Analyst says Bebe running business appropriately

An analyst said Monday Bebe Stores Inc. is doing the right thing by running its business conservatively amid a difficult environment.

Friedman, Billings, Ramsey analyst Adrienne Tennant said in a note to investors Monday that after a meeting with executives, she feels Bebe's management is making the right operational and merchandising decisions.

Those include keeping inventory tight and markdowns low and returning to suiting, one of its historically strongest categories, according to Tennant.

Many retailers have faced falling sales amid a difficult environment, as consumers cut back on discretionary spending because of high food and gas prices and falling home values. Bebe has faced declining sales in stores open at least one year, a key retail metric known as same-store sales, since April 2007.

But Tennant said same-store sales improved during the fiscal fourth quarter, from a decline in the high-single digits at the beginning of the quarter, to a 5.6 percent drop in the quarter overall.

"We believe that the tight inventory control is helping limit markdowns (although potentially leaving some sales on the table)," she wrote.

She reiterated her "Market Perform" rating, but said if traffic and conversion improve during the back-to-school season, she would be "inclined to become constructive on the stock."

Shares rose 12 cents to $10.17 during morning trading.