bebe stores, inc. Announces Fourth Quarter and Fiscal Year 2016 Financial Results

Fourth quarter comparable store sales decreased 4.6%

Fourth quarter gross margin decreased 393 bps

Fourth quarter income per share from continuing operations was $0.31

Non-GAAP adjusted fourth quarter loss per share from continuing
operations was $0.08

BRISBANE, Calif.–(BUSINESS WIRE)–bebe stores, inc. (NASDAQ:BEBE) today announced financial results for
the fourth quarter and fiscal year ended July 2, 2016.

Manny Mashouf, Chief Executive Officer said, “In the fourth quarter of
Fiscal 2016 we saw sustainable changes in our business, including the
signing of the Joint Venture agreement with Bluestar. To date, Bluestar
has signed 14 new licensees including Global Brands Group, Major Brands
PVT, Ltd., Mamiye Brothers, Inc., and PPI Apparel Group. Also, during
the quarter our comparable store sales improved each month; from
negative 10% in April and negative 6% in May to a positive 1.3%
comparable store sales increase in June. As we began fiscal 2017, our
inventory on a per square foot basis is flat compared to our guidance of
+14%. Our promotions at the end of June and the beginning of July
assured us of a clean conversion into the new fiscal year. The
significant reduction from 220 days to 105 days in our design to market
process has allowed us to improve our product offering and return to our
historical model of test and chase. These changes combined with the $25
million annual reduction in SG&A give me confidence as we enter the new
fiscal year.”

For the fourth quarter of fiscal 2016:

Net sales were $94.9 million, a decrease of 9.0% from $104.3 million
reported for the fourth quarter a year ago. Comparable store sales for
the quarter ended July 2, 2016, decreased 4.6% compared to an increase
of 1.1% in the comparable period of the prior year.

Gross margin as a percentage of net sales decreased to 30.9% compared to
34.8% in the fourth quarter of fiscal 2015. The decrease in margin was
primarily the effect of aggressive promotions discussed above, write
downs of aged inventory and lost leverage on fixed occupancy cost.

SG&A expenses were $36.3 million, or 38.2% of net sales, compared to
$41.3 million, or 39.6% of net sales, for the same period in the prior
year. 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 $1 million in asset impairment cost
related to stores.

Net gain from the sale of our intellectual property assets of $31.7
million in fiscal 2016 is the result of the transaction with Bluestar.

Income from continuing operations for the fourth quarter of fiscal 2016
was $25.1 million, or $0.31 per share, on 80.6 million diluted shares
outstanding, compared to a loss of $5.5 million, or $0.07 per share, on
79.6 million diluted shares outstanding for the same period of the prior
year. Included in income from continuing operations for the quarter is
the net gain from the Bluestar transaction of $31.7 million. Excluding
the impact of the Bluestar transaction, loss from continuing operations
was $6.8 million, or $0.08 per share, for the fourth quarter of fiscal
2016.

During the quarter ended July 2, 2016, the Company closed 4 bebe stores
and opened one outlet store.

Full year fiscal 2016 results:

Net sales for the fiscal year ended July 2, 2016, were $393.6 million, a
decrease of 8.0% from $428.0 million for the fiscal year ended July 4,
2015. Comparable store sales for the fiscal year ended July 2, 2016,
decreased 4.5% compared to an increase of 3.1% in the prior year.

Loss from continuing operations for the fiscal year ended July 2, 2016,
was $27.5 million, or $0.34 per share, compared to a loss of $25.4
million, or $0.32 per share in the prior year. Included in the loss from
continuing operations for fiscal 2016 was a net gain of $31.7 million as
described above. Excluding the impact of the net gain, loss from
continuing operations was $59.2 million or $0.74 per share for fiscal
2016. Loss from continuing operations in fiscal 2016 was impacted by
higher store impairment charges and expenses incurred related to store
closures. In addition, compensation expense was higher relative to net
sales due to the effects of severance payments related to corporate
restructuring earlier in the fiscal year.

Balance sheet summary:

Cash and investments at July 2, 2016 were $55.5 million.

As of July 2, 2016, average finished goods inventory per square foot was
flat compared to the prior year.

Capital expenditures for the fiscal year were approximately $6.3
million, and depreciation expense was approximately $20.0 million.

Fiscal 2017 guidance:

For the fiscal year, the Company expects comparable store sales to be in
the negative low-single digit to positive low-single digit range. Gross
margin is expected to be higher than the prior year as a result of
inventory management initiatives which include a 20% reduction in
receipts and SKU’s. We believe this change will begin to address the
over assortment in our stores and the high level of markdowns
experienced in prior periods. Our objective is to turn the inventory
faster, improve the sell through at full price and the return on our
inventory investment.

Finished goods inventory per square foot is anticipated to decrease in
the low-teens this fall and single digits next spring compared to the
prior year as we implement the strategic plan discussed in the prior
paragraph.

Total capital expenditures for the year are anticipated to be
approximately $6 million for a relocation, remodels and information
technology systems. Depreciation for the year is anticipated to be
approximately $16 million.

For fiscal year 2017, the Company does not plan to open any new store
locations and to close up to 40 bebe and outlet stores, which will
result in approximately a 20% decrease in total store square footage
from the end of fiscal year 2016.

For the year we anticipate, at the mid-point of the sales range provided
and before one-time charges EBITDA, to be a loss of approximately $6
million compared to the trailing three year average loss of $33 million.
We anticipate cash used including the purchase of fixed assets to be
approximately $6 million compared to an average three year usage of
$31.2 million. At the high end of the range provided above we believe
each will be flat for the fiscal year.

We are working diligently to change the model that had become
unsustainable as evidenced by the recent financial results. We have made
significant strides to create a sustainable financial model to move the
business forward. There is much work to be done, but we have stabilized
the business and positioned the company to return to a reasonable level
of profitability in fiscal 2018 and remain committed to the challenge.

For the eight weeks ended August 27, 2016, comparable store sales
decreased 3.1%. For the eight weeks gross margin as a percent of sales
increased 150 basis points with August increasing 550 basis points.
Contributing to this comparable store sales decrease is a reduction in
the number and frequency of in-store and on-line promotions which is
consistent with our strategic initiative to improve gross margin. We
currently anticipate the reduction in promotions to be consistent
throughout the fiscal year.

SEC Regulation G – Non-GAAP Information

This press release includes non-GAAP adjusted net income (loss) and
adjusted diluted earnings (loss) per share, each a non-GAAP financial
measure. We have reconciled these non-GAAP financial measures with the
most directly comparable GAAP financial measures in the text above. We
believe that these non-GAAP financial measures not only provide our
management with comparable financial data for internal financial
analysis but also provide meaningful supplemental information to
investors. Specifically, these non-GAAP financial measures allow
investors to better understand the performance of our business and
facilitate a meaningful evaluation of our quarterly and fiscal year 2016
diluted earnings per share and actual results on a comparable basis with
our quarterly and fiscal year 2015 results. These non-GAAP measures
should be considered a supplement to, and not as a substitute for, or
superior to, financial measures calculated in accordance with GAAP.

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 146 retail stores, 38 outlet stores and 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)

   
July 2, 2016 July 4, 2015
Assets
 
Cash and equivalents $ 55,523

 

$ 46,947
Available for sale securities 17,880
Inventories, net 28,736 31,317
Total current assets 103,259 114,040
Available for sale securities 5,241
Property and equipment, net 72,623 93,229
Total assets 179,443 216,413
 
Liabilities and Shareholders’ Equity
 
Total current liabilities $ 32,774 $ 40,812
Total liabilities 50,841 64,844
Total shareholders’ equity 128,602 151,569
Total liabilities and shareholders’ equity 179,443 216,413
 
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 Twelve Months Ended
July 2,     July 4,   July 2,     July 4,  
2016 % 2015 % 2016 % 2015 %
 
Net sales $ 94,925 100.0 % $ 104,259 100.0 % $ 393,594 100.0 % $ 427,997 100.0 %
Cost of sales, including production and occupancy   65,591   -69.1 %   67,942   65.2 %   271,752   69.0 %   282,816   66.1 %
 
Gross margin 29,334 30.9 % 36,317 34.8 % 121,842 31.0 % 145,181 33.9 %
Selling, general and administrative expenses 36,297 38.2 % 41,288 39.6 % 177,714 45.2 % 170,278 39.8 %
Gain on sale of intellectual property assets, net   (31,694 ) -48.3 %     0.0 %   (31,694 ) -8.1 %     0.0 %
 
Operating income (loss) 24,730 26.1 % (4,971 ) -4.8 % (24,179 ) -6.1 % (25,097 ) -5.9 %
Interest and other income, net   362   0.4 %   (109 ) -0.1 %   (3,281 ) -0.8 %   368   0.1 %
 
Income (loss) before tax 25,092 26.4 % (5,080 ) -4.9 % (27,460 ) -7.0 % (24,729 ) -5.8 %
Income tax provision 200 0.2 % 396 0.4 % 215 0.1 % 645 0.2 %
Equity in earnings of investee   193   0.2 %     0.0 %   193   0.0 %     0.0 %
 
Income (loss) from continuing operations 25,085 26.4 % (5,476 ) -5.3 % (27,482 ) -7.0 % (25,374 ) -5.9 %
 
Income (loss) from discontinued operations, net of tax     0.0 %   253   0.2 %     0.0 %   (2,297 ) -0.4 %
 
Net Income (loss) $ 25,085   26.4 % $ (5,223 ) -5.0 % $ (27,482 ) -7.0 % $ (27,671 ) -6.5 %

 

 

 

 

Basic income (loss) per share amounts:
Income (loss) from continuing operations $ 0.31 $ (0.07 ) $ (0.34 ) $ (0.32 )
Income (loss) from discontinued operations       0.00         (0.03 )
Net Income (loss) $ 0.31   $ (0.07 ) $ (0.34 ) $ (0.35 )
 
Diluted income (loss) per share amounts:
Income (loss) from continuing operations $ 0.31 $ (0.07 ) $ (0.34 ) $ (0.32 )
Income (loss) from discontinued operations       0.00         (0.03 )
Net Income (loss) $ 0.31   $ (0.07 ) $ (0.34 ) $ (0.35 )
 
Basic weighted average shares outstanding 80,049 79,644 79,930 79,616
Diluted weighted average shares outstanding 80,613 79,644 79,930 79,616
 
Number of stores open at beginning of period 189 203 201 207
Number of stores opened during period 1 1 6 9
Number of stores closed during period 4 3 21 15
Number of stores open at end of period 186 201 186 201
 
Number of stores expanded/relocated during period 4 1 10
 
Total square footage at end of period (000’s) 729 786 729 786

Contacts

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