Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Oct. 01, 2016 | Oct. 31, 2016 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | bebe stores, inc. | |
Trading Symbol | BEBE | |
Entity Central Index Key | 1,059,272 | |
Current Fiscal Year End Date | --07-01 | |
Entity Filer Category | Smaller Reporting Company | |
Document Type | 10-Q | |
Document Period End Date | Oct. 1, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 80,079,919 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Oct. 01, 2016 | Jul. 02, 2016 | Oct. 03, 2015 |
Current assets: | |||
Cash and equivalents | $ 47,278,000 | $ 55,525,000 | $ 26,542,000 |
Available for sale securities | 0 | 0 | 15,454,000 |
Receivables | 8,956,000 | 8,502,000 | 6,351,000 |
Inventories, net | 28,321,000 | 28,736,000 | 34,931,000 |
Prepaid and other | 11,493,000 | 10,498,000 | 13,830,000 |
Total current assets | 96,048,000 | 103,261,000 | 97,108,000 |
Available for sale securities | 0 | 0 | 5,290,000 |
Property and equipment, net | 67,516,000 | 72,623,000 | 89,804,000 |
Other assets | 3,448,000 | 3,561,000 | 3,861,000 |
Total assets | 167,012,000 | 179,445,000 | 196,063,000 |
Current liabilities: | |||
Accounts payable | 10,864,000 | 11,263,000 | 13,936,000 |
Accrued liabilities | 17,905,000 | 21,510,000 | 25,588,000 |
Total current liabilities | 28,769,000 | 32,773,000 | 39,524,000 |
Deferred rent and other lease incentives | 16,927,000 | 17,983,000 | 22,300,000 |
Uncertain tax positions | 85,000 | 85,000 | 82,000 |
Total liabilities | 45,781,000 | 50,841,000 | 61,906,000 |
Commitments and contingencies | |||
Shareholders’ equity: | |||
Preferred stock-authorized 1,000,000 shares at $0.001 par value per share; no shares issued and outstanding | 0 | 0 | 0 |
Common stock-authorized 135,000,000 shares at $0.001 par value per share; issued and outstanding 80,079,919, 80,051,155 and 79,871,705 shares | 80,000 | 80,000 | 80,000 |
Additional paid-in capital | 147,988,000 | 147,513,000 | 146,228,000 |
Accumulated other comprehensive income (loss) | 659,000 | 728,000 | (2,775,000) |
Accumulated deficit | (27,496,000) | (19,717,000) | (9,376,000) |
Total shareholders’ equity | 121,231,000 | 128,604,000 | 134,157,000 |
Total liabilities and shareholders’ equity | $ 167,012,000 | $ 179,445,000 | $ 196,063,000 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Oct. 01, 2016 | Jul. 02, 2016 | Oct. 03, 2015 |
Statement of Financial Position [Abstract] | |||
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 | 1,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock, shares issued (in shares) | 0 | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 | 0 |
Common stock, shares authorized (in shares) | 135,000,000 | 135,000,000 | 135,000,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, shares issued (in shares) | 80,079,919 | 80,051,155 | 79,871,705 |
Common stock, shares outstanding (in shares) | 80,079,919 | 80,051,155 | 79,871,705 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Oct. 01, 2016 | Oct. 03, 2015 | |
Income Statement [Abstract] | ||
Net sales | $ 87,238 | $ 96,283 |
Cost of sales, including production and occupancy | 59,743 | 68,420 |
Gross margin | 27,495 | 27,863 |
Selling, general and administrative expenses | 35,720 | 44,890 |
Operating loss | (8,225) | (17,027) |
Interest and other income (loss), net | 14 | (87) |
Loss from operations, before income taxes | (8,211) | (17,114) |
Income tax provision | 17 | 27 |
Earnings in equity method investment | 450 | 0 |
Net loss | $ (7,778) | $ (17,141) |
Net loss per share amounts: | ||
Basic (in dollars per share) | $ (0.10) | $ (0.22) |
Diluted (in dollars per share) | $ (0.10) | $ (0.22) |
Basic weighted average shares outstanding (in shares) | 80,068 | 79,722 |
Diluted weighted average shares outstanding (in shares) | 80,068 | 79,722 |
Other comprehensive income (loss) | ||
Gain on available for sale securities | $ 0 | $ 48 |
Foreign currency translation adjustments | 69 | (1,047) |
Other comprehensive income (loss) | 69 | (999) |
Comprehensive loss | $ (7,709) | $ (18,140) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 01, 2016 | Oct. 03, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (7,778) | $ (17,141) |
Adjustments to reconcile net loss to cash used by operating activities: | ||
Non-cash compensation expense | 472 | 725 |
Depreciation and amortization | 4,268 | 4,510 |
Non-cash charge for asset impairment | 764 | 1,517 |
Earnings in equity method investment | (450) | 0 |
Cash receipt from equity method investment | 600 | 0 |
Other | (91) | 51 |
Changes in operating assets and liabilities: | ||
Receivables | (454) | 765 |
Inventories | 406 | (3,645) |
Prepaid expenses and other | (1,052) | (3,008) |
Accounts payable | (312) | 1,202 |
Deferred rent and other lease incentives | (1,047) | (1,570) |
Accrued liabilities | (3,091) | (2,535) |
Net cash used by operating activities | (7,765) | (19,129) |
Cash flows from investing activities: | ||
Purchase of property and equipment and store construction deposits | (376) | (2,740) |
Proceeds from sales of investment securities | 0 | 1,509 |
Net cash used by investing activities | (376) | (1,231) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock | 3 | 4 |
Net cash provided by financing activities | 3 | 4 |
Net decrease in cash and equivalents | (8,138) | (20,356) |
Effect of exchange rate changes on cash | (109) | (49) |
Cash and equivalents: | ||
Beginning of period | 55,525 | 46,947 |
End of period | $ 47,278 | $ 26,542 |
INTERIM FINANCIAL STATEMENTS
INTERIM FINANCIAL STATEMENTS | 3 Months Ended |
Oct. 01, 2016 | |
Accounting Policies [Abstract] | |
INTERIM FINANCIAL STATEMENTS | INTERIM FINANCIAL STATEMENTS The accompanying condensed consolidated balance sheets of bebe stores, inc. (the “Company”) as of October 1, 2016 and October 3, 2015 , the condensed consolidated statements of operations and comprehensive loss for the three months ended October 1, 2016 and October 3, 2015 and the condensed consolidated statements of cash flows for the three months ended October 1, 2016 and October 3, 2015 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, without audit. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States of America for annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2016. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position at the balance sheet dates and the results of operations for the periods presented have been included. The condensed consolidated balance sheet at July 2, 2016, presented herein, was derived from the audited balance sheet included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2016. The Company’s business is affected by the pattern of seasonality common to most retail apparel businesses. The results for the periods presented are not necessarily indicative of future financial results. The Company has incurred net losses and cash used in operating activities in fiscal 2016, 2015 and 2014. Cash and equivalents were $55.5 million as of July 2, 2016. During the three months ended October 1, 2016, net loss and net cash used in operating activities were $7.8 million and $7.8 million , respectively. As a result, cash and equivalents were $47.3 million as of October 1, 2016. We used $7.8 million , $38.6 million , $25.0 million and $30.3 million net of our cash in operating activities in the first quarter of fiscal 2017 and in the fiscal years 2016, 2015 and 2014 respectively. Our liquidity is dependent upon our ability to generate cash from operations along with usage of our existing cash and cash equivalents. Our strategic focus for the remainder of fiscal 2017 is to close unprofitable stores or negotiate rent reductions for stores with kickout rights or where the store lease is up for renewal. In addition, we continue to limit the size of the investment in inventory and capital expenditures. We are also expecting significant savings in selling, general and administrative expenses as compared with the prior year from the corporate restructuring activities which occurred in fiscal 2016 including headcount reductions. We believe our cash and equivalents, together with our cash flows from operations, will be sufficient to meet our operating and capital requirements for at least the next twelve months. Our future operating and capital requirements, however, will depend on numerous factors, including without limitation, investment costs for management information systems, potential investments and/or licensing arrangements, and future results of operations. The inability to generate positive cash flow from operations could have a material adverse effect on our business and financial conditions. |
FISCAL YEAR
FISCAL YEAR | 3 Months Ended |
Oct. 01, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
FISCAL YEAR | FISCAL YEAR The Company’s fiscal year is a 52 or 53 week period, each period ending on the first Saturday on or after June 30. Fiscal years 2017 and 2016 both include 52 weeks. The three month periods ended October 1, 2016 and October 3, 2015 each include 13 weeks. |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Oct. 01, 2016 | |
Accounting Policies [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS Stock Compensation In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, "Compensation - Stock Compensation (Topic 718)", which is part of the FASB's Simplification Initiative. The updated guidance simplifies the accounting for share-based payment transactions. The amended guidance is effective for fiscal years, and interim periods within those years, beginning with fiscal 2018, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. Leases In February 2016 the FASB issued ASU 2016-02, "Leases". This standard requires lessees to put most leases on their balance sheets as a right-to-use asset and a lease liability, but to continue to recognize expenses in the statements of operations in a manner similar to current accounting. The Company will adopt this standard at the beginning of fiscal year 2020 and is currently assessing the impact to the consolidated financial statements. Revenue Recognition In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers", or ASU 2014-09, which states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this, an entity will need to: identify the contract with a customer; identify the separate performance obligations in the contract; determine the transaction price; allocate the transaction price to the separate performance obligation in the contract; and recognize revenue when (or as) the entity satisfies each performance obligation. ASU No. 2014-09 will be effective beginning with fiscal year 2019. The Company is currently assessing its approach to the adoption of this standard and the impact on the results of operations and financial position. Inventory In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory". The new standard amends the guidelines for the measurement of inventory from lower of cost or market to the lower of cost and net realizable value (NRV). NRV is defined as the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. Under existing standards, inventory is measured at lower of cost or market, which requires the consideration of replacement cost, NRV and NRV less an amount that approximates a normal profit margin. This ASU eliminates the requirement to determine and consider replacement cost or NRV less an approximately normal profit margin for inventory measurement. The new standard is effective prospectively at the beginning of fiscal year 2018. The Company is currently evaluating the impact, if any, of adopting this new accounting guidance on its results of operations and financial position. |
INVESTMENTS
INVESTMENTS | 3 Months Ended |
Oct. 01, 2016 | |
Investments Schedule [Abstract] | |
INVESTMENTS | INVESTMENTS As of October 1, 2016 , the Company held no investments in auction rate securities nor any other marketable securities. As of October 3, 2015, the Company’s investment portfolio consisted of certificates of deposit and auction rate securities. The Company held short term available for sale securities totaling $15.5 million as of October 3, 2015 , that consisted entirely of certificates of deposit at cost which approximates fair value. The Company also held long term available for sale securities at fair value totaling $5.3 million as of October 3, 2015 , that consisted entirely of interest bearing auction rate securities (“ARS”). The Company held interest bearing ARS consisting of federally insured student loan backed securities. As of October 3, 2015 , the Company’s ARS portfolio totaled approximately $9.0 million and was classified as available for sale securities, net of a temporary impairment charge of $3.7 million . As of that date, the Company’s ARS portfolio consisted of approximately 22% A rated investments and 78% CCC rated investments. The Company's ARS were sold during the third quarter of fiscal 2016. The valuation of the Company’s investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact its valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates and ongoing strength and quality of market credit and liquidity. The Company had no available for sale securities as of October 1, 2016. The following is a summary of our available for sale securities as of October 3, 2015: Cost Unrealized Unrealized Estimated (In thousands) Short term certificates of deposit $ 15,454 $ — $ — $ 15,454 Long term auction rate securities $ 9,000 $ — $ 3,710 $ 5,290 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Oct. 01, 2016 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The FASB has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. As of October 1, 2016 , the Company held financial instruments that are measured at fair value on a recurring basis. These included cash equivalents consisting of money market funds. The Company determined the estimated fair value of its investment in ARS as of October 3, 2015 by reviewing trading activity for similar securities in secondary markets as well as by using a discounted cash flow model. The assumptions used in preparing the discounted cash flow model include estimates for liquidity (average of LIBOR + 5.64% ), interest rates (weighted average of 0.2% ), timing (range from 10 – 14 years), credit ratings and amount of cash flows and expected holding periods of the ARS and recent trading activity in the secondary marketplace. The following items are measured at fair value on a recurring basis as of October 1, 2016 : Description October 1, Using Quoted Prices Significant Significant (Level 1) (Level 2) (Level 3) Fair value measurements at reporting date (In thousands) Cash equivalents $ 236 $ 236 $ — $ — Total $ 236 $ 236 $ — $ — The following items are measured at fair value on a recurring basis as of July 2, 2016: Description July 2, Using Quoted Prices Significant Significant (Level 1) (Level 2) (Level 3) Fair value measurements at reporting date (In thousands) Cash equivalents $ 236 $ 236 $ — $ — Total $ 236 $ 236 $ — $ — The following items are measured at fair value on a recurring basis as of October 3, 2015 : Description October 3, 2015 Using Quoted Prices Significant Significant (Level 1) (Level 2) (Level 3) Fair value measurements at reporting date (In thousands) Cash equivalents $ 426 $ 426 $ — $ — Current available for sale securities 15,454 — 15,454 — Long term auction rate securities 5,290 — — 5,290 Total $ 21,170 $ 426 $ 15,454 $ 5,290 An impairment charge was recorded in accumulated other comprehensive income that reduced the carrying amount of the applicable non-current assets of $9.0 million to their fair value of $5.3 million as of October 3, 2015 . Non-Financial Assets: The Company measures certain non-financial assets and liabilities, including long-lived assets, at fair value on a non-recurring basis. During the three months ended October 1, 2016 and October 3, 2015 , the Company recorded impairment charges of approximately $0.8 million and $1.5 million , respectively, related to under-performing stores. The following table presents the Company’s considerations of at-risk assets for the three month periods ended October 1, 2016 and October 3, 2015 , respectively: Three Months Ended October 1, 2016 October 3, 2015 (dollar amounts in millions) Number of stores identified as at risk and evaluated for impairment 7 11 Number of stores identified as at risk, but not impaired (3 ) (5 ) Number of stores identified as at risk with impairment 4 6 Total carrying amount of stores identified as at risk prior to any impairment charges taken $ 1.7 $ 2.3 Total carrying amount of stores identified as at risk, but not impaired (0.9 ) (0.8 ) Total carrying amount of stores identified for impairment 0.8 1.5 Impairment charges recorded during the period $ 0.8 $ 1.5 The fair market value of these assets was determined using the income approach and Level 3 inputs, which require management to make significant estimates about future operating plans and projected cash flows. Management estimates the amount and timing of future cash flows based on its experience and knowledge of the retail market in which each store operates. The assumptions used in preparing the discounted cash flow model and the related sensitivity analysis around the discounted cash flow model include estimates for weighted average cost of capital 11.0% and annual revenue growth rates (range from 0.0% – 5.0% ). The stores not impaired had undiscounted cash flows that exceeded their net carrying amount at a weighted average of 126% for the three month period ended October 1, 2016 . For the three months ended October 3, 2015 , the stores not impaired had undiscounted cash flows that exceeded their net carrying amount at a weighted average of 52% . The impairment charge is included in selling, general and administrative expenses (“SG&A”) in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company was not required to measure any other significant non-financial assets and liabilities at fair value. |
INVENTORIES
INVENTORIES | 3 Months Ended |
Oct. 01, 2016 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES The Company’s inventories consisted of: As of October 1, 2016 July 2, 2016 October 3, 2015 (In thousands) Raw materials $ 717 $ 903 $ 773 Merchandise available for sale 27,604 27,833 34,158 Inventories, net $ 28,321 $ 28,736 $ 34,931 |
CREDIT FACILITIES
CREDIT FACILITIES | 3 Months Ended |
Oct. 01, 2016 | |
Debt Disclosure [Abstract] | |
CREDIT FACILITIES | CREDIT FACILITIES On May 14, 2014, the Company entered into a secured stand-by letter of credit agreement which provides for issuance of one or more stand-by letters of credit. As of October 1, 2016 , the Company had $5.0 million outstanding, related to four stand-by letters of credit and $0.2 million outstanding related to one commercial letter of credit. To date, no beneficiary has drawn upon any stand-by letter of credit. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Oct. 01, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expenses. The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In evaluating whether it is more likely than not that some or all of the Company’s deferred tax assets will not be realized, it considers all available positive and negative evidence, including recent year’s operational results which is objectively verifiable evidence. As a result of its evaluation of the realizability of its deferred tax assets as of October 1, 2016 , the Company continues to believe, based upon all available evidence, that it is more likely than not that the majority of its deferred tax assets will continue to not be realized. Accordingly, the tax benefit related to the current quarter losses is not recognized. The Company will continue to maintain a valuation allowance against its deferred tax assets until the Company believes it is more likely than not that these assets will be realized in the future. If sufficient positive evidence arises in the future indicating that all or a portion of the deferred tax assets meet the more likely than not standard, the valuation allowance will be reversed accordingly in the period that such determination is made. |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 3 Months Ended |
Oct. 01, 2016 | |
Earnings Per Share [Abstract] | |
EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is computed as net earnings divided by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur from common shares issuable through the exercise of dilutive stock options. There is no difference between the number of shares used in the basic and diluted earnings per share computations. Excluded from the computation of the number of diluted weighted average shares outstanding were options to purchase 2,368,874 and 3,799,152 shares of common stock for the three months ended October 1, 2016 and October 3, 2015 , respectively, which would have been anti-dilutive. |
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION | 3 Months Ended |
Oct. 01, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK BASED COMPENSATION | STOCK BASED COMPENSATION The following table summarizes the stock based compensation expense recognized under the Company’s stock plan during the three months ended October 1, 2016 and October 3, 2015 : Three Months Ended October 1, 2016 October 3, 2015 (In thousands) Stock options $ 86 $ 336 Nonvested stock awards/units 386 389 Total stock based compensation expense $ 472 $ 725 Unrecognized compensation cost related to nonvested stock options and nonvested stock awards/units totaled approximately $0.0 million and $0.8 million , respectively, as of October 1, 2016 . This cost is expected to be recognized over a weighted average period of 1.0 years and 2.1 years respectively. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 3 Months Ended |
Oct. 01, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | LEGAL PROCEEDINGS As of the date of this filing, the Company is involved in ongoing legal proceedings as described below. A former employee filed a complaint against the Company on November 2, 2010, in the Superior Court of California, San Bernardino County (Case No. CIVRS1011823) alleging failure to pay wages, failure to provide meal and rest periods, and other violations of the California Labor Code and Business & Professions Code §17200 et. seq . The plaintiff purported to bring the action on behalf of current and former California bebe stylists and sales associates who are similarly situated. The complaint sought damages, civil penalties, and injunctive relief among other remedies. The Company continues to defend itself against the claims. The parties are conducting discovery. The trial date is set for April 10, 2017. The Company is unable to estimate an amount or range of any reasonably possible losses. A customer served the Company with a complaint on January 31, 2014, in the United States District Court for the Northern District of California (Civil Action No. C14-267 DMR) alleging various violations of the Telephone Consumer Protection Act (47 U.S.C. §§227 et seq .) and violations of California’s unfair competition law (California Business and Professions Code §§ 17200, et seq .) stemming from an alleged failure to obtain customer consent prior to sending text messages. The plaintiff purported to bring the action on behalf of others similarly situated. The complaint sought damages and injunctive relief among other remedies. The parties are conducting discovery. There is no trial date set. The Company continues to defend itself against the claims. The Company is unable to estimate an amount or range of any reasonably possible losses. A companion proceeding, previously reported, in the United States District Court for the Northern District of California (Civil Action No. 3:14-CV-01968)) was consolidated with this action. The Company is subject to various other legal proceedings and claims arising in the ordinary course of business. Regarding all matters referenced herein, the Company intends to defend itself vigorously and has accrued estimated amounts of liability where required, appropriate and determinable. Any such estimates may be revised as further information becomes available. The results of any litigation are inherently uncertain and as such the Company cannot assure that it will be able to successfully defend itself in these lawsuits nor that any amounts accrued are sufficient. The Company believes that the legal proceedings referenced herein, as well as the amounts accrued as of this filing, either individually or in the aggregate, will not have a material adverse effect on our business, financial condition or results of operations. |
INTERIM FINANCIAL STATEMENTS (P
INTERIM FINANCIAL STATEMENTS (Policies) | 3 Months Ended |
Oct. 01, 2016 | |
Accounting Policies [Abstract] | |
Interim financial statements | The accompanying condensed consolidated balance sheets of bebe stores, inc. (the “Company”) as of October 1, 2016 and October 3, 2015 , the condensed consolidated statements of operations and comprehensive loss for the three months ended October 1, 2016 and October 3, 2015 and the condensed consolidated statements of cash flows for the three months ended October 1, 2016 and October 3, 2015 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, without audit. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States of America for annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2016. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position at the balance sheet dates and the results of operations for the periods presented have been included. The condensed consolidated balance sheet at July 2, 2016, presented herein, was derived from the audited balance sheet included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2016. The Company’s business is affected by the pattern of seasonality common to most retail apparel businesses. The results for the periods presented are not necessarily indicative of future financial results. |
Fiscal year | The Company’s fiscal year is a 52 or 53 week period, each period ending on the first Saturday on or after June 30. Fiscal years 2017 and 2016 both include 52 weeks. The three month periods ended October 1, 2016 and October 3, 2015 each include 13 weeks. |
Recent Accounting Pronouncements | Stock Compensation In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, "Compensation - Stock Compensation (Topic 718)", which is part of the FASB's Simplification Initiative. The updated guidance simplifies the accounting for share-based payment transactions. The amended guidance is effective for fiscal years, and interim periods within those years, beginning with fiscal 2018, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. Leases In February 2016 the FASB issued ASU 2016-02, "Leases". This standard requires lessees to put most leases on their balance sheets as a right-to-use asset and a lease liability, but to continue to recognize expenses in the statements of operations in a manner similar to current accounting. The Company will adopt this standard at the beginning of fiscal year 2020 and is currently assessing the impact to the consolidated financial statements. Revenue Recognition In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers", or ASU 2014-09, which states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this, an entity will need to: identify the contract with a customer; identify the separate performance obligations in the contract; determine the transaction price; allocate the transaction price to the separate performance obligation in the contract; and recognize revenue when (or as) the entity satisfies each performance obligation. ASU No. 2014-09 will be effective beginning with fiscal year 2019. The Company is currently assessing its approach to the adoption of this standard and the impact on the results of operations and financial position. Inventory In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory". The new standard amends the guidelines for the measurement of inventory from lower of cost or market to the lower of cost and net realizable value (NRV). NRV is defined as the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. Under existing standards, inventory is measured at lower of cost or market, which requires the consideration of replacement cost, NRV and NRV less an amount that approximates a normal profit margin. This ASU eliminates the requirement to determine and consider replacement cost or NRV less an approximately normal profit margin for inventory measurement. The new standard is effective prospectively at the beginning of fiscal year 2018. The Company is currently evaluating the impact, if any, of adopting this new accounting guidance on its results of operations and financial position. |
Fair value measurements | The FASB has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
Fair value of financial instruments | The valuation of the Company’s investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact its valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates and ongoing strength and quality of market credit and liquidity. The fair market value of these assets was determined using the income approach and Level 3 inputs, which require management to make significant estimates about future operating plans and projected cash flows. Management estimates the amount and timing of future cash flows based on its experience and knowledge of the retail market in which each store operates. The assumptions used in preparing the discounted cash flow model and the related sensitivity analysis around the discounted cash flow model include estimates for weighted average cost of capital 11.0% and annual revenue growth rates (range from 0.0% – 5.0% ). |
Income taxes | Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expenses. The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In evaluating whether it is more likely than not that some or all of the Company’s deferred tax assets will not be realized, it considers all available positive and negative evidence, including recent year’s operational results which is objectively verifiable evidence. |
Earnings per share | Basic earnings (loss) per share is computed as net earnings divided by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur from common shares issuable through the exercise of dilutive stock options. |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 3 Months Ended |
Oct. 01, 2016 | |
Investments Schedule [Abstract] | |
Summary of Available for Sale Securities | The following is a summary of our available for sale securities as of October 3, 2015: Cost Unrealized Unrealized Estimated (In thousands) Short term certificates of deposit $ 15,454 $ — $ — $ 15,454 Long term auction rate securities $ 9,000 $ — $ 3,710 $ 5,290 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Oct. 01, 2016 | |
Fair Value Disclosures [Abstract] | |
Summary of Items Measured at Fair Value on a Recurring Basis | The following items are measured at fair value on a recurring basis as of October 1, 2016 : Description October 1, Using Quoted Prices Significant Significant (Level 1) (Level 2) (Level 3) Fair value measurements at reporting date (In thousands) Cash equivalents $ 236 $ 236 $ — $ — Total $ 236 $ 236 $ — $ — The following items are measured at fair value on a recurring basis as of July 2, 2016: Description July 2, Using Quoted Prices Significant Significant (Level 1) (Level 2) (Level 3) Fair value measurements at reporting date (In thousands) Cash equivalents $ 236 $ 236 $ — $ — Total $ 236 $ 236 $ — $ — The following items are measured at fair value on a recurring basis as of October 3, 2015 : Description October 3, 2015 Using Quoted Prices Significant Significant (Level 1) (Level 2) (Level 3) Fair value measurements at reporting date (In thousands) Cash equivalents $ 426 $ 426 $ — $ — Current available for sale securities 15,454 — 15,454 — Long term auction rate securities 5,290 — — 5,290 Total $ 21,170 $ 426 $ 15,454 $ 5,290 |
Summary of Considerations of At-Risk Assets | The following table presents the Company’s considerations of at-risk assets for the three month periods ended October 1, 2016 and October 3, 2015 , respectively: Three Months Ended October 1, 2016 October 3, 2015 (dollar amounts in millions) Number of stores identified as at risk and evaluated for impairment 7 11 Number of stores identified as at risk, but not impaired (3 ) (5 ) Number of stores identified as at risk with impairment 4 6 Total carrying amount of stores identified as at risk prior to any impairment charges taken $ 1.7 $ 2.3 Total carrying amount of stores identified as at risk, but not impaired (0.9 ) (0.8 ) Total carrying amount of stores identified for impairment 0.8 1.5 Impairment charges recorded during the period $ 0.8 $ 1.5 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Oct. 01, 2016 | |
Inventory Disclosure [Abstract] | |
Summary of Inventories | The Company’s inventories consisted of: As of October 1, 2016 July 2, 2016 October 3, 2015 (In thousands) Raw materials $ 717 $ 903 $ 773 Merchandise available for sale 27,604 27,833 34,158 Inventories, net $ 28,321 $ 28,736 $ 34,931 |
STOCK BASED COMPENSATION (Table
STOCK BASED COMPENSATION (Tables) | 3 Months Ended |
Oct. 01, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock Based Compensation Expense Recognized Under Stock Plan | The following table summarizes the stock based compensation expense recognized under the Company’s stock plan during the three months ended October 1, 2016 and October 3, 2015 : Three Months Ended October 1, 2016 October 3, 2015 (In thousands) Stock options $ 86 $ 336 Nonvested stock awards/units 386 389 Total stock based compensation expense $ 472 $ 725 |
INTERIM FINANCIAL STATEMENTS -
INTERIM FINANCIAL STATEMENTS - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Oct. 01, 2016 | Oct. 03, 2015 | Jul. 02, 2016 | Jul. 04, 2015 | Jul. 05, 2014 | |
Accounting Policies [Abstract] | |||||
Cash equivalents and short-term available securities | $ 47,300 | $ 55,500 | |||
Net loss | 7,778 | $ 17,141 | |||
Net cash used in operating activities | $ 7,765 | $ 19,129 | $ 38,600 | $ 25,000 | $ 30,300 |
INVESTMENTS - Narrative (Detail
INVESTMENTS - Narrative (Details) - USD ($) | 3 Months Ended | ||
Oct. 03, 2015 | Oct. 01, 2016 | Jul. 02, 2016 | |
Schedule of Available-for-sale Securities [Line Items] | |||
Current available for sale securities | $ 15,454,000 | $ 0 | $ 0 |
Marketable securities | 0 | ||
Long term auction rate securities | 5,290,000 | $ 0 | $ 0 |
Temporary impairment charge | $ 3,700,000 | ||
Standard & Poor's, A Rating | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Company's ARS portfolio percentage | 22.00% | ||
Standard & Poor's, CCC Rating | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Company's ARS portfolio percentage | 78.00% | ||
Long Term Auction Rate Securities Gross | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Long term auction rate securities | $ 9,000,000 | $ 0 |
INVESTMENTS - Summary of Availa
INVESTMENTS - Summary of Available for Sale Securities (Details) $ in Thousands | Oct. 03, 2015USD ($) |
Short term | Short term certificates of deposit | |
Schedule of Available-for-sale Securities [Line Items] | |
Cost | $ 15,454 |
Unrealized Losses Less Than 12 Months | 0 |
Unrealized Losses 12 Months or Greater | 0 |
Estimated Fair Value | 15,454 |
Long term | Long term auction rate securities | |
Schedule of Available-for-sale Securities [Line Items] | |
Cost | 9,000 |
Unrealized Losses Less Than 12 Months | 0 |
Unrealized Losses 12 Months or Greater | 3,710 |
Estimated Fair Value | $ 5,290 |
FAIR VALUE MEASUREMENTS - Narra
FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Oct. 01, 2016 | Oct. 03, 2015 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Weighted average interest rate | 0.20% | |
Carrying amount of the non-current available for sale securities | $ 9 | |
Fair value of available-for-sale securities | 5.3 | |
Impairment charges recorded during the period | $ 0.8 | $ 1.5 |
Weighted average cost of capital | 11.00% | |
Percentage of undiscounted cash flows exceeded net carrying value | 126.00% | 52.00% |
Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Discounted cash flow model, estimated timing | 10 years | |
Annual revenue growth rates | 0.00% | |
Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Discounted cash flow model, estimated timing | 14 years | |
Annual revenue growth rates | 5.00% | |
LIBOR | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Discounted cash flow model, estimated interest rate | 5.64% |
FAIR VALUE MEASUREMENTS - Summa
FAIR VALUE MEASUREMENTS - Summary of Items Measured at Fair Value on a Recurring Basis (Details) - USD ($) | Oct. 01, 2016 | Jul. 02, 2016 | Oct. 03, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Current available for sale securities | $ 0 | $ 0 | $ 15,454,000 |
Long term auction rate securities | 0 | 0 | 5,290,000 |
Fair value, measurements, recurring | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash equivalents | 236,000 | 236,000 | 426,000 |
Current available for sale securities | 15,454,000 | ||
Long term auction rate securities | 5,290,000 | ||
Total | 236,000 | 236,000 | 21,170,000 |
Fair value, measurements, recurring | Level 1 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash equivalents | 236,000 | 236,000 | 426,000 |
Current available for sale securities | 0 | ||
Long term auction rate securities | 0 | ||
Total | 236,000 | 236,000 | 426,000 |
Fair value, measurements, recurring | Level 2 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash equivalents | 0 | 0 | 0 |
Current available for sale securities | 15,454,000 | ||
Long term auction rate securities | 0 | ||
Total | 0 | 0 | 15,454,000 |
Fair value, measurements, recurring | Level 3 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash equivalents | 0 | 0 | 0 |
Current available for sale securities | 0 | ||
Long term auction rate securities | 5,290,000 | ||
Total | $ 0 | $ 0 | $ 5,290,000 |
FAIR VALUE MEASUREMENTS - Sum27
FAIR VALUE MEASUREMENTS - Summary of Considerations of At-Risk Assets (Details) $ in Millions | 3 Months Ended | |
Oct. 01, 2016USD ($)store | Oct. 03, 2015USD ($)store | |
Fair Value Disclosures [Abstract] | ||
Number of stores identified as at risk and evaluated for impairment | store | 7 | 11 |
Number of stores identified as at risk, but not impaired | store | (3) | (5) |
Number of stores identified as at risk with impairment | store | 4 | 6 |
Total carrying amount of stores identified as at risk prior to any impairment charges taken | $ 1.7 | $ 2.3 |
Total carrying amount of stores identified as at risk, but not impaired | (0.9) | (0.8) |
Total carrying amount of stores identified for impairment | 0.8 | 1.5 |
Impairment charges recorded during the period | $ 0.8 | $ 1.5 |
INVENTORIES - Summary of Invent
INVENTORIES - Summary of Inventories (Details) - USD ($) $ in Thousands | Oct. 01, 2016 | Jul. 02, 2016 | Oct. 03, 2015 |
Inventory Disclosure [Abstract] | |||
Raw materials | $ 717 | $ 903 | $ 773 |
Merchandise available for sale | 27,604 | 27,833 | 34,158 |
Inventories, net | $ 28,321 | $ 28,736 | $ 34,931 |
CREDIT FACILITIES - Narrative (
CREDIT FACILITIES - Narrative (Details) $ in Millions | Oct. 01, 2016USD ($)letter_of_credit |
Stand-by letter of credit | |
Line of Credit Facility [Line Items] | |
Line of credit facility, amount outstanding | $ | $ 5 |
Number of letters of credit | letter_of_credit | 4 |
Commercial letter of credit | |
Line of Credit Facility [Line Items] | |
Line of credit facility, amount outstanding | $ | $ 0.2 |
Number of letters of credit | letter_of_credit | 1 |
EARNINGS (LOSS) PER SHARE - Nar
EARNINGS (LOSS) PER SHARE - Narrative (Details) - shares | 3 Months Ended | |
Oct. 01, 2016 | Oct. 03, 2015 | |
Common stock | ||
Schedule of Computation of Basic and Diluted Earnings Per Common Share [Line Items] | ||
Antidilutive shares outstanding (in shares) | 2,368,874 | 3,799,152 |
STOCK BASED COMPENSATION - Summ
STOCK BASED COMPENSATION - Summary of Stock Based Compensation Expense Recognized Under Stock Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 01, 2016 | Oct. 03, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock based compensation expense | $ 472 | $ 725 |
Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock based compensation expense | 86 | 336 |
Nonvested stock awards/units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock based compensation expense | $ 386 | $ 389 |
STOCK BASED COMPENSATION - Narr
STOCK BASED COMPENSATION - Narrative (Details) $ in Millions | 3 Months Ended |
Oct. 01, 2016USD ($) | |
Nonvested stock options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation cost, nonvested stock options | $ 0 |
Expected to be recognized over a weighted average period | 1 year 18 days |
Nonvested stock awards/units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation cost, nonvested stock awards/units | $ 0.8 |
Expected to be recognized over a weighted average period | 2 years 1 month 6 days |