bebe stores, inc.
Announces Record Fourth Quarter Earnings
Increase of 133% to $0.21 per share
And Quarterly Dividend

BRISBANE, CALIF. – August 18, 2005 – bebe stores, inc. (Nasdaq:BEBE) today announced unaudited financial results for the fourth quarter ended July 2, 2005 and that its Board of Directors has voted to approve the quarterly cash dividend, of $0.04 per share, which will be paid on September 30, 2005 to shareholders of record as of September 19, 2005.

Net sales for the fourth quarter of fiscal 2005 were $136.9 million, up 47.0% from $93.1 million reported for the fourth quarter a year ago. As previously reported, same store sales for the quarter increased 34.2% compared to an increase of 9.0% in the prior year.

Gross profit as a percentage of net sales increased to 51.0% in the fourth quarter of fiscal 2005, compared to 47.0% in the fourth quarter of fiscal 2004. The increase in gross profit as a percentage of net sales from the prior year of 4.0% was primarily the result of favorable occupancy leverage as a result of higher comparable store sales.

SG&A expenses for the fourth quarter of fiscal 2005 were $40.4 million, or 29.5% of net sales, compared to $30.2 million, or 32.4% of net sales for the same period of the prior year. The decrease in SG&A expenses as a percent of sales is primarily due to increased leverage on compensation and fixed expenses as a result of higher comparable store sales, and reduced legal expenses.

Net earnings for the fourth quarter increased 132.1% to $19.5 million, compared to $8.4 million for the same period of the prior year. Diluted earnings per share for the fourth quarter increased 133.3% to $0.21 based on 94.9 million weighted average shares outstanding versus $0.09 based on 90.3 million weighted average shares outstanding in the same period of the prior year.

Net sales for the year-to-date period ended July 2, 2005 were $509.5 million, up 36.9% from $372.3 million reported for the year-to-date period ended June 30, 2004. As previously reported, same store sales for the year-to-date period beginning July 1, 2004 and ending July 2, 2005 increased 25.7% compared to an increase of 9.5% for the year-to-date period beginning July 1, 2003 and ending June 30, 2004.

Net earnings for the year-to-date period ended July 2, 2005 were $66.3 million, an increase of 96.2% from $33.8 million for the year-to-date period ended June 30, 2004. Diluted earnings per share for the year-to-date period ended July 2, 2005 were $0.71 based on 93.5 million weighted average shares outstanding compared to $0.38 based on 89.4 million weighted average shares outstanding for the year-to-date period ended June 30, 2004. As previously announced, fiscal 2005 results include the $0.02 per share impact of the lease accounting charge.

During the fiscal year ended July 2, 2005, the Company opened twenty-one stores, including eleven bebe stores and ten BEBE SPORT stores and closed six stores, including two bebe stores, three BEBE SPORT stores and one outlet store. For fiscal year 2005, the Company’s capital expenditures were approximately $25 million.

“The fourth quarter and fiscal year were truly amazing with comparable store sales increasing 34% and 26%, respectively. For the full year, sales increased 37% to an impressive $510 million and our operating profit increased to 20% from 14% in the prior year. We are pleased with our customer’s response to our offering of attainable luxury as we continue to elevate the brand,” said Greg Scott, bebe’s Chief Executive Officer.

For the first quarter of fiscal 2006, the Company currently anticipates comparable store sales to be in the positive low twenties range and diluted earnings per share in the range of $0.14 to $0.17 per share based on 95.3 million weighted average shares outstanding, versus $0.13 based on 90.0 million weighted average shares outstanding in the first quarter of fiscal 2005. Fiscal 2006 expected results exclude the impact of the recent accounting change requiring the expensing of stock based compensation beginning with the first quarter of fiscal 2006.

For the first quarter of fiscal 2006, the Company is currently planning finished goods inventory on a per square foot basis to be approximately 10% to 15% higher than the first quarter of fiscal 2005.

For fiscal 2006, the Company anticipates opening thirty-five stores, expanding or renovating seventeen existing stores and closing four stores resulting in an approximate square footage growth of 15%. The number of planned new stores includes twenty bebe stores, twelve BEBE SPORT stores and three bebe outlet stores. Total capital expenditures for the year will be approximately $33 million which will include capital expenditures for new stores, store expansions and renovations, information technology systems and office improvements.

bebe stores, inc. will host a conference call today, August 18, 2005 at 1:30 P.M. Pacific Time to discuss fourth quarter results. Interested parties are invited to listen to the conference by calling (888) 241-2232. A replay of the call will be available for approximately one week by calling (800) 642-1687 and using the passcode “7708582". A link to the audio replay will be available on our web site at www.bebe.com following the conference call.

bebe stores, inc. designs, develops and produces a distinctive line of contemporary women’s apparel and accessories, which it markets under the bebe, BEBE SPORT and bebe O brand names. bebe currently operates 213 stores, of which 165 are bebe stores, 31 are BEBE SPORT stores and 17 are bebe outlet stores. These stores are located in the United States, Puerto Rico and Canada. In addition, we have an online store at www.bebe.com.

The statements in this news release, other than the historical financial information, contain forward-looking statements, such as our estimates of first quarter fiscal 2006 financial results, that involve risks and uncertainties that could cause actual results to differ from anticipated results. Wherever used, the words “expect,” “plan,” “anticipate,” “believe” and similar expressions identify forward-looking statements. Any such forward-looking statements are subject to risks and uncertainties and the company’s future results of operations could differ materially from historical results or current expectations. Some of these risks include, without limitation, miscalculation of the demand for our products, effective management of our growth, decline in comparable store sales performance, ongoing competitive pressures in the apparel industry, changes in the level of consumer spending or preferences in apparel, loss of key personnel, difficulties in manufacturing, disruption of supply or adverse economic conditions, and/or other factors that may be described in the company’s annual report on Form 10-K and/or other filings with the Securities and Exchange Commission. Future economic and industry trends that could potentially impact revenues and profitability are difficult to predict.