Bebe Analysis

Only available on StudyMode
  • Download(s) : 30
  • Published : May 27, 2012
Open Document
Text Preview
Financial Statements Final Project

for Dr. Rimona Palas

TABLE OF CONTENTS

Executive Summary ………………………………………………………………………………………… 3 Background …………………………………………………………………………………………………………… 5 Marketing Analysis………………………………………………………………………………………… 11 Porter Analysis ………………………………………………………………………… 11 SWOT Analysis ……………………………………………………………………………… 14 Financial Statements Overview ………………………………………………………… 18 Ratio Analysis ………………………………………………………………………………………………… 20 Risk Analysis …………………………………………………………………………………………………… 28

Credit risk Analysis ………………………………………………………………………………… 28 Bankruptcy Analysis …………………………………………………………………………………… 29 Valuation ……………………………………………………………………………………………………………… 30 Conclusions ………………………………………………………………………………………………………… 33 Appendix…………………………………………………………………………………………………………………… 35

1. EXECUTIVE SUMMARY

Since 1976 BEBE designs, develop and produces a line of contemporary women’s apparel and accessories. Nowadays operates 285 stores in United States and 9 stores overseas. In addition 1% of its sells are done to 14 international licenses. BEBE is publicly traded on the NASADAQ for a value over 1.2 billion. BEBE targets women between the ages of 21 and 35 who are concern about fashion. During the last four years BEBE has expanded its number of stores markets and product lines, particularly in 2004 with a change of management. BEBE’s industry is highly competitive due to very low entry barriers, many suppliers, easy substitutable products and buying power that is diluted among a large mass of buyers. In addition there are low exit barriers which predict an industry of low and stable income. BEBE’s sophisticated inventory control, high differentiation strategy and high sensitivity to fashion trend changes enable it to succeed at a domestic level however its limited size makes it difficult to compete with the largest players at a global dimension. Fashion products are highly sensitive to economic conditions therefore in case that the present forecasted crisis takes place BEBE would have a hard time striving in order to overcome it. BEBE shows a stable moderate pace of growth on revenues. BEBE sophisticated inventory management and marketing differentiation policy derives in relatively low levels of cost of revenue and inventory held. BEBE evidences extraordinary strong liquidity in an inconvenient extreme to shareholders interests. BEBE is financed purely with equity having therefore lower return on equity than its competitor while at the same time is able to yield higher return on assets than its competitor. We can appreciate how higher return on equity comes with higher risk.

We can understand watching the activity ratios that BEBE manages inventory better than its competitor and has higher account receivable turnover because BEBE’s sales are almost pure retail while its competitor has a significant portion of wholesales. BEBE neither offers material credit risk nor bankruptcy risk. However there is uncertainty on how it would be handled an eventual succession crisis of its founder that still plays a protagonist role. After applying the P/E ration valuation method combined with the DCF valuation method I recommend to hold BEBE’s stock.

2. BACKGROUND
BEBE designs, develops and produces a line of contemporary women’s apparel and accessories. Was founded in San Francisco in 1976.Nowadays operates 285 stores in United States, Canada, Puerto Rico, Virgin Islands and an online store. In addition it licenses 14 international stores. It went pubic on NASDAQ stock exchange on June 1998.Today’s market value is over 1.2 billion 2.1 The target market

Women between the ages of 21 and 35 who are sophisticated regarding their appearance concern, who seek current fashion trends to suit their lifestyle with a hint of sensuality in their look. 2.2 The industry

* The retail and apparel industries...
tracking img