Ahead of the Bell: bebe Stores

Analyst says full impact of new bebe management not felt yet

Associated Press

NEW YORK (AP) -- A Janney Capital analyst said Friday that investors are likely to overlook bebe Stores' disappointing fourth-quarter forecast seeing as new management's full impact likely won't be felt until late fall or the around the holidays.

On Thursday bebe Stores Inc. reported a third-quarter adjusted loss of 14 cents per share on revenue of $112.9 million. Analysts polled by FactSet expected a loss of 15 cents per share on revenue of $113 million.

The teen retailer said that revenue at stores open at least a year declined 8.6 percent, excluding the extra week in January. This figure is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

For the fourth quarter, bebe foresees a loss in the low to mid-teens per share. Revenue at stores open at least a year is expected to be a high single-digit percentage decline.

Adrienne Tennant of Janney Capital Markets said in a client note that she expects the rest of fiscal 2013, which ends in June, to be soft. The analyst called it a transition period in which the retailer will likely continue with markdowns to get rid of inventory.

But Tennant says things may start to change.

"With the right talent and initiatives in place we have increased confidence in the turn," she wrote.

CEO Steve Birkhold — who took over the post in January — said during a conference call on Wednesday that all major leadership positions across the company have been filled. Tennant feels the new executives will bring positive changes and that the company will be able to take advantage of improving inventory management and a better product assortment that's on point with the latest trends.

The analyst reaffirmed a "Buy" rating and $7 price target.

A representative for bebe did not immediately respond to an email seeking comment.

Its shares finished at $5.36 on Thursday. They have traded in a 52-week range of $3.48 to $6.51.

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