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Bebe to Slash 50 Jobs; Authorizes $5M Share Buyback Plan

Zacks Equity Research
Updated

Shares of Bebe Stores Inc. BEBE soared 7.5% after the company announced that it will lay off 50 employees but retained its fiscal 2016 guidance and approved a $5 million worth share repurchase program.

The company’s decision to cut jobs, mainly in the design, merchandising, and production areas, comes after a complete review which suggests streamlining its lifestyle assortments that satisfy customer needs and increasing efficiency of its business operations.

Bebe expects the job cuts to result in pre-tax costs of nearly $1.5 million and to save about $4.8 million in costs annually. Additionally, the company’s board authorized a $5 million share repurchase program, which mirrors its confidence in the company’s growth prospects and ability to achieve targets.

Further, citing favorable quarter-to-date business trends, Bebe retained its guidance for first-quarter fiscal 2016. The company pointed out that it reported positive comparable-store sales (comps) in September as it has largely overcome the effects of the underperforming bohemian product that impacted fourth-quarter fiscal 2015 results.

The company continues to project first-quarter fiscal 2016 comps decline in the mid-single digit range. Gross margin is expected to contract year over year, while net loss per share is anticipated in the high-teens range. Moreover, the company expects finished goods inventory per square foot to rise in the mid-teens range year over year.

Keeping its focus on cost containment, the company also indicated that it will evaluate its costs structure and capital expenditures on an ongoing basis through the second half of fiscal 2016.

This California-based women's apparel and accessories retailer had reported fourth-quarter adjusted loss per share of 5 cents, a penny wider than the Zacks Consensus Estimate of a loss of 4 cents. Net sales improved marginally year over year by 0.7% to $104.3 million but fell short of the Zacks Consensus Estimate of $105.5 million.

Zacks Rank

At present, Bebe carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same industry include Express Inc. EXPR, Citi Trends Inc. CTRN and Foot Locker Inc. FL, all carrying a Zacks Rank #1 (Strong Buy).

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FOOT LOCKER INC (FL): Free Stock Analysis Report
 
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Zacks Investment Research