bebe stores announces Q4 earnings of $0.02 per share

31 Aug '10

6 min read

Net sales for the fourth quarter of fiscal 2010 were $127.4 million, a decrease of 2.1% compared to $130.2 million for the fiscal quarter ended July 4, 2009. As previously reported, comparable store sales for the fiscal quarter ended July 3, 2010 decreased 3.4% compared to a decrease of 29.6% in the prior year. Comparable store sales exclude PH8 stores due to the conversion of BEBE SPORT stores to PH8 stores in November fiscal 2010.

Gross margin as a percentage of net sales increased to 40.8% in the fourth quarter of fiscal 2010 compared to 39.5% in the fourth quarter of fiscal 2009. The increase in gross margin as a percentage of net sales from the prior year of 1.3% was driven by a decrease in markdown activity, an increase in initial mark-up, and decreases in other costs, partially offset by unfavorable occupancy leverage and an increase in inventory write-offs of $1.0 million over the prior year primarily related to PH8.

SG&A expenses for the fourth quarter of fiscal 2010 were $52.6 million, or 41.4% of net sales, resulting in 150 basis point reduction over the prior year's SG&A expense of $55.9 million, or 42.9% of net sales. The dollar and percentage decrease in SG&A expense was primarily due to lower compensation, offset by increases in advertising due to an incremental direct mailer compared to the prior year.

Also, the store impairment charges of $3.2 million, primarily driven by the discontinuation of PH8 operations, impacted diluted earnings per share for the quarter, net of tax, by approximately $0.02. For the prior year, we recorded $4.1 million in store impairment charges or $0.03 per share, net of tax.

While the effective tax rate is expected to fluctuate from quarter to quarter due to discrete items, the tax benefit in the fourth quarter of fiscal 2010 is due to adjustments of temporary and permanent items, including a benefit in deferred stock compensation expense.

Operating loss for the fourth quarter of fiscal 2010 was $0.6 million or 0.4% of net sales, compared to an operating loss of $4.5 million or 3.4% of net sales for the same period of the prior year. Net income for the fourth quarter was $2.0 million compared to a net loss of $0.3 million for the same period of the prior year.

Net sales for the fiscal year ended July 3, 2010 were $509.0 million, down 15.6% from $603.0 million for the fiscal year ended July 4, 2009. Comparable store sales for the fiscal year ended July 3, 2010 decreased 17.1% compared to a decrease of 20.9% in the prior year.

SG&A expenses for the fiscal year ended July 3, 2010 decreased 10% in dollars, though increased by 240 basis points to 41.1% of net sales over the prior year's SG&A expenses of 38.7% of sales. The dollar decrease in SG&A expense was primarily due to lower compensation and advertising, as well as gift card breakage income recorded in the second quarter of fiscal 2010.

Also, store impairment charges of $8.0 million, primarily driven by the discontinuation of PH8 operations, impacted diluted earnings per share for the fiscal year, net of tax, by approximately $0.06. For the prior year, we recorded $7.3 million in store impairment charges or $0.06 per share, net of tax.

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