1 Analysis of BEBE Stores, Inc. Report by 3one2.com Analysts: Kristen Bender, Lynne Hail, Erin Sellman, Megan Watkins Investment Recommendation: HOLD April 4, 2001 BEBE- Nasdaq (3/16/01) $23.81 INDUSTRY Retail (Apparel) 52 Week Range $24.13 Beta 2.39 EPS Forecast FYE 3/16 1998A 1999A 2000A Earnings (mrq) 0.47 Forward P/E Forward PEG Valuation Ratios M/B 4.57 6.84 Price/ Earnings (ttm) 22.41 P/S 2.31 Price/ Book (mrq) 4.54 ROE 23.81 Price/ Sales 2.31 Valuation Predictions Management Effectiveness Actual Current Price $23.81 Return on Assets (ttm) 18.90% P/E Valuation $16.97 Return on Equity (ttm) 23.81% PEG Valuation $6.27 M/B Valuation $16.18 Financial Strength EBO (Abn Earn Val) $4.01 Current Ratio 4.03 DCF Valuation $43.53 Debt/ Equity 0 Total Cash 93.6 Million Performance of BEBE Trailing Est. 5 Years EPS Growth Rate 36.96% Actual Return Relative to S&P 500 • We have established a HOLD rating for BEBE Stores, Inc. at a target price of $18.99 • We believe that the retail apparel industry is undervalued as a whole • BEBE’s sales have grown an average of 31.1% over the past 3 years • Stores boast roughly $800 in sales per square foot per year, more than double most rivals’ • Successful international expansion in Greece, Israel, United Arab Emirates, and Singapore • Development of new distribution channels through the Internet Rating System: BUY: A strong purchase recommendation with above average long-term growth potential. MARKET OUTPERFORM : A purchase recommendation that is expected to marginally outperform the return of the market. MARKET PERFORMER: A recommendation to maintain current positions with returns to match that of the market. SELL: A recommendation to sell the security (or short the security) as it is expected to decrease in price in the medium term. BEBE- Nasdaq (3/16/01) $23.81 INDUSTRY: Retail (Apparel) 52 Week Range $24.13 Beta 2.39 EPS Forecast This Next This Next Qtr. Qtr. Year Year FYE 3/16 3/01A 6/01E 6/01E 6/02E Per Share Data EPS .22 .23 1.17 1.40 Book Value (mrq) 5.29 Earnings (ttm) 1.07 Ratios Firm Average of Competitors Earnings (mrq) 0.47 Forward P/E N/A 15.86 Forward PEG N/A 1.08 Valuation Ratios M/B 4.57 6.84 Price/ Earnings (ttm) 22.41 ROE 23.81 35.75 Price/ Book (mrq) 4.54 P/S 2.31 1.24 Price/ Sales 2.31 Valuation Predictions Management Effectiveness Actual Current Price $23.81 Return on Assets (ttm) 18.90% P/E Valuation $16.97 Return on Equity (ttm) 23.81% PEG Valuation $6.27 M/B Valuation $16.18 Financial Strength EBO (Abn Earn Val) $4.01 Current Ratio 4.03 DCF Valuation $45.53 Debt/ Equity 0 Total Cash 93.6 Mil Performance of BEBE Market Capitalization 592.9 Mil Est. 5 Years EPS Growth Rate 36.96% Shares Outstanding 24.7 Mil Book Value/share $5.29 mrq=most-recent quarter; ttm=trailing twelve months; (figures as of 3/16/01)2 Business Analysis Mission Statement “BEBE is a global company that creates and sells quality products that enhance the spirit and playful sensuality of the contemporary woman.” Company Overview BEBE designs, develops, and produces a distinctive line of contemporary women’s apparel and accessories. It designs products under the BEBE, BEBE Moda and BBSP brand names through its 139 specialty retail stores located in 27 states, the District of Columbia, Canada, the United Kingdom and its on-line store at www.bebe.com. While BEBE attracts a broad audience, its target customers are women ages 18-35 who seek current fashion trends interpreted to suit their lifestyle needs. The BEBE customer is a discriminating consumer who demands value in the form of quality at competitive prices. BEBE designs and develops most of its merchandise in-house. The merchandise is then made to specifications in conjunction with third-party apparel manufacturers or is selected directly from those manufacturers’ lines. BEBE reinforces its brand with a distinctive lifestyle image advertising campaign, using prominent fashion photographers who believe that BEBE’s emphasis on non-product specific lifestyle advertising promotes brand awareness and attracts consumers who are intrigued by the playful sensual and evocative imagery. BEBE communicates its images to consumers through advertising vehicles including fashion magazines, bus shelters, in-store displays and customer mailings. The BEBE brand image is furthered