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GuruFocus has detected 2 Warning Signs with bebe stores Inc \$BEBE.
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bebe stores Inc (NAS:BEBE)
Gross Profit
\$114.8 Mil (TTM As of Dec. 2016)

bebe stores Inc's gross profit for the three months ended in Dec. 2016 was \$35.0 Mil. bebe stores Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$114.8 Mil.

Gross Margin is calculated as gross profit divided by its revenue. bebe stores Inc's gross profit for the three months ended in Dec. 2016 was \$35.0 Mil. bebe stores Inc's revenue for the three months ended in Dec. 2016 was \$101.9 Mil. Therefore, bebe stores Inc's Gross Margin for the quarter that ended in Dec. 2016 was 34.36%.

bebe stores Inc had a gross margin of 34.36% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of bebe stores Inc was 47.97%. The lowest was 30.96%. And the median was 39.53%.

Warning Sign:

bebe stores Inc gross margin has been in long term decline. The average rate of decline per year is -4.7%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

bebe stores Inc's Gross Profit for the fiscal year that ended in Jun. 2016 is calculated as

 Gross Profit (A: Jun. 2016 ) = Revenue - Cost of Goods Sold = 393.594 - 271.752 = 121.8

bebe stores Inc's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 101.931 - 66.903 = 35.0

bebe stores Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 22.971 (Mar. 2016 ) + 29.328 (Jun. 2016 ) + 27.495 (Sep. 2016 ) + 35.028 (Dec. 2016 ) = \$114.8 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

bebe stores Inc's Gross Margin for the quarter that ended in Dec. 2016 is calculated as

 Gross Margin (Q: Dec. 2016 ) = Gross Profit (Q: Dec. 2016 ) / Revenue (Q: Dec. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 35.0 / 101.931 = 34.36 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

bebe stores Inc had a gross margin of 34.36% for the quarter that ended in Dec. 2016 => Competition eroding margins

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

bebe stores Inc Annual Data

 Jun07 Jun08 Jun09 Jun10 Jun11 Jun12 Jun13 Jun14 Jun15 Jun16 Gross_Profit 321.8 315.4 243.2 193.9 191.8 208.8 154.2 138.1 145.2 121.8

bebe stores Inc Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 32.8 47.9 28.2 36.3 27.9 41.7 23.0 29.3 27.5 35.0
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