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

Second quarter comparable store sales decreased 10.5%

Second quarter gross margin increased 40 bps

Second quarter loss per share was $0.65

BRISBANE, Calif.–(BUSINESS WIRE)–bebe stores, inc. (NASDAQ:BEBE) today announced financial results for
the fiscal second quarter ended December 31, 2016.

Manny Mashouf, Chief Executive Officer said, “In the second quarter of
Fiscal 2017 we reacted to sales and traffic trends below the incoming
trends of the fiscal first quarter and the month of October. While we
saw improvement in the week before Thanksgiving and the two weeks before
Christmas, the results for those three weeks were not sufficient to
offset the overall negative traffic trends in the first three weeks of
November. We ended the quarter with our inventory and SG&A below the
prior year and increased our gross margin 40 bps as a result of fewer
markdowns. As a result of the reductions in SG&A, inventory and capital
expenditures we generated cash for the six months ended December 31,
2016 for the first time since the fall of 2012.”

Mr. Mashouf continued, “Similar to the last quarter we had a very strong
denim and leggings business which we will continue to invest in. We also
had improved results in knit tops, total outerwear and evening dresses
offset by weakness in day dresses, woven tops and non-apparel. In
addition, our Outlet business generated positive comparable stores sales
for the quarter. As we discussed in our last release 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
departments within our tops business. Consistent with the prior quarter
we continue to find it challenging to offset the extremely high levels
of markdowns and promotions realized in the prior year.

For the second quarter of fiscal 2017:

Net sales were $101.9 million, a decrease of 16.8% from $122.4 million
reported for the second quarter a year ago. Comparable store sales for
the quarter ended December 31, 2016 decreased 10.5% compared to a
decrease of 2.5% in the comparable period of the prior year.

Gross margin as a percentage of net sales increased to 34.4% compared to
34.0% in the second quarter of fiscal 2016. The increase in margin was
primarily the effect of a reduction in markdowns and promotions.

SG&A expenses were $41.4 million, or 40.6% of net sales, compared to
$47.1 million, or 38.5% of net sales, for the same period in the prior
year. The decrease in SG&A expenses was attributable to reductions
across most categories reflecting the effects of savings from
restructuring.

Net loss for the second quarter of fiscal 2017 was $5.2 million, or
$0.65 per share, on 8 million diluted shares outstanding, compared to a
loss of $5.5 million, or $0.68 per share, on 8 million diluted shares
outstanding for the same period of the prior year.

During the quarter ended December 31, 2016, the Company closed one bebe
store.

For the six months ended December 31, 2016

Net sales for the first six months ended December 31, 2016, were $189.2
million, a decrease of 13.5% from $218.7 million for the first six
months ended January 2, 2016. Comparable store sales for the first six
months ended January 2, 2016 decreased 7.4%.

Net loss for the fiscal six months ended December 31, 2016, was $13.0
million, or $1.62 per share, compared to net loss of $22.6 million, or
$2.83 per share, in the same prior year period.

Balance sheet summary:

Cash and investments at December 31, 2016 were $67.1 million.

As of December 31, 2016, average finished goods inventory per square
foot decreased 18% compared to the prior year.

Capital expenditures for the six months ended December 31, 2016 were
approximately $1.3 million, and depreciation expense was approximately
$8.5 million.

Fiscal 2017 guidance:

Consistent with the period beginning October 30, 2016 and ending
November 19, 2016, mall traffic was below expectations for the first
three weeks of the current fiscal quarter ending January 21, 2017.
However we are seeing improvement in traffic and comparable store sales
although both measures continue to trend negative to the prior year.
While we expect to see further improvement, we expect both will finish
negative for the quarter. 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 are consistent with our strategic
initiative to protect the brand image and improve gross margin.

Finished goods inventory per square foot is anticipated to decrease 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 25 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 137 retail stores, 35 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 75 doors through its licensees in more than 21 countries.

Contacts

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