A continuous drop in share prices over the year along with a weaker business environment has led Bebe Stores, Inc. (BEBE) to buy back shares worth $30.0 million. Currently, the company has about 84 million shares outstanding.
Bebe exited the first quarter of fiscal 2013 with cash & marketable securities of $161.1 million. Hence, it can be stated that the company’s plan to repurchase shares will not only boost its share prices but will also drive its earnings per share.
Despite meeting the Zacks Consensus Estimates, Bebe reported dismal financial results for the recently concluded quarter, where it experienced a decline in revenue as well as a net loss.
Moreover, the company presented a dull outlook for the next quarter. The company’s dismal performances were mainly attributable to an increase in markdown resulting from mounted competition from other discount retailers, such as Nordstrom Inc. (JWN) and Guess Inc. (GES). Increased occupancy expenses also drags down the company’s profitability.
Bebe’s poor performance is reflected in its recent share price movements. The company’s shares have now dropped to the lowest level since 2004. Therefore, in order to regain investors’ faith as well as maximize their wealth, the company has opted for a share buyback program, which will also drive share prices.
At the closing market price of $3.72 on November 21st, the company may buy back approximately 8.1 million shares of its common stock, which will bring its market cap below the $300.0 million mark. However, it is yet to be seen how long the company can retain the investors’ faith by means of share buybacks and dividend payments instead of generating profit from the business. Therefore, Bebe currently holds a Zacks #4 Rank, which translates to a short-term Sell rating.
However, we are maintaining a long-term Neutral recommendation on the stock, since we believe that the company’s sustained focus on the development of a multi-channel retail format through the enhancement of its e-commerce capabilities, along with expanding international business, will certainly help it fight against falling retail sales.
At the end of fiscal 2012, the company had 110 sales points, with plans to add 20 more sales points in fiscal 2013 across 21 countries. We anticipate these expansion strategies to help drive sales.
Bebe Stores designs, develops and produces a distinctive line of contemporary women's apparel and accessories. They market their products under the bebe, bebe moda and bbsp brand names through their retail stores located in Canada and the United Kingdom.
Their broad product offering includes suits, tops, pants, skirts, dresses, logo and other activewear, outerwear, and handbags and other accessories. Bebe Stores design and develop most of the merchandise in-house.
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