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TheStreet Open House

Why Bebe (BEBE) Stock Is Falling In Pre-Market Trading Today

NEW YORK (TheStreet) -- Bebe Stores (BEBE) shares are down -2.2% to $3.08 in pre-market trading on Monday after being downgraded to "neutral" from "buy" by analysts at B. Riley.

The pessimistic outlook stems from the women's fashion retailer's announcement on Friday that it expects same store sales growth to slow down to single percentage growth this quarter.

Additionally, the company plans to lay off 9% of its non-store employees and 1% of its store employees.

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TheStreet Ratings team rates BEBE STORES INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate BEBE STORES INC (BEBE) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Specialty Retail industry and the overall market, BEBE STORES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for BEBE STORES INC is currently lower than what is desirable, coming in at 32.54%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -25.97% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$19.86 million or 97.75% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • BEBE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 40.39%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • BEBE, with its decline in revenue, underperformed when compared the industry average of 1.5%. Since the same quarter one year prior, revenues fell by 17.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: BEBE Ratings Report
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