BEBE Stores designs, develops and produces a line of contemporary women's apparel and accessories, which it markets under the BEBE and BEBE Moda and BBSP brand names through its 124 specialty retail stores. For the 6 months ended 12/31/00, revenues rose 15% to $155M. Net income fell 11% to $17.7M. Revenues reflect new store openings and increased on-line sales. Earnings were offset by increased occupancy costs and reduced net merchandise margins.

June 10, 2001

BEBE is a purveyor of contemporary women's fashions. They market their clothing towards the younger crowd and carry everything from suits to handbags. Their operating margins of 14.3% are impressive for a clothier and their 21.5% return on equity tells us that the company is run efficiently and effectively. In addition, they just reported May sales that were up 35% over last May's sales. If BEBE is doing this well under the current economic environment, just think what it can do in good times. It is a well-known fact that when the economy is coming out of a recession, people tend to spend money on clothes first. Turning to BEBE's chart, we can see that it just emerged from an inverse head and shoulders continuation pattern. The neckline was defined by the $29-level. The initial breakout occurred on Tuesday and was accompanied by good volume of 425,000 shares. This tells us that the rally has buying support. Another good sign was that the MACD issued a buy signal on Tuesday as well. Traders looking to get into our retail clothing play could look to do so on a bounce off of $29 or on a break above Friday's high of $31.47. In either case volume should be on track to do at least 300,000 shares for the day.

Picked On June 10th @ $30.80
Change Since Picked 0.00
Stop Loss @ $ $27.00

June 14, 2001

BEBE followed the S&P Retail Index (RLX.X) lower on Thursday, losing $1.34 to $30.10. We had a feeling that a sell off was coming and the good news is that the overbought condition in BEBE has been largely removed now. In addition, the stock found good support at its 10-dma at $29.80. However, going forward we will keep an eye on the MACD since it is about to issue a sell signal. Traders looking to get into BEBE should probably wait for either a bounce off support at $29.40 or a break above $32.25. In either case volume should be close to 300,000 shares for the day.

Picked On June 10th @ $30.80
Change Since Picked -0.70
Stop Loss @ $ $27.00

June 12, 2001

BEBE continues its march higher. The good news is that shares of BEBE are ascending on increasing volume. The bad news is that the stock is ripe for a pullback according to its stochastic. While we don't think that any pullback will be sharp or prolonged, we just want to get the warning out incase you see this starting to occur. With the stock only 5% above its prior base, it is by no means overly extended, however, we will caution against chasing it any higher than $32.50, as the risk of a more severe pullback increases after this point. We would rather see the stock move sideways and digest its gains before moving higher. That said traders could look to get into BEBE on a pullback to support at $31 with a subsequent bounce. Our stops remain at $27.00.

Picked On June 10th @ $30.80
Change Since Picked +1.21
Stop Loss @ $ $27.00