Bebe Stores Inc. (BEBE) seems to be derailing after reporting dismal fourth-quarter fiscal 2014 results on Sep 4, 2014 with 62.8% year-to-date return, as the company’s shares have plunged 12.2% since. Moreover, this Zacks Rank #4 (Sell) stock hit a 52-week low of $2.02 yesterday, before closing at $2.03 and dropping 4.69% during the day.

Bebe has been losing momentum because of the intense promotional headwinds, a tough retail environment and higher operating costs. Also, the company recently closed its 2b division as the brand was a financial burden, which weighed significantly on its sales.

In the last reported quarter, Bebe’s loss per share from continuing operations came in at 30 cents, wider than both the prior-year quarter figure and the Zacks Consensus Estimate of a loss of 20 cents.

Further, net sales of this women’s clothing and accessories designer fell 8.7% to $103.6 million and missed the Zacks Consensus Estimate of $106 million. The decline resulted from store closures that led to slow traffic, coupled with a 1.9% decline in the company’s quarterly comparable-store sales.

Additionally, the company’s selling, general and administrative expenses, as a percentage of sales, expanded 820 basis points to 54.2% on account of higher advertising expenses and costs associated with corporate restructuring, store closures, impairment and CEO transition.

Following these shortfalls, the Zacks Consensus Estimate of loss for both fiscal 2015 and 2016 have widened significantly over the past 60 days, moving from 38 to 59 cents and from 8 to 39 cents per share, respectively. This is likely to further reduce investor confidence in the stock.

Although the company has been displaying disappointing results lately, it has undertaken several initiatives for brand development, delivery of operational efficiencies and cash savings to enhance shareholder value.

Further, it plans to maintain its commitment toward efficient inventory management, cost cutting and investments in projects which require less capital and generate more revenues. With these efforts underway, Bebe hopes to boost sales and enhance margins.

Better-ranked stocks in the apparel-shoe industry include Citi Trends Inc. (CTRN) and Christopher & Banks Corp. (CBK), both carrying a Zacks Rank #1 (Strong Buy) and DSW Inc. (DSW) with a Zacks Rank #2 (Buy).

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