By most normal standards, bebe
- Sales were up 36% over last year.
- Earnings per share were up 70% to $0.39.
- Gross margins were up 3%.
- Same-store sales were up a whopping 27.3%.
That dream turned into a nightmare for bebe owners Thursday morning, though, as a one-penny earnings miss and cautious guidance sent the shares down over 12% in early trading.
More cynical Fools might recognize this story -- small company begins posting 25%+ earnings growth, stock goes up over 100%, stock trades at four times industry average price-sales ratio, company posts minor earnings miss, stock gets creamed. Rinse and repeat.
Despite today's slide, bebe is clearly still in the center of a hot market -- upper-end retailers that cater largely to women. Peers such as Chico's FAS
With strong same-store sales, robust inventory turns, and a rational plan to build new stores, bebe doesn't appear to be in danger. Even the low end of the company's guidance for March would represent more than 20% growth over the prior year. Then again, the stock is trading at over 20 times the highest estimate for the year ending in June 2006 -- a bargain-bin stock this is not.
As today illustrates, sporting such a high valuation means that even the suggestion of a slowdown in growth will have investors treating these shares like last season's hand-me-downs. Investors who think bebe can keep the registers ringing fast enough to please Wall Street can hang on, but this stock is still just too fashion-forward for this Fool.
Fool contributor Stephen Simpson is a chartered financial analyst and has no ownership interest in any stocks mentioned.
