• Q1 net loss widened to $9.2m from $2.6m
  • Net sales down 2.6% to $114.1m from $117.1m
  • Comparable store sales decreased 2.8% 

Women's wear retailer Bebe Stores has seen its first quarter losses widen on falling sales and margins - but says the results mark the beginning of its turnaround.

"We saw a favourable response to our new merchandising strategy while we continued to clear through legacy merchandise during the quarter," said CEO Steve Birkhold.

"While the retail environment remains difficult, we continue to focus on our turnaround initiatives and remain confident that we are taking the right strategic direction."

He added: "Fiscal first quarter 2014 marks the beginning of our turnaround journey.

The company, which operates 233 stores, said the decline in comparable store sales has improved sequentially, with the first quarter drop of 2.8% marking progress on the 8.7% drop seen in the same period last year and the 7.1% decrease booked in the fourth quarter of fiscal 2013.

The results were driven by "slight improvement in both traffic and conversion," a statement said.

Gross margin in the three months to 5 October decreased to 35.6% from 36.1% a year ago, largely due to the increase in markdowns to clear through legacy products.

At the end of the quarter, average finished goods inventory per square foot was 0.7% lower than the prior year.

Looking ahead, Bebe Stores expects second quarter comparable store sales to be in the negative mid-single digit range "considering the challenging and highly promotional retail environment."

It also sees gross margin falling on the prior year due to higher markdowns on legacy inventory, higher promotional activity and the deleveraging of certain fixed costs.