Women's wear retailer Bebe Stores saw its net loss widen in the second quarter as margins narrowed and sales fell.

In the quarter ended 4 January, the company reported a net loss of US$5.5m compared to a loss of $4.8m in the prior year period.

Gross margin was down 33.6% from 33.9% in the comparable period last year, primarily due to an increase in markdowns and heightened promotional activities.

Net sales were down 4.1% to $130m from $135.5m last year, while comparable store sales dropped 1.9%.

CEO Steve Birkhold said the retail environment remains challenging, and that it will continue to operate with "disciplined inventory management and cost controls".

"Looking ahead, we remain focused on executing our six strategic initiatives to move our business forward and anticipate continued improvement in comparable store sales and margin performance."

For the third quarter, Bebe said it expects comparable store sales to be flat. Gross margin is expected to be higher than the prior year, with a net loss per share in the mid-teens range.