Bebe Shares Surge 20% as Profit Beats Forecast
Bebe Stores Inc. shares jumped 20% on Friday to their highest level in almost a year after the women’s apparel retailer posted better-than-expected results and forecast fiscal first-quarter profit that could exceed Wall Street’s view.
Late Thursday, Bebe posted fiscal fourth-quarter profit of $22 million, or 24 cents a share, up from $19.5 million, or 21 cents, a year earlier. The results beat analysts’ average expectation of 21 cents a share, according to Reuters Estimates.
Sales rose 11% to $152.2 million, fueled by strong demand for the company’s trendy fashions.
Burlingame, Calif.-based Bebe forecast fiscal first-quarter earnings in a range of 17 cents to 21 cents a share, compared with a Wall Street consensus estimate of 18 cents, according to Reuters Estimates.
Friedman Billings Ramsey upgraded the stock to “outperform” from “market perform,” citing the company’s successful customer loyalty program, its fashion-right fall offerings and its efforts to woo higher-end customers with more-expensive items.
“We believe the company’s fashions are uniquely Bebe, and the proprietary designs can drive strong fall and holiday business,” Friedman analyst Adrienne Tennant wrote.
Brean Murray Carret & Co. analyst Eric Beder raised his target price on the shares and his full-year 2007 earnings projection, noting that the chain, which is known for its dressy clothes, was poised to capitalize on the fashion shift toward more formal and elegant looks.
“With the fashion trends now Bebe’s ‘friend’ and the company on track for the largest expansion [in terms of units] in its history in fiscal 2007, we believe that Bebe is once again poised to drive material upside and garner a premium multiple from investors,” Beder wrote in a research note.
Shares of Bebe, which operates 244 stores in North America, rose $3.76 to $22.21.
The stock has gained 34% since the start of the year and trades at 24.3 times earnings estimates for the current year, a steep premium to its rivals on the Dow Jones U.S. apparel retailers index, which trades at 17.3 times earnings estimates, according to Reuters data.
