Why bebe stores' Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of fashion retailer bebe stores (Nasdaq: BEBE  ) were looking pretty frumpy in today's trading, falling as much as 12% in intraday trading after the company's president resigned.

So what: Emilia Fabricant, who had been bebe's president since August of 2010, resigned effective Aug. 17. The company's SEC filing was terse, noting that she was leaving for "personal" reasons and that Chairman and CEO Manny Mashouf and Executive Vice President of Merchandising Renee Bell would pick up Fabricant's duties.

Now what: As a general rule, investors get upset by events like this -- at the very least, tumult at the top of the company is rarely something to cheer. How notable is this departure? In my mind, it's questionable. Janney Capital Markets analyst Adrienne Tennant downgraded the stock from "buy" to "neutral" on the news, noting that she had the hope that Fabricant's merchandising and retail experience would help bebe over the long term.

On the flip side, while Fabricant a decade handling merchandising for Barney's New York -- which bebe emphasized when it hired her -- her experience since then included founding and running eStyle and its Cadeau Maternity subsidiary, which went bankrupt in 2008 (and has since emerged), and spending less than a year as the president and chief marketing officer at Charlotte Russe.

Bebe's financial performance did improve over the timeframe that Fabricant was at the company, but that was also coincident with the post-recession economic recovery, so the improvement could have been due to positive tailwinds.

Fabricant's departure may indeed be a net negative for bebe, but investors may want to step back and take a closer look at the bigger picture before rushing to sell the stock on this news alone.

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Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, @KoppTheFool, or on Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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