bebe stores ($BEBE) — FY20 Update (9/8/2020)

As a retailer with a mid-summer fiscal yearend, BEBE has finally reported FY2020 annual results!

A quick recap of the stock:

  • BEBE is in the business of owning retail brands through joint ventures where the JV partner handles all operations — BEBE has no employees
  • There are 11.4m shares outstanding x $4 share price = $46m market cap. Net cash of $8m makes it a $36m EV.
  • Earnings from JVs were $8.4m in FY20 with $1.3m in SG&A for $0.64 in earnings per share
  • Stock trades at roughly 5x EV/earnings
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BEBE received $8.8m in cash distributions from JVs in FY20 — reminder that they received $6m in a one-time distribution from BB Brand Holdings in FY19:

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The big concern here was how the JV brands would perform during COVID and store closures…

I was a bit relieved with Q4 equity earnings of ~$2.4m ($0.21 per share) compared to $4.2m ($0.37 per share) in Q4 of FY19… This is still down ~40% YoY but much better than the share price or dividend cut have been indicating… (as a reminder, the dividend went from $0.17/sh to $0.06/sh).

Overall, from Jan 1 to Jul 4 of calendar 2020, BEBE has earning $0.35 per share in net income… That’s over a 6-month period and this remains a $4 stock!

Another $0.70/sh in net cash doesn’t hurt either…

8x net earnings of $7.5m = $60m + $8m in net cash (which is purely excess cash given the minimal cost structure) = $68m market value or $6 per share — 50% upside from today’s price…

This seems pretty conservative… There’s a good chance BEBE eventually deploys cash to acquire another 1-3 brands adding $1m in net earnings apiece…

In the meantime, they should continue to pay out all earnings as dividends and could resume the normal pace after things stabilize in Q3… Call it $0.60/sh in dividends = 15% yield at today’s prices… This is a fine return even if nothing exciting happens for years…