- The first product offering from the design lab is collaboration between bebe and actress/designer, Tara Subkoff. Ms. Subkoff was one of the original founders of Imitation of Christ, and will be offering a collection of designs for the fashion for bebe client. This collection will launch in all of stores during the first week of February, next week under the label Tara Subkoff for bebe.
- The company continues to believe that it will see strength in bebe accessories business. The company has seen continued improvement in the trends during January. The company launched first accessory catalog last week to 500,000 customers.
- The company will see continued strength in handbag including signature handbags and shoes. In addition, the company will rollout sunglasses to 40 additional locations this spring. Six, BEBE SPORT will be investing in bbsp logo and shoes.

- The bbsp business will be supported by the investment in iconic essentials, which will consist of three core bottoms, and an increased penetration of fashion offerings.
- On the international front, the company will be opening two additional stores.
- Over the next 12 months, the company plans to expand to seven new countries: Saudi Arabia, Egypt, Kuwait, Russia, Ukraine, Romania and Mexico. The company is excited about the opening of the first store in Mexico City this April, and look forward to continued international growth as a priority for the company.

- Rebecca Romijn will be featured in the bebe advertising through the beginning of March. Beginning in the middle of March, the company will return to be featuring a model in bebe advertising as Rebecca’s contract has ended.
- The company has been pleased with the results of marketing featuring in Rebecca Romijn, and core client has responded favorably.

- The company anticipates spending to be approximately 5% of sales on total advertising versus 3.9% in the prior year, as a result of the BEBE SPORT campaign, and doubling circulation in bebe direct to 1.5 million from 550,000 last year. This increase is driven by the first accessory catalog in January, and an increase in circulation of March book.

- The company mailed 500,000 of first accessory catalogs featuring a Valentine''s gift giving offer. In March, the company has increased bebe catalog from 550,000 last year to 1 million this year. The company will hold semi-annual collection preview event in March in both bebe and BEBE SPORT during week two of March versus week three last year.
- The company will open three bebe stores including the signature store at Oak Street in Chicago with a newly designed logo areas. This store will have many features similar to store on Rodeo Drive and Columbus Circle in New York City. The company will expand one bebe store at Roosevelt Field on Long Island, and open one new SPORT store. The seven ""to be bebe"" stores are planned to open in fiscal fourth quarter.

- The company anticipates comparable store sales to be in the negative mid single digit range.
- Earnings per share should be in the range of 8 cents per share to 12 cents per share based on 91 million weighted average shares outstanding in the third quarter versus 14 cents per share per share based on 95 million weighted average shares outstanding in the third quarter of fiscal 2007.
- The company is currently anticipating an effective tax rate of 35%.
- Inventory at the end of the quarter will be down versus the prior year per square foot in the low to mid single digits.
- Advertising will be approximately 5% versus 3.9% in the prior year as a percentage of sales.

Fiscal 2008 Outlook

- Advertising spend will be 4.5% of sales versus 4.1% last year. This increase is driven by investment in BEBE SPORT advertising, including Eva Longoria. bebe will be featured in Elle, Vogue, Cosmo, and InStyle and BEBE SPORT will be featured in Elle, Glamour, InStyle and Shape.
- Capital expenditures are planned at approximately $45 million for new and expanded stores, IS&T and office improvements.
- Depreciation expense will be approximately $23 million.
- Total square footage is anticipated to be approximately 14% higher than fiscal year 2007.

Key questions from the second quarter earnings call conducted by Bebe Stores Inc. on January 31, 2008.

Betty Chen (Wedbush Morgan Securities): Could you talk about especially your club bebe customers?

Greg Scott: We continue to be happy with our club bebe participation. Club bebe sales are still a large percent of our sales. I believe that we should be offering continued fashion to our bebe customers. We should be offering less depth of fashion item than we have had in the past, in the sense that I still want to offer a lot of freshness and newness on a continued basis but not as much depth and the depth will come from proven reorder items. The area that we need to focus on in terms of a fashion perspective would be our sportswear, suiting and bottoms categories, where we have struggled in the last two quarters, where we continue to see great performance in our denim business. We are offering the right thing for her or in direct business, we are offering the right thing for her, and we are still having success in our tops and our sweaters business. I would say in a nutshell in the bebe apparel world collection including suiting and bottoms.

Betty Chen (Wedbush Morgan Securities): Was the average dollar sale down across the business this past quarter?

Walter Parks: Yes. It was down about 3%.

Lauren Levitan (Cowen & Company): You talked about the reduction in depth of the fashion buys. How you feel about the inventory composition currently?

Greg Scott: We did a good job did of converting markdowns into January. Our inventories opened 6% less on an average square foot basis. I believe by the end of this quarter, we will be down in the mid single digits, and that is in line with sales also. We have started this philosophy a quarter ago, and I still think we are heavy on some of our fashion buys, that we have taken reductions already. I feel we are headed in right direction. I am not anticipating today large markdowns that I am foreseeing, but other retailers have said, this climate is non-historical, and I would say that as I look today I would say I am happy with our inventory composition, I am happy with our markdown levels, I wish they were low, and I think one of the ways to get them lower is to reduce our fashion risk. It could change based on where the economic conditions for the overall consumer goes in the quarter.

Lauren Levitan (Cowen & Company): How much of the weakness that you have seen in the last couple of quarters would you attribute to an erosion in the confidence of your consumers overall, and how much would you attribute to fashion direction and merchandising decisions within bebe?

Greg Scott: I will always take responsibility for our business. We refer to the macroeconomic conditions more than usual. The only reason I am referring to them is not to blame our business on them, but to just state that, that has changed the historical patterns of our business. For instance, today, if the stock market drops a certain amount a day, you would necessarily see maybe not as many consumers shopping that day, and I do believe that.
However, I do take responsibility for our business and the products. As we came out of November, we were optimistic, and a lot of retailers probably were. What happened was weeks one, two and three did not perform, and what I would say is our strategy of deciding to go after value, deciding to go after key price initiative was not successful. I take responsibility for that in the sense that she does not care about price, we thought she would, we thought she would in this economy. She does not. She wants fashion, and if it is a right fashion, she will pay the price. I will attribute December to 100% of our fashion; this is in bebe apparel, because at the same time I saw my non-apparel business successful. I saw my bebe.com business successful. I saw the international business successful, and I saw SPORT business having improved margins. I would have to say we did the wrong strategy about going after price and depth in the December month.

Lauren Levitan (Cowen & Company): What are your thoughts on your ability to control expenses against a difficult environment?

Greg Scott: Even with the comp sales reported, we were able to control SG&A as a percent well. What that was about was controlling our inventories; controlling our raw material, so, we are not taking hits on raw material; controlling our store payroll expenses; controlling our corporate overhead; controlling our travel. The only reason compensation was up, was because of accounting. We have controlled expenses, and that is something this business has always done well except for the second quarter in the prior year, but we continue to do it. If the sales improve, we should continue to see deterioration involved but it should not be as substantial as it was. Part of the challenge for the next quarter, is that we are giving up a weak, and it does not seem like a lot, $8 million moved the needle. That extra week will hit the EPS by about 2 cents.

Jeff Van Sinderen (B Riley): What your plan is in terms of improving the fashion content?

Greg Scott: We won the design lab, while small, gives us an infiltration of new designers on an experimental basis, gives us some infiltration of new ideas, and Manny had a great idea when he led this charge. On Saturday, we launched Tara Subkoff for bebe. It is all over the wires, it is one of biggest buds we have had in a long time that is one of the ways. Two, splitting the merchant team in terms of wear-to-work and going out versus casual will give us that delineation, and will also give us something able to address lifestyles for our client. Three, we are always looking for new design talent everyday at something we do, Susan Peterson, the Vice President, Design are always looking for new people who can infiltrate and come in and give us new ideas, and we will continue to do that, because I do believe it is all about design, and it is a way we buy it. Design can present some great things and if we are buying too deep on the wrong thing or too light on the other thing, that will hurt you. I am making big strides right now, in the depth and the way we look at our buys. I did a 20 store tour in the month of January, for a week, and I talked to our client, I talk to the field, I saw what our markdowns were. I realized the true issue was not the re-orders, not the things that are proven, but taking fashion and buying it with too much conviction. In the sense that, if I have taken that fashion and bought less of it, I would have been a lot more profitable, lot more successful, and that is a strategy I am going with right now.