were impacted by the costs we incurred in connection with these efforts. As of the end of the quarter, we have eliminated 86 corporate positions with an anticipated annual savings of approximately $9.0 million. Going into the fourth quarter we are continuing to move forward with our strategy of streamlining the production cycle for our product, improvements to the assortment within each of our stores, further rationalization of the store fleet, and continued focus on discretionary spending. In addition, we are evaluating several different channel expansion opportunities as well as evaluating several potential sources of liquidity through the leveraging of our assets.”

For the third quarter of fiscal 2016:

Net sales decreased 13.7% to $79.9 million, as compared to $92.7 million in the third quarter of fiscal 2015. Comparable store sales for the quarter ended April 2, 2016, decreased 8.1%. The decrease in sales was due to a decline in traffic and in Average Unit Retail in both bebe and outlet businesses along with a reduction in international sales.

Gross margin as a percentage of net sales declined to 28.7% compared to 30.4% in the third quarter of fiscal 2015. The decrease in margin primarily reflected higher markdowns and promotions during the quarter and decreased store leverage.

SG&A expenses were $49.4 million, or 61.8% of net sales, compared to $39.0 million or 42.1% of net sales for the same period in the prior year. SG&A expenses increased $9.2 million as the result of costs incurred in connection with corporate restructuring activities and store closures including severance, lease settlement and store impairment costs as included in the GAAP to non-GAAP table provided in this release.

Loss from continuing operations for the third quarter of fiscal 2016 was $30.0 million, or $0.37 per share, based on 80.0 million shares outstanding, compared to a loss of $10.9 million, or $0.14 per share, based on 79.6 million shares outstanding for the same period of the prior year. Included in loss from continuing operations for the third quarter of fiscal 2016 were $12.8 million in costs outlined in the GAAP to non-GAAP table provided in this earnings release.

Net loss for the third quarter of fiscal 2016 was $30.0 million, representing $0.37 loss per share. For the third quarter of fiscal 2015, net loss was $11.2 million including $0.4 million in loss from discontinued operations which reflects the operating results of the 2b business, which was shut down on July 5, 2014. For the third quarter of fiscal 2015, the loss in the discontinued operations was primarily related to additional lease termination costs based on landlord negotiations.

During the quarter ended April 2, 2016, the Company closed twelve bebe stores and two outlet stores.

For the fiscal nine months ended April 2, 2016:

Net sales for the nine months ended April 2, 2016, were $298.7 million, a decrease of 7.7% from $323.7 million for the first nine months ended April 4, 2015. Comparable store sales for the first nine months ended April 2, 2016 decreased 4.5% compared to an increase of 3.7% for the same period in fiscal 2015.

Loss from continuing operations for the fiscal nine months ended April 2, 2016, was $52.6 million, or $0.66 per share, compared to net loss of $19.9 million, or $0.25 per share, in the same prior year period.

Net loss for the first nine months of fiscal 2016 was $52.6 million or $0.66 per share. Included in net loss for the first nine months of fiscal 2016 were $18.5 million of costs including severance expense, store impairment and closure charges and loss on sale of auction rate securities. Excluding the impact of these charges, loss from continuing operations was $34.1 million or $0.44 per share, for the first nine months of fiscal 2016 (a reconciliation of GAAP to non-GAAP measures is provided in this earnings release). Including loss from discontinued operations of $2.5 million, net loss for the first nine months of fiscal 2015 was $22.4 million, or $0.28 per share. Loss from discontinued operations in fiscal 2015 reflects the operating results of the 2b business, which was shut down on July 5, 2014. For the first nine months of fiscal 2015, the loss in the discontinued operations was primarily related to additional lease termination costs based on landlord negotiations.

Balance sheet summary:

Cash and investments at April 2, 2016, were $27.9 million. The decrease in cash and investments from the third quarter of fiscal 2015 was primarily due to the cash used in operations coupled with the timing of working capital, including payments for inventory.

As of April 2, 2016, average finished goods inventory per square foot decreased approximately 2.3% compared to the prior year.

Capital expenditures for the fiscal year to date were $5.2 million, and depreciation expense was $15.9 million.

Fourth quarter and fiscal 2016 guidance:

For the fourth quarter of fiscal 2016, the Company expects comparable store sales to decrease in mid to high single digit range. The Company expects net loss per share to be in the range of $0.08 to $0.12. The expected net loss per share range also reflects the continuing impact of maintaining a valuation allowance against deferred tax assets and thus a close to 0% effective tax rate.

Inventory is anticipated to increase approximately 14% per square foot as a result of seasonal investments. This increase is made in response to customer acceptance of product offered earlier in the spring season. This investment is consistent with the strategic changes we have been implementing as we reduce the time to market and work to offer a more compelling offering to our customers.

Total capital expenditures for the year are anticipated to be approximately $6 million for new stores, remodels and information technology systems.

For the fourth quarter of fiscal year 2016, the Company plans to close up to 2 bebe stores and 1 outlet store. Total store square footage is expected to decrease approximately 8.0% as compared to the end of fiscal 2015.

During the third quarter of fiscal 2016 we took significant steps to restructure our organization which included headcount reductions and the closure of non-productive stores. The combined annual savings from the expense reductions including the operating expenses of closed stores are estimated to be approximately $25 million that we believe we will see the benefit of in fiscal 2017. In addition to these expense savings we currently anticipate closing up to 40 additional stores in fiscal 2017 that had a trailing 12 month loss of $5.5 million.

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.

About bebe:

bebe stores, inc. is a global specialty retailer, which designs, develops and produces a distinctive line of contemporary women’s apparel and accessories under the bebe and BEBE SPORT brand names. bebe currently operates 150 bebe retail stores, the on-line store, bebe.com, and 38 bebe outlet stores. These stores are located in the United States, Puerto Rico and Canada. bebe also distributes and sells bebe branded product in approximately 100 doors through its licensees in 20 plus countries.

   

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

 

 
April 2, 2016 April 4, 2015
Assets
 
Cash and equivalents $ 25,181 # $ 51,865
Available for sale securities 2,689 19,681
Inventories, net 31,673 32,589
Total current assets 79,184 121,190
Available for sale securities - 5,343
Property and equipment, net 77,261 93,924
Total assets 160,078 225,176
 
Liabilities and Shareholders' Equity
 
Total current liabilities $ 37,661 $ 43,959
Total liabilities 56,841 69,110
Total shareholders' equity 103,237 156,066
Total liabilities and shareholders' equity 160,078 225,176
 
       

bebe stores, inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands except per share data and store statistics)

 
For the Three Months Ended For the Nine Months Ended
 
April 2,     April 4,   April 2,     April 4,  
  2016   %     2015   %     2016   %     2015   %  
 
Net sales $ 79,939 100.0 % $ 92,668 100.0 % $ 298,669 100.0 % $ 323,738 100.0 %
Cost of sales, including production and occupancy   56,968   71.3 %   64,481   69.6 %   206,155   69.0 %   214,873   66.4 %
 
Gross margin 22,971 28.7 % 28,187 30.4 % 92,514 31.0 % 108,865 33.6 %
Selling, general and administrative expenses   49,417   61.8 %   39,047   42.1 %   141,423   47.4 %   128,991   39.8 %
 
Operating income (loss) (26,446 ) -33.1 % (10,860 ) -11.7 % (48,909 ) -16.4 % (20,126 ) -6.2 %
Interest and other income, net   (3,564 ) -4.5 %   43   0.0 %   (3,643 ) -1.2 %   478   0.1 %
 
Income (loss) before tax (30,010 ) -37.5 % (10,817 ) -11.7 % (52,552 ) -17.6 % (19,648 ) -6.1 %
Income tax provision (benefit)   (42 ) -0.1 %   75   0.1 %   15   0.0 %   250   0.1 %
 
Income (loss) from continuing operations (29,968 ) -37.5 % (10,892 ) -11.8 % (52,567 ) -17.6 % (19,898 ) -6.1 %
 
Income (loss) from discontinued operations, net of tax   -   0.0 %   (354 ) -0.4 %   -   0.0 %   (2,548 ) -0.7 %
 
Net Income (loss) $ (29,968 ) -37.5 % $ (11,246 ) -12.1 % $ (52,567 ) -17.6 % $ (22,446 ) -6.9 %
 
Basic loss per share amounts:
Loss from continuing operations $ (0.37 ) $ (0.14 ) $ (0.66 ) $ (0.25 )
Loss from discontinued operations   -     (0.00 )   -     (0.03 )
Net Loss $ (0.37 ) $ (0.14 ) $ (0.66 ) $ (0.28 )
 
Diluted loss per share amounts:
Loss from continuing operations $ (0.37 ) $ (0.14 ) $ (0.66 ) $ (0.25 )
Loss from discontinued operations   -     (0.00 )   -     (0.03 )
Net Loss $ (0.37 ) $ (0.14 ) $ (0.66 ) $ (0.28 )
 
Basic weighted average shares outstanding 80,027 79,630 79,888 79,607
Diluted weighted average shares outstanding 80,027 79,630 79,888 79,607
 
Number of stores open at beginning of period 203 211 201 207
Number of stores opened during period - 2 5 8
Number of stores closed during period 14 10 17 12
Number of stores open at end of period 189 203 189 203
 
Number of stores expanded/relocated during period 1 1 1 5
 
Total square footage at end of period (000's) 742 796 742 796
 

bebe stores, inc.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(Amounts in millions except per share data)

Included within this press release are references to non-GAAP financial measures ("non-GAAP" or "adjusted"), including operating (loss) income, net (loss) income and net (loss) income per diluted share excluding the effect of certain charges. These financial measures are not in compliance with U.S. generally accepted accounting principles ("GAAP") and are not necessarily comparable to similar measures presented by other companies. The Company believes that this non-GAAP information is useful as an additional means for investors to evaluate the Company's operating performance, when reviewed in conjunction with its GAAP financial statements. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding expenses that the Company believes are not indicative of the Company’s core operating performance, as well as assists with the comparison of past financial performance to the Company’s future financial results. These amounts are not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating the Company's business and operations and are not viewed as being superior to GAAP financial measures. For further information, see "Company Statement on Disclosure of Non-GAAP Financial Measures" within the Investor Relations section of the Company's corporate web site, www.bebe.com.

The following is a reconciliation of the applicable GAAP financial measures to the non-GAAP financial measures (in millions, except for net (loss) income per diluted share):

    For the Three Months Ended April 2, 2016     For the Three Months Ended April 4, 2015
 

 

 

 

 

Income
(Loss)

Income
(Loss)
Per Share

Net
Income
(Loss)

Income
(Loss)
Per Share

from
continuing

from
continuing

from
continuing

from
continuing

 
GAAP financial measure $ (30.0 ) $ (0.37 ) $ (10.9 ) $ (0.14 )
 
Charges, net of income tax where applicable
 
Store impairment and closure related costs 2.0 0.02 - -
Costs related to severance, recruiting and retention 4.1 0.05 - -
Loss on Sale of Auction Rate Securities 3.6 0.04 - -
Lease settlement and consulting related expenses   3.1       0.04     -       -  
  12.8       0.16     -  

 

  -  
           
Non-GAAP financial measure $ (17.2 )   $ (0.21 ) $ (10.9 )   $ (0.15 )
 
 
For the Nine Months Ended April 2, 2016 For the Nine Months Ended April 4, 2015

 

 

 

 

Income
(Loss)
from
continuing

Income
(Loss)
Per Share
from
continuing

Income
(Loss)
from
continuing

Income
(Loss)
Per Share
from
continuing

 
GAAP financial measure $ (52.6 ) $ (0.66 )

$

(19.9 ) $ (0.25 )
 
Charges, net of income tax where applicable
 
Store impairment and closure related costs 5.5 0.06 0.5 (0.00 )
Costs related to severance, recruiting and retention 6.3 0.07 0.5 (0.00 )
Costs related to security breach - - 0.5 0.01
Loss on Sale of Auction Rate Securities 3.6 0.05 - -
Lease settlement and consulting related expenses   3.1       0.04     -       -  
  18.5       0.22     1.5  

 

  0.01  
           
Non-GAAP financial measure $ (34.1 )   $ (0.44 ) $ (18.4 )   $ (0.24 )
 

Contacts

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

Contacts

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