bebe stores, inc.
Announces Second Quarter Earnings of $0.26 per Share

BRISBANE, CALIF. – January 25, 2007 – bebe stores, inc. (Nasdaq:BEBE) today announced unaudited financial results for the second quarter ended December 30, 2006.

Net sales for the second quarter of fiscal 2007 were $196.8 million, up 17.2% from $167.9 million reported for the second quarter a year ago. Same store sales for the second quarter ended December 30, 2006 increased 5.5% compared to an increase of 2.2% in the prior year.

Gross margin as a percentage of net sales decreased to 47.9% in the second quarter of fiscal 2007, compared to 50.7% in the second quarter of fiscal 2006. The decrease in gross margin as a percentage of net sales from the prior year was primarily due to lower merchandise margins resulting from higher markdowns sold and higher inventory reserves.

SG&A expenses for the second quarter of fiscal 2007 were $58.9 million, or 30.0% of net sales, compared to $46.9 million, or 27.9% of net sales for the same period of the prior year. The increase in SG&A expenses as a percent of sales is primarily due to an increase in advertising expenses and store compensation.

Operating income for the second quarter of fiscal 2007 was $35.4 million, or 17.9% of net sales, compared to $38.2 million or 22.8% of net sales for the same period of the prior year. Net income for the second quarter is $24.3 million compared to $25.0 million for the same period of the prior year. Diluted earnings per share for the second quarter were $0.26 versus $0.27 per share in the same period of fiscal 2006.

The effective tax rate for the second quarter of fiscal 2007 decreased to 35.9% from 38.2% in the second quarter of fiscal 2006 primarily due to an increase in tax exempt interest income.

Net sales for the year-to-date period ended December 30, 2006 were $353.9 million, up 20.3% from $294.1 million for the year-to- date period ended December 31, 2005. Same store sales for the year-to-date period ended December 30, 2006 increased 8.6% compared to an increase of 8.1% in the prior year.

Net earnings for the year-to-date period ended December 30, 2006 were $44.7 million compared to $38.6 million in the prior year. Diluted earnings per share for the year-to-date period ended December 30, 2006 were $0.47 compared to $0.41 per share in the prior year.

During the second quarter ended December 30, 2006, the Company opened ten stores including five bebe stores, five BEBE SPORT stores and expanded or relocated two existing bebe stores resulting in total square footage growth of 4.3%. For the second quarter ended December 30, 2006, the Company’s capital expenditures were approximately $11 million and depreciation expense was approximately $5 million.

For the third quarter of fiscal 2007, the Company anticipates comparable store sales will be in the low single digit range and earnings per share in the range of $0.13 to $0.16 versus $0.14 per share in the third quarter of fiscal 2006. The Company is currently anticipating an effective tax rate of 36.5% for the third quarter of fiscal 2007.

For the third quarter of fiscal 2007, the Company is currently planning finished goods inventory to increase on a per square foot basis in the range of mid single digits as compared to the third quarter of fiscal 2006.

For fiscal 2007, the Company anticipates opening 40 to 45 new stores, expanding or relocating 10 existing stores and renovating 12 stores resulting in an approximate square footage growth of 16%. The number of planned new stores includes 24 to 27 bebe stores, 15 to 17 BEBE SPORT stores and one bebe accessories store offset by the closure of four stores.

bebe stores, inc. will host a conference call today, January 25, 2007 at 1:30 P.M. Pacific Time to discuss second 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 “5609258". 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, COLLECTION bebe, Neda by bebe, Neda, BEBE SPORT and bebe O brand names. bebe currently operates 256 stores, of which 186 are bebe stores, 20 are bebe outlet stores, 49 are BEBE SPORT stores and 1 is a bebe accessories store. These stores are located in the United States, Puerto Rico and Canada. In addition, there is an online store at www.bebe.com.

The statements in this news release and on our recorded message, other than the historical financial information, contain forward-looking statements 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, 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.

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