This summary is based on the third quarter fiscal 2007 earnings call conducted by Bebe Stores, Inc. (BEBE: chart) on May 03, 2007.

Chief Executive Officer: Gregory Scott
Chief Financial Officer and Chief Operating Officer: Walter Parks

Key Investors Issues

- EPS were 14 cents per share compared to 14 cents per share a year ago.
- Net income was $12.9 million compared to $13.3 million last year.
- Revenue was $154.4 million compared to $132.8 million in the year-ago period.

Third Quarter Highlights

Net sales increased 16% to $154 million compared to sales of $133 million in the third quarter a year ago.

- Same-store sales decreased 0.4% compared to an increase of 4.7% in the prior year.
- The comparable store average dollar sales decreased approximately 1%. Average comparable store transaction increased approximately 1% and units per transaction were approximately flat when compared to the prior year.
- Net income was $12.9 million, versus $13.3 million in the prior year.
- Earnings per share is 14 cents per share on 95 million weighted average shares outstanding, compared to 14 cents per share on 94 million average weighted shares outstanding for the third quarter of fiscal 2006.

Gross margin decreased to 45.3% from 46.9% in the prior year.

This decrease is primarily due to lower merchandize margins resulting from lower than anticipated sales, higher than planned markdowns and unfavorable occupancy leverage, partially offset by lower inventory reserves.

SG&A expenses were 35.1% of sales, compared to 33.7% in the same period of the prior year.

The increase in SG&A expenses is primarily due to de-leveraging of store expenses, including store compensation and depreciation expense, partially offset by lower advertising expenses. The effective tax rate increased to 35.9% from 34.6% in the third quarter fiscal 2006, primarily due to a cumulative adjustment of temporary and permanent differences recorded in the third quarter of fiscal 2006.

The company is disappointed with the fiscal third quarter comparable stores sales performance.

- The company has returned to its core brand proposition of sexy.
- The best performing departments in BEBE division were collection separates, dresses, tops, outwear and accessories offset by weaker than planned performance in casuals including denim and sweaters.
- The company continues to struggle in casual offerings with the exception of day dresses and the company will not have an improved assortment until late June, early July for back to school.
- The company saw continued improvement in the BEBE accessory division and comparable store sales in accessories were up in the mid double-digits, this increase was driven by shoe and handbags.

Advertising expense was 90 basis points below the prior year.

This decrease as a percent of sales is the result of higher sales and a reduction in print advertising and the elimination of the BEBE Sport catalogue compared to last year.

- In March, the company mailed 550,000 BEBE catalogues compared to 500,000 BEBE catalogues mailed in the prior year.
- To replace BEBE Sport catalogue, the company has sent a mail out featuring the new face of BEBE Sports, Eva Longoria to most loyal Sport customers and the response was above expectations. The mailer was more cost effective than a catalogue and produced stronger results.

Bebe.com sales were up 27% compared to the prior year.

The company continues to leverage bebe.com as an important point of brand experience and communication with clients.

- The company lost two new product cat plumb sets, BEBE Boudoir in January and BEBE Sports Swim in late March with the introduction of Eva Longoria campaign.
- In addition to product launches, the company continues to strengthen the online component of Club Bebe program. Online participation the program grew 19%.
- Club Bebe and direct have over 1.5 million active Club Bebe members.
- Through both email and direct mail communications, objectives have been to increase wallet share with these client defined by how frequently they shop and how much they spend.
- The company continues to see increases in year-over-year clients and their existing Club Bebe clients.

- Outlook stores continue to perform well and BEBE O, outlet label performed, produced exclusively for 20 outlet stores also performed well.