Bebe stores cited various factors, among them severe weather conditions that caused 136 store closures, the shuttering of 19 unproductive stores and the timing of Easter in late April, as contributing to its 17.2% net sales decrease in the third quarter from the prior-year quarter.
Net sales dropped to $93.5 million from $112.9 million for the third quarter a year ago. Comparable store sales for the quarter decreased 5.7%. The sales decrease, according to the company, was also fueled by one fewer retail week in January in the current fiscal year.
Gross margin decreased to 27.1% compared to 29.7% in the third quarter of fiscal 2013. The decrease in gross margin was primarily due to deleveraging of sales. While Bebe has experienced an increased level of promotions in response to the challenging retail environment, merchandising margin was 50 basis points higher than the third fiscal quarter of the prior year.
“As previously disclosed in our preannouncement, our third quarter performance did not meet our expectations largely due to winter storms and a challenging overall retail environment. That said, we were highly encouraged with the improved sales and margin performance in both our e-commerce and catalog businesses,” said CEO Steve Birkhold. “Overall, the favorable response to our spring merchandise offering and marketing programs gives us confidence that we are winning over and retaining our bebe girl. While we expect the overall retail environment to remain challenging in the near term, we believe that we are taking the right steps to position our company for long-term sustainable growth.”
Looking ahead, the company anticipates comparable-store sales in the fourth quarter to be flat. Gross margin is expected to exhibit sequential improvement.
For the remainder of the year, the company plans to open up one Bebe outlet store, and close one 2b Bebe store, which will result in approximately 8% decrease in the total store sq. footage from the end of fiscal year 2013.