Skimpy-clothing retailer bebe Stores (NASDAQ:BEBE) will report third-quarter 2007 financial results on Thursday, May 3.

What analysts say:

  • Buy, sell, or waffle? With 15 analysts covering more of the company than its clothes do, eight have bundled up with a buy rating, while seven advocate a form-fitting hold.

  • Revenues. While the consensus view has steadily pared back its expectations, revenues were most recently forecast to come in at $151.2 million, a 15% increase year over year.

  • Earnings. Profits, however, were expected to drop 7% to $0.13 per share.

What management says:
When bebe announced its same-store sales results for the month, it also revealed its quarterly sales results, as it typically does. So it's no surprise that analysts have pegged the numbers. However, since comps were essentially flat for the month, and down 0.4% for the quarter, CEO Greg Scott must have been referring to some other customer when he said, "We are pleased with our customers' response to the product currently in our stores and are reacting accordingly."

Comps measure the growth of a company's sales at stores open for at least a year, excluding any increases owed to expansion. With lower-than-expected sales growth, and earnings coming in at the low end of expectations, perhaps Scott's simply thankful that comps weren't negative for the month again.

What management does:
Bebe is known for sexy clothes, period. When it started to fray that concept by offering 60's-style fashions, it had to start putting stuff on sale, and both revenues and margins took a hit. The company says it's mended its ways, but fashion shoppers are a fickle lot, and getting them back into your stores is not as simple as raising your hemlines or using more Lycra. In an industry that already throws plenty of curves, it may take a bit longer for bebe's core customer to return.

























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The Motley Fool Stock Advisor recommendation has been as volatile as a pampered supermodel. Risks abound in any fashion stock, and bebe, so long on the leading end of that trend, has weathered its share of storms. Yet certain threads seem to carry greater risk of unraveling -- for example, the loss of the company's "trend spotter," Neda Mashouf, the soon-to-be ex-wife of chairman and founder Manny Mashouf.

Trying to spot the difference between what's hot and what's oh-so-last year is a constant process, and any retailer is bound to have a miss or two. The bebe brand does not seem damaged by its forage away from its classic look. Though its return to health might not be immediate, that doesn't mean the company won't recover at all.

With a valuation equal to industry rivals Gap (NYSE:GPS) and Abercrombie & Fitch (NYSE:ANF), bebe still trades at a significant discount to Guess? (NYSE:GES) and H&M, and it should offer investors an alluring value.

Related Foolishness:

bebe Stores has earned a four-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock rating service by joining today. It's free!

bebe is a recommendation of Motley Fool Stock Advisor, where Fool co-founder Tom Gardner has unraveled this retailer's tale. A 30-day guest pass gives you full access to all of Tom and his brother David's market-beating recommendations.

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. Gap is both a Stock Advisor and an Inside Value pick. The Motley Fool has a disclosure policy.