Bebe Falls on Tepid Outlook

Strong third-quarter results can't make up for a weaker outlook.
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Shares of specialty retailer



were dropping after the company guided fourth-quarter earnings to the low end of Wall Street's consensus.

The news took the spotlight away from the company's third-quarter earnings report, which surpassed consensus estimates.

For the fourth quarter, bebe expects to earn 16 cents to 19 cents a share, before a 3-for-2 stock split; analysts are calling for 19 cents a share. A year earlier, the company earned 13 cents a share in the fourth quarter.

The stock was lately down $1.83, or 5.3%, at $32.50.

In the third quarter ended March 31, earnings rose to $5.5 million, or 21 cents a share, from $142,000, or 1 cent a share, a year ago, as a higher gross margin and lower expenses boosted results. Analysts were expecting 18 cents a share.

Sales rose 21.6% to $83.6 million from $68.8 million last year. Same-store sales in the quarter rose 16.7%, compared with an 11% decrease a year ago.

As a result of improved merchandise margins, gross margin expanded to 46.3% as a percentage of sales, from 42.1% in the prior-year period.

For the fourth quarter, bebe expects same-store sales in the high single digits; in fiscal 2005, bebe anticipates same-store sales in the low to mid-single digits.

The Brisbane, Calif.-based company also expects to open 20 new stores in 2005.