Like other specialty apparel purveyors, Bebe Stores (BEBE) is still clawing its way back after sales peaked in 2008. But the retailer does have an ace up its sleeve. Specialty retailers’ market share was 32 percent in 2010, after gaining 1 percent. Meanwhile, mass merchants’ share is shrinking, according to NPD Fashionworld.
Bebe’s work is far from done, though. Its forte is offering highly distinctive women’s apparel, appealing to the 21- to 34-year-old age group. After expanding too fast during the go-go years, Bebe reduced its U.S. store network to 253 in 2011 from 312 in 2007.
S&P analysts believe that this strong brand could now regain lost momentum. Long-term, Bebe stores and lines could significantly expand, they write. For the five-year-period through 2010, Bebe revenue compound annual growth rate was flat, though.
Fortunately, revenue has stopped a slide. Fiscal fourth quarter sales rose 7 percent to $122.4 million, versus $114 million a year ago. The balance sheet is strong, with zero debt and positive cash flow. Bebe CEO Manny Mashouf owns about 74 percent of the stock.
On the downside, Bebe must pin down fast-changing fashion trends. S&P notes that Bebe has improved its fashion merchandise and inventory management.
Of the nine analysts followed by Thomson/ First Call, three have strong buy recommendations on Bebe and three have buys, with two holds and one underperform.
S&P analysts aren’t as optimistic. They have a hold rating on Bebe, citing its exposure to rapidly changing consumer preferences. The company next reports in mid-November.
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