|UNITED STATES SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM 10-Q



(X) QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934


For the quarterly
period ended December 31, 2003


OR


( ) TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934



Commission File Number
0-24395
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|bebe stores, inc.(Exact name of registrant as specified in its charter)
|-----------------------------------------------------------------------

|California(State or Jurisdiction of 
Incorporation or Organization) | 94-2450490(IRS EmployerIdentification Number)
|------------------------------------------------------------------- | ---------------------------------------------

|400 Valley Drive Brisbane,
California 94005(Address of principal executive offices) Telephone: (415) 715-3900



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.  [X] Yes [ ] No


Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities
Exchange Act).  [X] Yes [ ] No


Indicate the number of shares outstanding of each of the issuers of common stock, as of the latest
practicable date.


COMMON STOCK, PAR VALUE OF $0.001 PER SHARE, 25,866,834 SHARES
OUTSTANDING AS OF JANUARY 30, 2004
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|bebe stores, inc.


TABLE OF CONTENTS
|-------------------------------------

|                                                                                                                                      |                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------
|PART I                                                                                                                                | FINANCIAL INFORMATION                                                                
|ITEM 1.                                                                                                                               | Condensed Consolidated Financial Statements                                          
|Condensed Consolidated Balance Sheets as of December 31, 2003, June 30, 2003 and December 31, 2002                                   
|Condensed Consolidated Statements of Earnings for the three months and six months ended Decemer 31,
                    2003 and 2002
|Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2003 and 2002                                  
|Notes to Condensed Consolidated Financial Statements                                                                                 
|ITEM 2.                                                                                                                               | Management's Discussion and Analysis of Financial Condition and Results of Operations
|ITEM 3.                                                                                                                               | Quantitative and Qualitative Disclosures about Market Risk                           
|ITEM 4.                                                                                                                               | Controls and Procedures                                                              
|PART II                                                                                                                               | OTHER INFORMATION                                                                    
|ITEM 1.                                                                                                                               | Legal Proceedings                                                                    
|ITEM 2.                                                                                                                               | Changes in Securities and Use of Proceeds                                            
|ITEM 3.                                                                                                                               | Defaults Upon Senior Securities                                                      
|ITEM 4.                                                                                                                               | Submission of Matters to a Vote of Security Holders                                  
|ITEM 5.                                                                                                                               | Other Information                                                                    
|ITEM 6.                                                                                                                               | Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                                                           
|EXHIBIT INDEX                                                                                                                        

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|PART I.  FINANCIAL INFORMATION
ITEM 1. Condensed
Consolidated Financial Statements
|----------------------------------------------------------------------------------

|bebe stores, inc.
                                                 CONDENSED CONSOLIDATED BALANCE SHEETS
                                               (Dollars in thousands, except share data)
                                                              (unaudited)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                                                             |  |    |     | As of December 31, |    |     | As of June 30, |    |      | As of December 31, | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -- | --- | ------------------ | -- | --- | -------------- | -- | ---- | ------------------ | 
|                                                                                                                                                                             |  |    |     | 2003               |    |     | 2003           |    |      | 2002               | 
|                                                                                                                                                                             |  |    |     |                    |    |    
|Assets:                                                                                                                                                                      |  |   
|Current assets:                                                                                                                                                              |  |   
|Cash and cash equivalents                                                                                                                                                    |  |    | $   | 185,630            |    | $   | 132,889        |    | $    | 142,588            | 
|Short term marketable securities                                                                                                                                             |  |    |     | --                 |    |     | 10,500         |    |      | 5,400              | 
|Receivables                                                                                                                                                                  |  |    |     | 1,303              |    |     | 1,750          |    |      | 1,705              | 
|Inventories                                                                                                                                                                  |  |    |     | 24,855             |    |     | 25,422         |    |      | 22,149             | 
|Prepaid and other                                                                                                                                                            |  |    |     | 5,275              |    |     | 6,289          |    |      | 4,733              | 
|                                                                                                                                                                             |  |    |     |                    |    |    
|Total current assets                                                                                                                                                         |  |    |     | 217,063            |    |     | 176,850        |    |      | 176,575            | 
|Equipment and leasehold improvements, net                                                                                                                                    |  |    |     | 49,756             |    |     | 52,305         |    |      | 55,186             | 
|Long term marketable securities                                                                                                                                              |  |    |     | 7,875              |    |     | 7,875          |    |      | 2,000              | 
|Other assets                                                                                                                                                                 |  |    |     | 4,904              |    |     | 4,948          |    |      | 9,273              | 
|                                                                                                                                                                             |  |    |     |                    |    |    
|Total assets                                                                                                                                                                 |  |    | $   | 279,598            |    | $   | 241,978        |    | $    | 243,034            | 
|                                                                                                                                                                             |  |    |     |                    |    |    
|Liabilities and Shareholders' Equity:                                                                                                                                        |  |   
|Current liabilities:                                                                                                                                                         |  |   
|Accounts payable                                                                                                                                                             |  |    | $   | 14,780             |    | $   | 15,310         |    | $    | 12,003             | 
|Accrued liabilities                                                                                                                                                          |  |    |     | 19,920             |    |     | 11,700         |    |      | 17,203             | 
|Income taxes payable                                                                                                                                                         |  |    |     | 5,980              |    |     | --             |    |      | 5,128              | 
|                                                                                                                                                                             |  |    |     |                    |    |    
|Total current liabilities                                                                                                                                                    |  |    |     | 40,680             |    |     | 27,010         |    |      | 34,334             | 
|Deferred rent                                                                                                                                                                |  |    |     | 14,701             |    |     | 13,623         |    |      | 12,034             | 
|                                                                                                                                                                             |  |    |     |                    |    |    
|Total liabilities                                                                                                                                                            |  |    |     | 55,381             |    |     | 40,633         |    |      | 46,368             | 
|                                                                                                                                                                             |  |    |     |                    |    |    
|Commitments and contingencies                                                                                                                                                |  |   
|Shareholders' equity:                                                                                                                                                        |  |   
|Preferred stock-authorized 1,000,000 shares at $0.001 par
             value per share; no shares issued and outstanding                                                     |  | -- |     |                    | -- |     |                | -- |     
|Common stock-authorized 40,000,000 shares at $0.001 par
             value  per  share;  issued  and  outstanding 25,854,990,
              25,682,875 and 25,641,945 shares |  | 26 |     |                    | 26 |     |                | 26 |     
|Additional paid-in capital                                                                                                                                                   |  |    |     | 42,618             |    |     | 39,918         |    |      | 38,927             | 
|Deferred compensation                                                                                                                                                        |  |    |     | (91                | )  |     | (75            | )  |      | --                 | 
|Accumulated other comprehensive income/(loss) and other                                                                                                                      |  |    | 525 |                    |    | 269 |                |    | (101 | )                 
|Retained earnings                                                                                                                                                            |  |    |     | 181,139            |    |     | 161,207        |    |      | 157,814            | 
|                                                                                                                                                                             |  |    |     |                    |    |    
|Total shareholders' equity                                                                                                                                                   |  |    |     | 224,217            |    |     | 201,345        |    |      | 196,666            | 
|                                                                                                                                                                             |  |    |     |                    |    |    
|Total liabilities and shareholders' equity                                                                                                                                   |  |    | $   | 279,598            |    | $   | 241,978        |    | $    | 243,034            | 
|                                                                                                                                                                             |  |    |     |                    |    |    

|See
accompanying notes to condensed consolidated financial statements.
|----------------------------------------------------------------------

|3
|-

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|bebe stores, inc.
                                                 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                               (Amounts in thousands, except per share data)
                                                              (unaudited)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                              |   |         | Three Months Ended  December 31, |        | Six Months Ended  December 31, |  
|--------------------------------------------- | - | ------- | -------------------------------- | ------ | ------------------------------ | -
|                                              |   |         |                                  | 2003   |                                |  
|                                              |   |         |                                  |        |                                |  
|Net sales                                     | $ | 112,014 |                                  | $      | 100,823                        |  
|Cost of sales, including buying and occupancy |   | 57,962  |                                  |        | 52,403                         |  
|                                              |   |         |                                  |        |                                |  
|Gross profit                                  |   |         |                                  | 54,052 |                                |  
|Selling, general and administrative expenses  |   | 32,327  |                                  |        | 31,730                         |  
|                                              |   |         |                                  |        |                                |  
|Income from operations                        |   |         |                                  | 21,725 |                                |  
|Interest (income) and other, net              |   |         |                                  | (497   | )                              |  
|                                              |   |         |                                  |        |                                |  
|Earnings before income taxes                  |   |         |                                  | 22,222 |                                |  
|Provision for income taxes                    |   |         |                                  | 8,333  |                                |  
|                                              |   |         |                                  |        |                                |  
|Net earnings                                  |   |         | $                                | 13,889 |                                | $
|                                              |   |         |                                  |        |                                |  
|Basic earnings per share                      |   |         | $                                | 0.54   |                                | $
|Diluted earnings per share                    |   |         | $                                | 0.53   |                                | $
|Basic weighted average shares outstanding     |   | 25,813  |                                  |        | 25,638                         |  
|Diluted weighted average shares outstanding   |   | 26,438  |                                  |        | 25,849                         |  

|See
accompanying notes to condensed consolidated financial statements.
|----------------------------------------------------------------------

|4
|-

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|bebe stores, inc.
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               (Amounts in thousands)
                                                              (unaudited)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                |  |  | Six Months Ended December 31, |        
|------------------------------------------------------------------------------- |  |  | ----------------------------- | -------
|                                                                                |  |  |                               | 2003   
|                                                                                |  |  |                               |        
|Cash flows from operating activities:                                           |  | 
|Net earnings                                                                    |  |  | $                             | 19,932 
|Adjustments to reconcile net earnings to cash provided by operating activities: |  | 
|Non-cash compensation expense                                                   |  |  |                               | 84     
|Depreciation and amortization                                                   |  |  |                               | 6,260  
|Tax benefit from stock options exercised                                        |  |  |                               | 417    
|Net loss on disposal of property                                                |  |  |                               | 58     
|Changes in operating assets and liabilities:                                    |  | 
|Receivables                                                                     |  |  |                               | 398    
|Inventories                                                                     |  |  |                               | 579    
|Other assets                                                                    |  |  |                               | (83    
|Prepaid expenses                                                                |  |  |                               | 1,027  
|Accounts payable                                                                |  |  |                               | (530   
|Accrued liabilities                                                             |  |  |                               | 8,209  
|Income taxes payable                                                            |  |  |                               | 6,005  
|Deferred rent                                                                   |  |  |                               | 1,078  
|                                                                                |  |  |                               |        
|Net cash provided by operating activities                                       |  |  |                               | 43,434 
|                                                                                |  |  |                               |        
|Cash flows from investing activities:                                           |  | 
|Purchase of equipment and leasehold improvements                                |  |  |                               | (3,656 
|Proceeds from sales of equipment                                                |  |  |                               | --     
|Purchase of marketable securities                                               |  |  |                               | --     
|Proceeds from sale of marketable securities                                     |  |  |                               | 10,500 
|                                                                                |  |  |                               |        
|Net cash provided/(used) by investing activities                                |  |  |                               | 6,844  
|                                                                                |  |  |                               |        
|Cash flows from financing activities:                                           |  | 
|Repayments of capital leases                                                    |  |  |                               | --     
|Net proceeds from issuance of common stock                                      |  |  |                               | 2,182  
|                                                                                |  |  |                               |        
|Net cash provided by financing activities                                       |  |  |                               | 2,182  
|                                                                                |  |  |                               |        
|Effect of exchange rate changes on cash                                         |  |  |                               | 281    
|Net increase in cash and equivalents                                            |  |  |                               | 52,741 
|Cash and equivalents:                                                           |  | 
|Beginning of year                                                               |  |  |                               | 132,889
|                                                                                |  |  |                               |        
|End of period                                                                   |  |  | $                             | 185,630
|                                                                                |  |  |                               |        

|See
accompanying notes to condensed consolidated financial statements.
|----------------------------------------------------------------------

|5
|-

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|bebe stores, inc.


NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS


INTERIM FINANCIAL
STATEMENTS


The accompanying condensed consolidated
balance sheets of bebe stores, inc. as of December 31, 2003, June 30, 2003 and December 31, 2002, the
condensed consolidated statements of earnings for the three months and six months ended December 31, 2003
and 2002 and the condensed consolidated statements of cash flows for the six months ended December 31, 2003
and 2002  have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X, without audit. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary to present fairly the financial position at the balance sheet dates and the results of earnings for
three months then ended have been included. The condensed consolidated balance sheet at June 30, 2003, presented
herein, was derived from the audited balance sheet included in the Form 10-K for the fiscal year ended June 30, 2003.


Our
business is affected by the pattern of seasonality common to most retail apparel
businesses. The results for the periods presented are not necessarily indicative
of future financial results.


Certain
notes and other information have been condensed or omitted from the interim condensed
consolidated financial statements presented in this Quarterly Report on Form 10-Q.
Therefore, these condensed consolidated financial statements should be read in conjunction
with our Annual Report on Form 10-K for the year ended June 30, 2003.


MARKETABLE SECURITIES


The
Companys marketable securities are classified as available for sale.
Marketable securities are comprised of closed-end variable interest rate funds that invest primarily in
tax-exempt municipal bonds. Short-term marketable securities consist of investments with maturities less than or equal
to 1 year. Long-term marketable securities consist of investments with maturities greater
than 1 year. As of December 31, 2003, the carrying value approximated the fair value based on
the nature of the investments held.


EARNINGS PER SHARE


Basic
earnings per share is computed as net earnings divided by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur from common shares issuable through stock options,
warrants and other convertible securities.


The
following is a reconciliation of the number of shares used in the basic and diluted
earnings per share computations:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                              |  | Three Months Ended December 31, |  | Six Months Ended December 31, | 
|------------------------------------------------------------- |  | ------------------------------- |  | ----------------------------- | 
|                                                              |  |                                 |  |                              
|                                                              |  | 2003                            |  | 2002                          | 
|                                                              |  |                                 |  |                               | 
|                                                              |  | (In thousands)                  |  | (In thousands)                | 
|Basic weighted average number of shares outstanding           |  | 25,813                          |  | 25,638                        | 
|Incremental shares from the assumed issuance of stock options |  | 625                             |  | 211                           | 
|                                                              |  |                                 |  |                               | 
|Diluted weighted average number of shares outstanding         |  | 26,438                          |  | 25,849                        | 
|                                                              |  |                                 |  |                               | 

|The
number of incremental shares from the assumed issuance of stock options is calculated
applying the treasury stock method.


Excluded
from the computation of the number of diluted weighted average shares outstanding were
antidilutive options of 197,000 and 3,123,000 for the three months ended December 31, 2003
and 2002, respectively, and 246,000 and 2,649,000 for the six months ended December 31, 2003 and 2002, respectively.


6
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|COMPREHENSIVE INCOME



Comprehensive income
consists of net income and other comprehensive income (income,  expenses,  gains and losses that bypass the income
statement and are reported  directly as a separate component of equity).  The Company's comprehensive  income equals
net income plus foreign currency  translation  adjustments for all periods  presented.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  |  |                        |                   |                  |                   |   |                   |   |                   |        |  |   |        |  
|--------------------------------- |  | ---------------------- | ----------------- | ---------------- | ----------------- | - | ----------------- | - | ----------------- | ------ |  | - | ------ | -
|                                  |  | Three Months Ended     |                   | Six Months Ended
|                                  |  |                        |                   |                 
|                                  |  |                        | December 31, 2003 |                  | December 31, 2002 |   | December 31, 2003 |   | December 31, 2002 |       
|                                  |  |                        |                   |                  |                   |   |                   |   |                   |       
|                                  |  | (Dollars in thousands)
|Net income                        |  |                        | $                 | 13,889           |                   | $ | 10,791            |   | $                 | 19,932 |  | $ | 15,886 |  
|Other comprehensive income (loss) |  |                        |                   | 209              |                   |   | (17               | ) |                   | 256    |  |   | (64    | )
|                                  |  |                        |                   |                  |                   |   |                   |   |                   |       
|Total comprehensive income (loss) |  |                        | $                 | 14,098           |                   | $ | 10,774            |   | $                 | 20,188 |  | $ | 15,822 |  
|                                  |  |                        |                   |                  |                   |   |                   |   |                   |       

|STOCK PLAN INFORMATION


The
Company has various stock option plans that provide for the granting of stock options to
officers, key employees and directors. The Company accounts for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, whereby the options are granted at
market price, and therefore no compensation costs are recognized. The Company has elected
to retain its current method of accounting as described above and has adopted the Statement of Financial Accounting
Standard (SFAS) Nos. 123 and 148 disclosure requirements.


If
compensation expense for the Companys various stock option plans had been determined
based upon the fair values at the grant dates for awards under those plans in accordance
with SFAS No. 123, the Companys pro-forma net earnings, basic and diluted earnings
per common share would have been as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                            |  |                                                  |                   |                  |                   |   |                   |   |                   |        |   |   |        |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ----------------- | ---------------- | ----------------- | - | ----------------- | - | ----------------- | ------ | - | - | ------ | -
|                                                                                                                            |  | Three Months Ended                               |                   | Six Months Ended
|                                                                                                                            |  |                                                  |                   |                 
|                                                                                                                            |  |                                                  | December 31, 2003 |                  | December 31, 2002 |   | December 31, 2003 |   | December 31, 2002 |       
|                                                                                                                            |  |                                                  |                   |                  |                   |   |                   |   |                   |       
|                                                                                                                            |  | (Dollars in thousands, except per share amounts)
|Net income                                                                                                                  |  |                                                 
|As reported                                                                                                                 |  |                                                  | $                 | 13,889           |                   | $ | 10,791            |   | $                 | 19,932 |   | $ | 15,886 |  
|Add: Stock based employee compensation,         net of income tax                                                           |  |                                                  |                   | 15               |                   |   | 0                 |   |                   | 53     |   |   | 0      |  
|Deduct: Stock based employee compensation         determined
        under the fair value method,         net of income tax |  |                                                  |                   | (471             | )                 |   | (656              | ) |                   | (1,052 | ) |   | (1,221 | )
|                                                                                                                            |  |                                                  |                   |                  |                   |   |                   |   |                   |       
|Proforma                                                                                                                    |  |                                                  | $                 | 13,433           |                   | $ | 10,135            |   | $                 | 18,933 |   | $ | 14,665 |  
|                                                                                                                            |  |                                                  |                   |                  |                   |   |                   |   |                   |       
|Basic EPS                                                                                                                   |  |                                                 
|As reported                                                                                                                 |  |                                                  | $                 | 0.54             |                   | $ | 0.42              |   | $                 | 0.77   |   | $ | 0.62   |  
|Proforma                                                                                                                    |  |                                                  | $                 | 0.52             |                   | $ | 0.40              |   | $                 | 0.73   |   | $ | 0.57   |  
|Diluted EPS                                                                                                                 |  |                                                 
|As reported                                                                                                                 |  |                                                  | $                 | 0.53             |                   | $ | 0.42              |   | $                 | 0.76   |   | $ | 0.61   |  
|Proforma                                                                                                                    |  |                                                  | $                 | 0.51             |                   | $ | 0.39              |   | $                 | 0.72   |   | $ | 0.57   |  

|LEGAL MATTERS



From
time to time, we may be involved in litigation relating to claims arising out of our
operations. As of the date of this filing, we are currently involved in several ongoing
legal proceedings; however, none of these proceedings are expected, individually or in the
aggregate, to have a material adverse effect on our business, financial condition or
results of operations.

7
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|Along with approximately one hundred and seven other parties, we were named in a class action suit filed on April 17, 2003, in Los
Angeles Superior Court (case No. BC294155) concerning the substance of one of the questions on our employment application.
Plaintiffs are seeking compensatory, statutory and injunctive relief. The case was dismissed on January 28, 2004, based on a
misjoinder of Defendants. A similar complaint has been filed on January 30, 2004, against bebe as an individual
Defendant, but bebe has not yet been served.


Three
former employees filed suit on November 20, 2003, in San Mateo Superior Court (case No. CIV435794) against bebe alleging their
misclassification under California law as exempt employees. The plaintiffs seek to certify this matter as a
class action made up of former and present bebe store managers and co-managers. Plantiffs are seeking compensatory,
statutory and injunctive relief.


A former employee sued bebe in the Superior Court of the State of California, County of San Diego, claiming
unpaid wages and unfair business practices. The complaint was filed on January 20, 2004 . The plaintiff
purports to bring the action on behalf of a class of California employees who hold or have held the position
of Co-Manager or others similarly designated . The lawsuit seeks compensatory, statutory and injunctive relief.


We
intend to defend ourselves vigorously against the above claims.



ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The
following discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from the results discussed in the
forward-looking statements. This Form 10-Q includes forward-looking statements that could
differ from actual future results. Statements that are predictive in nature, that depend
upon or refer to future events or conditions of that include words such as
expects, anticipates, intends, plans,
believes, estimates, thinks, and similar expressions
are forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors, including our ability to respond to changing fashion
trends, competition within our industry, our ability to manage our growth and other
factors described below, that may cause our actual results and performance to be
materially different from any future results or performance expressed or implied by these
forward-looking statements. Although we believe that these statements are based upon
reasonable assumptions, we cannot assure you that our goals will be achieved. These
forward-looking statements are made as of the date of this Form 10-Q, and we assume no
obligation to update or revise them or provide reasons why actual results may differ.
Factors that might cause such a difference include, but are not limited to, openings in key
management positions, 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, our ability to attract and retain key management personnel
and/or other factors discussed in Risks That May Affect Results and elsewhere
in this Form 10-Q.


OVERVIEW


We
design, develop and produce a distinctive line of contemporary womens apparel and
accessories. While we attract a broad audience, our target customers are 21 to 35-year-old
women who seek current fashion trends interpreted to suit their lifestyle needs. The
bebe look, appeals to a hip, sophisticated, body-conscious woman who takes
pride in her appearance. The bebe customer expects value in the form of quality at a
competitive price.


Our
broad product offering includes tops, pants, skirts, dresses, suits, logo products, casual
sportswear, activewear, outerwear, handbags and other accessories. We design and develop
the majority of our merchandise in-house. The merchandise is then manufactured to our
specifications, the majority of which is produced domestically. The remainder of our
merchandise is selected directly from third party manufacturers lines.


Our
stores are designed to create a clean, upscale boutique environment, featuring
contemporary furnishings and sophisticated details. The open floor design allows customers
to readily view the majority of the merchandise on display while store fixtures allow for
the efficient display of garments, outfits and accessories.


We
market our products under the bebe and BEBE SPORT brand names through our 188 retail
stores, of which 155 are bebe stores, 15 are BEBE SPORT stores, and 18 are bebe outlet
stores. These stores are located in 32 states, the District of Columbia and Canada. In
addition, we have an on-line store at www.bebe.com and our licensees operate 12
international stores.


8
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|bebe stores. The Company was founded
by Manny Mashouf, our current Chairman of the Board and Chief Executive Officer. We opened
our first store in San Francisco, California in 1976, which was also the year we
incorporated.


BEBE SPORT stores. The Company
launched BEBE SPORT in the first half of fiscal 2003 to satisfy the casual lifestyle needs
of the bebe customer. The BEBE SPORT product line is active inspired sportswear featuring
cotton knits, fleece, casual active bottoms, sweaters, outerwear and accessories that are
easy, sexy and modern.


bebe outlet stores. The Company
utilizes the outlets as a clearance vehicle for merchandise from our retail stores.
Additionally, we round out the inventory of these stores with full price logo merchandise
and, to a lesser extent, garments specifically produced for the outlet stores often using
excess fabric inventory.


On-line store. The on-line store offers the
customer an extension of the bebe store experience and provide a broader merchandise
assortment from which the customer can choose. It is also used as a vehicle to communicate
with our customers through advertising and direct mail. For the six months ended
December 31, 2003 and 2002, bebe.com represented approximately 2% of total revenue.


We
reinforce our brand with a distinctive lifestyle image advertising campaign, using
prominent fashion photographers. We believe that our emphasis on non-product specific
lifestyle advertising promotes brand awareness and attracts customers. We communicate the
images to consumers through a variety of advertising vehicles including fashion magazines,
bus shelters, in-store displays, customer mailings and the BEBE SPORT catalog. We further
enhance the bebe brand image by designing our on-line and retail stores to create an
upscale, inviting, boutique environment.


CRITICAL ACCOUNTING POLICIES


Managements
Discussion and Analysis of Financial Condition and Results of Operations are based upon
our consolidated financial statements, which have been prepared in conformity with
accounting principles generally accepted in the United States of America.


The
preparation of these financial statements requires the appropriate application of certain
accounting policies, many of which require us to make estimates and assumptions about
future events and their impact on amounts reported in our financial statements and related
notes. Since future events and their impact cannot be determined with certainty, the
actual results will inevitably differ from our estimates. Such differences could be
material to the financial statements. We believe our application of accounting policies,
and the estimates inherently required therein, are reasonable. These accounting policies
and estimates are constantly reevaluated, and adjustments are made when facts and
circumstances dictate a change. Our accounting policies are more fully described in Note 1
to the financial statements in our annual report on Form 10-K for the year ended June 30,
2003.


We have identified certain critical
accounting policies, which are described below:


     Inventories. 
          Our inventories are stated at the lower of weighted average cost or market. We
          estimate shrinkage for the period between the last physical count and balance
          sheet date. Our estimate can be affected by shrinkage trends. In order to assess
          that raw material is recorded properly, we age the fabric inventory and record a
          reserve to reduce the cost in accordance with our established policy, which is
          based on historical experience. To ensure that finished goods inventory is
          recorded properly, we review our inventory and reduce the cost if the selling
          price is marked down below cost. These assumptions can have an impact on current
          and future operating results and financial position.


Long-lived assets.  We review
long-lived assets for impairment whenever events or changes in circumstances, such as
store closures or poor performing stores, indicate that the carrying value of an asset may not be recoverable. If
the undiscounted cash flows from the long-lived assets are less than the carrying value we
record an impairment charge equal to the difference between the carrying value and the
assets fair value. In addition, at the time a decision is made to close a store, we
record an impairment charge, if appropriate, or accelerate depreciation over the revised
useful life. Historically, our impairment charges have been immaterial. During the six months ended December 31, 2003,
we recorded no impairment charges. We believe at this time that the long-lived assets carrying values and
useful lives continue to be appropriate.


Sales Return Reserve. We record a
reserve for estimated product returns based on historical return trends. If actual returns
are greater than those projected, additional sales returns may be recorded in the future.


9
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|Income Taxes. We record reserves for
estimates of probable settlements of domestic and foreign tax audits.  At any one
time, many tax years may be subject to audit by various taxing jurisdictions.  The
results of these audits and negotiations with taxing authorities may affect our tax expense. Our
effective tax rate in a given financial statement period may be materially impacted by changes in
the mix and level of earnings.


RESULTS OF OPERATIONS


We
operated 188 stores at December 31, 2003 compared to 178 stores at December 31, 2002. We
opened 8 new stores in the first six months of fiscal 2004 and expect to open
approximately 25 stores during fiscal 2004. In addition to our traditional
retail locations, we also operate an on-line store, which can be found at
www.bebe.com.


The
following table sets forth certain financial data as a percentage of net sales for the
periods indicated:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  |  | Three Months Ended December 31, |   | Six Months Ended December 31, |   |      
|------------------------------------------------- |  | ------------------------------- | - | ----------------------------- | - | -----
|                                                  |  |                                 |  
|                                                  |  | 2003                            |   | 2002                          |   | 2003 
|                                                  |  |                                 |   |                               |   |      
|Statements of Operations Data:                    | 
|Net sales                                         |  | 100.0                           | % | 100.0                         | % | 100.0
|Cost of sales, including buying and occupancy (1) |  | 51.7                            |   | 52.0                          |   | 52.7 
|                                                  |  |                                 |   |                               |   |      
|Gross profit                                      |  | 48.3                            |   | 48.0                          |   | 47.3 
|Selling, general and administrative expenses (2)  |  | 28.9                            |   | 31.5                          |   | 31.5 
|                                                  |  |                                 |   |                               |   |      
|Income from operations                            |  | 19.4                            |   | 16.5                          |   | 15.8 
|Interest income and other, (net)                  |  | (0.4                            | ) | (0.6                          | ) | (0.5 
|                                                  |  |                                 |   |                               |   |      
|Earnings before income taxes                      |  | 19.8                            |   | 17.1                          |   | 16.3 
|Provision for income taxes                        |  | 7.4                             |   | 6.4                           |   | 6.1  
|                                                  |  |                                 |   |                               |   |      
|Net earnings                                      |  | 12.4                            | % | 10.7                          | % | 10.2 
|                                                  |  |                                 |   |                               |   |      

| | (1) | Cost of sales includes the cost of merchandise, buying costs and occupancy
               costs.
| | --- | ------------------------------------------------------------------------------------------------

| | (2) | Selling, general and administrative expenses primarily consist of non-occupancy
               store costs, corporate overhead and advertising costs.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|Net
Sales. Net sales increased to $112.0 million during the three months ended December 31,
2003 from $100.8 million in the same period of the prior year, an increase of $11.2
million, or 11.1%. Net sales for the quarter included $100.4 million from stores open more
than one year. During the quarter comparable store sales increased 7.1% versus the prior
year. The increase in comparable store sales performance was largely due to a more
balanced assortment of merchandise that contributed to an increase in transactions per
store. The remaining sales of $11.6 million were generated by stores not included in the
comparable store sales base, on-line sales, wholesale sales to international licensees,
and royalty revenue from product licensees.         For the six
months ended December 31, 2003,
net sales increased to $195.6 million from $174.7 million in the same six-month period of
the prior year, an increase of $20.9 million, or 12.0%. Net sales for the six-month period
included $172.8 million from stores open more than one year, representing a 6.9% increase
in comparable store sales versus the prior year. The increase in comparable store sales
performance was largely due to a more balanced assortment of merchandise that contributed
to an increase in transactions per store. The remaining sales of $22.8 million were
generated by stores not included in the comparable store sales base, on-line sales,
wholesale sales to international licensees, and royalty revenue from product licensees.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                      |  | Three Months Ended December 31, |   | Six Months Ended December 31, |    |            
|----------------------------------------------------- |  | ------------------------------- | - | ----------------------------- | -- | -----------
|                                                      |  |                                 |  
|                                                      |  | 2003                            |   | 2002                          |    | 2003       
|                                                      |  |                                 |   |                               |    |            
|Net sales (In thousands)                              |  | $112,014                        |   | $100,823                      |    | $195,566   
|Total net sales increase percentage                   |  | 11.1                            | % | 2.1                           | %  | 12.0       
|Comparable store sales increase (decrease) percentage |  | 7.1                             | % | (8.1                          | %) | 6.9        
|Net sales per average square foot (1)                 |  | $       167                     |   | $       157                   |    | $       294
|Square footage - at end of period (In thousands)      |  | 672                             |   | 648                           |    | 672        
|                                                      |  |                                 |   |                               |    |            
|Number of Store Locations:                            | 
|Beginning of Period                                   |  | 184                             |   | 171                           |    | 180        
|New store locations                                   |  | 4                               |   | 7                             |    | 8          
|Closed store locations                                |  | ----                            |   | ----                          |    | ----       
|End of Period                                         |  | 188                             |   | 178                           |    | 188        
|                                                      |  |                                 |   |                               |    |            

| | (1) | Net sales per average square foot is calculated using net store sales and a monthly average store
                square footage.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------

|10
|--

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|Gross
Profit.Gross profit increased to $54.1 million during the three months ended December
31, 2003 from $48.4 million for the same three-month period of the prior year, an increase
of $5.7 million, or 11.8%. As a percentage of net sales, gross profit increased to 48.3%
for the three-month period ended December 31, 2003 from 48.0% in the same three-month
period of the prior year. The increase in gross profit as a percentage of net sales from
the prior year of 0.3% was primarily the result of favorable occupancy leverage.    
    Gross profit increased to $92.6 million during the six
months ended December 31, 2003 from $82.1 million for the same six-month period of the
prior year, an increase of $10.5 million, or 12.8%. As a percentage of net sales, gross
profit increased to 47.3% for the six-month period ended December 31, 2003 from 47.0% in
the same three-month period of the prior year. The increase in gross profit as a
percentage of net sales from the prior year of 0.3% was primarily the result of favorable
occupancy leverage.


Selling,
General and Administrative Expenses.Selling, general and administrative expenses,
which primarily consist of non-occupancy store costs, corporate overhead and advertising
costs, increased to $32.3 million during the three months ended December 31, 2003 from
$31.7 million in the same period of the prior year, an increase of $0.6 million, or 1.9%.
As a percentage of net sales, these expenses decreased to 28.9% during the three-month
period from 31.5% in the same period of the prior year. This decrease as a
percentage of net sales was primarily due to lower compensation associated with improved store productivity,
lower professional fees related to trademark defense and corporate legal entity restructuring incurred in the prior
year, and lower advertising expenses primarily associated with outdoor media.
        For the six months ended December 31, 2003,
selling, general and administrative expenses increased to $61.6 million from
$57.8 million in the same six-month period of the prior year, an increase of $3.8 million,
or 6.6%. As a percentage of net sales, these expenses decreased to 31.5% during the
six-month period from 33.1% in the same period of the prior year. This decrease as a
percentage of net sales was primarily due to lower compensation associated with improved store productivity,
lower professional fees related to trademark defense and corporate legal entity restructuring incurred in the prior
year, and lower advertising expenses primarily associated with outdoor media.


Interest
Income and Other, Net. We generated approximately $0.5 million of interest
income and other, net during the three months ended December 31, 2003
as compared to approximately $0.6 million in the same three-month period of the prior
year. For the six months ended December 31, 2003, we generated approximately $1.0 million
of interest income and other, net as compared to approximately $1.0
million in the same six-month period of the prior year. The decreases are the result of lower interest rates
offset by higher average cash balances.


Provision
for Income Taxes.The effective tax rate was approximately 37.5% for both periods.


Seasonality of Business
and Quarterly Results


Our
business varies with general seasonal trends that are characteristic of the retail and
apparel industries. As a result, our typical store generates a disproportionate amount of
our annual net sales in the first half of our fiscal year (which includes the fall and
holiday selling seasons) compared to the second half of our fiscal year. If for any reason
our sales were below seasonal norms during the first half of our fiscal year, our annual
operating results would be negatively impacted. Because of the seasonality of our
business, results for any quarter are not necessarily indicative of results that may be
achieved for a full fiscal year.


LIQUIDITY AND CAPITAL
RESOURCES


Our
working capital requirements vary widely throughout the year and generally peak in the
first and second fiscal quarters. At December 31, 2003, we had approximately $193.5
million of cash, cash equivalents and marketable securities on hand. In addition, we had a
revolving line of credit, under which we could borrow or issue letters of credit up to a
combined total of $10.0 million. As of December 31, 2003, there were no borrowings under
the line of credit. As of December 31, 2003, letters of credit outstanding totaled $3.8 million.


Net
cash provided by operating activities for the six months ended December 31, 2003 was
$43.4 million versus $36.0 million for the six months ended December 31, 2002. Cash provided by operating
activities for the period was primarily generated by earnings before depreciation and deferred rent and
changes in working capital. The increase from prior year is due primarily to higher net earnings.

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|Net
cash provided by investing activities for the six-month period ended December 31, 2003
was $6.8 million primarily due to the sale of marketable securities offset by expenditures
related to the opening of 8 new stores, whereas, for the six-month period ended December 31, 2002, $17.1 million
was used primarily in the purchases of marketable securities, expenditures related to the opening of 13 new stores, and
investments in management information systems. We expect to open approximately 25 stores during fiscal 2004
and estimate that total capital expenditures will be approximately $17.0 million in fiscal 2004.


In addition, on January 19, 2004, we
entered into an agreement to purchase an approximately 50,000 square foot office building located in the city and
county of Los Angeles, California for a purchase price of approximately $11.0 million. This building is intended to house
our design studio and production facility.



Net
cash provided by financing activities was $2.2 million for the six months ended
December 31, 2003 compared to $0.2 million for the six months ended December 31, 2002, and was derived
from proceeds from stock option exercises.


We
believe that our cash on hand, together with our cash flows from operations, will be
sufficient to meet our capital and operating requirements for at least the next 12 months. Our future
capital requirements, however, will depend on numerous factors, including without
limitation, the size and number of new and expanded stores and/or store concepts,
investment costs for management information systems, corporate office and distribution
center expansions, potential acquisitions and/or joint ventures, stock repurchase, and
future results of operations.


The following
table summarizes significant contractual obligations for the remaining 6 months of fiscal year 2004 and all fiscal years thereafter:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |                        |  | Total    |  |  | 2004    |  |  | 2005    |  |  | 2006    |  |  | 2007    |  |  | 2008    |  |  | Thereafter | 
|----------------------- | ---------------------- |  | -------- |  |  | ------- |  |  | ------- |  |  | ------- |  |  | ------- |  |  | ------- |  |  | ---------- | 
|                        |                        |  |          |  |  |         |  |  |         |  |  |         | 
|                        | (Dollars in thousands)
|CONTRACTUAL OBLIGATIONS |                        | 
|Operating leases        |                        |  | $214,484 |  |  | $16,166 |  |  | $31,253 |  |  | $29,610 |  |  | $28,424 |  |  | $27,354 |  |  | $81,677    | 

|                                                                            |                        | Amount of commitment expiration period
|--------------------------------------------------------------------------- | ---------------------- | --------------------------------------
|                                                                            |                        |                                       
|                                                                            |                        | Total                                 
|                                                                            |                        |                                       
|                                                                            | (Dollars in thousands) |                                       
|OTHER COMMERCIAL COMMITMENTS                                                |                       
|Revolving line of credit, net of 
            outstanding letters of credit |                        | $   6,183                             
|Standby letters of credit                                                   |                        | 578                                   
|Trade letters of credit                                                     |                        | 3,239                                 
|                                                                            |                        |                                       
|Total Commercial Commitments                                                |                        | $10,000                               
|                                                                            |                        |                                       

|Inflation


We
do not believe that inflation has had a material effect on the results of operations in
the recent past. However, we cannot assure that our business will not be affected by
inflation in the future.


RISKS THAT MAY AFFECT
RESULTS


Factors
that might cause our actual results to differ materially from the forward looking
statements discussed elsewhere in this report, as well as affect our ability to achieve
our financial and other goals, include, but are not limited to, the following:

12
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|RISKS RELATING TO OUR BUSINESS:



     1.    
          The success of our business depends in large part on our ability to identify
          fashion trends as well as to react to changing customer demand in a timely
          manner.Consequently, we depend in part upon the continuing favorable market
          response to the creative efforts of our purchasing, design and marketing
          teams ability to anticipate trends and fashions that will appeal to our
          consumer base. If we miscalculate our customers product preferences or the
          demand for our products, we may be faced with significant excess inventory or
          lack of inventory. Historically, this type of occurrence has resulted in excess
          fabric for some products, missed sales opportunities and markdowns and/or
          write-offs, which has impaired our profitability, and may do so in the future.
          Similarly, any failure on our part to anticipate, identify and respond
          effectively to changing consumer demands and fashion trends will adversely
          affect our sales.


     2.    
          If we are unable to obtain raw materials or find manufacturing facilities, our
          financial condition may be harmed.We do not own any manufacturing facilities
          and therefore depend on a limited number of third parties to manufacture our
          products. We place all of our orders for production of merchandise and raw
          materials by purchase order and do not have any long-term contracts with any
          manufacturer or supplier. If we fail to obtain sufficient quantities of raw
          materials, it could have a harmful effect on our results of operations.
          Furthermore, we have received in the past, and may receive in the future,
          shipments of products from manufacturers that fail to conform to our quality
          control standards. In such event, unless we are able to obtain replacement
          products in a timely manner, we may lose sales. If we fail to maintain favorable
          relationships with these production facilities and to obtain an adequate supply
          of quality raw materials on commercially reasonable terms, it could harm our
          business and results of operations.



     3.    
          We depend on third party apparel manufacturers for production and storage, and
          our sales may be negatively affected if the manufacturers do not perform
          acceptably, or if design changes are communicated after the production has
          begun.We develop a significant portion of our merchandise in conjunction with
          third party apparel manufacturers. In some cases, we select merchandise directly
          from these manufacturers lines. We do not have long-term contracts with
          any third party apparel manufacturers and purchase all of the merchandise from
          such manufacturers by purchase order. Furthermore, we have received in the past,
          and may receive in the future, shipments of products from third party apparel
          manufacturers that fail to conform to our quality control standards. In such
          event, unless we are able to obtain replacement products in a timely manner, we
          may lose sales. We cannot assure you that third party manufacturers (1) will not
          supply similar products to our competitors, (2) will not stop supplying products
          to us completely or (3) will supply products that satisfy our quality control
          standards. In addition, certain of our third party manufacturers store our raw
          materials. In the event our inventory was damaged or destroyed and we were
          unable to obtain replacement raw materials, our earnings may be negatively
          impacted.


In addition, if we decide to change a
key element of the design after the manufacturing process has begun we may negatively
impact the manufacturers ability to deliver the products on a timely basis which
could impact earnings.



     4.    
          Our success depends on our ability to attract and retain key employees in order
          to support our existing business and future expansion.We are actively
          recruiting qualified candidates to fill key executive positions within the Company.
          There is substantial competition for experienced personnel, which we expect to continue.
          We compete for experienced personnel with companies who have greater financial
          resources than we do. In the past, we have experienced significant turnover of
          our executive management team and retail store personnel. We are also exposed to
          employment practice litigation due to the large number of employees and high
          turnover of our sales associates. If we fail to attract, motivate and retain
          qualified personnel, it could harm our business and limit our ability to expand.


In addition, we depend upon the
expertise and execution of our key employees, particularly Manny Mashouf, the founder,
Chairman of the Board, Chief Executive Officer and majority shareholder. We do not carry
key person life insurance policies on any of our employees. If we lose the
services of Mr. Mashouf or any key officers or employees, it could harm our business and
results of operations.


     5.    
          If we are not able to successfully develop and expand our new BEBE SPORT store
          concept our revenue base and earnings may be impaired.During fiscal 2003, we
          launched a new store concept, BEBE SPORT, in which our product offering is
          focused on active inspired sportswear branded with BEBE SPORT. We
          have committed significant financial and human resources to developing and
          expanding this concept. The failure of this new store concept might result in a
          negative impact to earnings.


     6.    
          There can be no assurance that future store openings will be successful.We
          expect to open approximately 25 stores in fiscal 2004, of which approximately 17
          will be BEBE SPORT stores. There can be no assurance that these stores, or
          any other stores that we might open in the future, will be successful or that
          our overall gross profit will increase as a result of opening these stores. In
          addition, most of our new store openings in fiscal 2004 will be in existing
          markets. These openings may affect the existing stores net sales volumes
          and profitability. Our failure to predict accurately the demographic or retail
          environment at any future store location could have a material adverse effect on
          our business, financial condition and results of operations.


13
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|7.    
          Any serious disruption at our major facilities could have a harmful effect on
          our business. We currently operate our corporate office in Brisbane, California,
          a distribution facility in Benicia, California, and a design studio and
          production facility in Los Angeles, California. Any serious disruption at these
          facilities whether due to construction, relocation, fire, earthquake, terrorist
          acts or otherwise would harm our operations and could have a harmful effect on
          our business and results of operations. Furthermore, we have little experience
          operating essential functions away from our main corporate offices and are
          uncertain what effect operating such satellite facilities might have on
          business, personnel and results of operations. We are in process of implementing a business
          continuity plan that will address recovery in the event of a serious disruption at one of our major facilities.



     8.    
          We face significant competition in the retail and apparel industry, which could
          harm our sales and profitability. The retail and apparel industries are highly
          competitive and are characterized by low barriers to entry. We expect competition in our markets to
          increase. The primary competitive factors in our markets are: brand name
          recognition, sourcing strategies, product styling, quality, presentation and
          pricing, timeliness of product development and delivery, store ambiance,
          customer service and convenience.


We compete with traditional
department stores, specialty store retailers, business to consumer websites, off-price
retailers and direct marketers for, among other things, raw materials, market share,
retail space, finished goods, sourcing and personnel. Because many of these competitors
are larger and have substantially greater financial, distribution and marketing resources
than we do, we may lack the resources to adequately compete with them. If we fail to
compete in any way, it could harm our business, financial condition and results of
operations.



     9.    
          Purchases of the merchandise we sell are generally discretionary and are
          therefore particularly susceptible to economic slowdowns. If current economic
          conditions do not improve, our business, financial condition and results of
          operations could be adversely affected. Consumers are generally more willing to
          make discretionary purchases, including purchases of fashion products, during
          periods in which favorable economic conditions prevail. Currently, there is a
          general slowdown in the United States economy, which has adversely affected
          consumer confidence and spending habits, as well as our sales.


The outlook for the United States
economy is uncertain and is directly affected by global political factors that are beyond
our control. Any escalation of military action involving the United States could cause
increased volatility in financial markets, further adversely affecting consumer confidence
and spending habits. If current economic conditions do not improve, our business,
financial condition and results of operations could be adversely affected.


     10.    
          If we are not able to successfully protect our intellectual property our ability
          to capitalize on the value of our brand name may be impaired. Even though we
          take actions to establish, register and protect our trademarks and other
          proprietary rights, we cannot assure you that we will be successful or that
          others will not imitate our products or infringe upon our intellectual property
          rights. In addition, we cannot assure you that others will not resist or seek to
          block the sale of our products as infringements of their trademark and
          proprietary rights.


We are seeking to register our
trademarks in targeted international markets. In some of these markets obstacles exist
that may prevent us from obtaining a trademark for the bebe name or related names. In such
countries, we may not be able to register trademarks in these international markets,
purchase the right or obtain a license to use the bebe name on commercially reasonable
terms. If we fail to obtain trademark, ownership or license rights, it would limit our
ability to expand into certain international markets. Furthermore, in some jurisdictions,
despite successful registration of our trademarks, third parties may allege infringement
and bring actions against us. In addition, if our licensees fail to use our intellectual
property correctly, the goodwill associated with our trademarks may be diluted.


Both domestically and
internationally, if we do not show use of our trademarks, our trademark rights may lapse
over time.


     11.    
          If an independent manufacturer violates labor or other laws, or is accused of
          violating any such laws, or if their labor practices diverge from those
          generally accepted as ethical, it could harm our business and brand image.While
          we maintain a policy to monitor the operations of our independent manufacturers
          by having an independent firm inspect these manufacturing sites, and all
          manufacturers are contractually required to comply with such labor practices, we
          cannot control the actions or the publics perceptions of such
          manufacturers, nor can we assure that these manufacturers will conduct their
          businesses using ethical or legal labor practices. Apparel companies can be held
          jointly liable for the wrongdoings of the manufacturers of their products. While
          we do not control their employees employment conditions or the
          manufacturers business practices, and the manufacturers act in their own
          interest, they may act in a manner that result in negative public perceptions of
          us and/or employee allegations or court determinations that we are jointly
          liable.

14
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|RISKS RELATING TO OUR COMMON STOCK:


     1.    
          Our stock price may fluctuate because of the small number of shares that can be
          publicly traded and the low average daily trading volumes. The vast majority of
          our outstanding shares of our common stock are not registered and are subject to
          trading restrictions. As of December 31, 2003, only 5,083,792 shares of our
          common stock were available to be publicly traded, and as a result, our average
          daily trading volumes are relatively low, and our stock price is vulnerable to
          market swings due to large purchases, sales and short sales of our common stock.


     2.    
          Because a principal shareholder controls the Company, other shareholders may not
          be able to influence the direction the Company takes. As of December 31, 2003,
          Manny Mashouf, the Chairman and Chief Executive Officer, beneficially owned
          approximately 80.3% of the outstanding shares of our common stock. As a result, he
          alone can control the election of directors and the outcome of all issues
          submitted to the shareholders. This may make it more difficult for a third party
          to acquire shares, may discourage acquisition bids, and could limit the price
          that certain investors might be willing to pay for shares of common stock. This
          concentration of stock ownership may have the effect of delaying, deferring or
          preventing a change in control of our Company.





ITEM 3.  QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK


We
are exposed to market risks, which include changes in U.S. interest rates and, to a lesser
extent, foreign exchange rates. We do not engage in financial transactions for trading or
speculative purposes.


Interest Rate Risk


We
currently maintain a portfolio of variable investments consisting of cash
equivalents, short-term marketable securities and long-term marketable securities. Marketable securities are
comprised of closed-end variable interest rate funds that invest primarily in tax-exempt municipal bonds.
Due to the variable nature of these investments, their value is typically
not subject to market rate changes. According to our investment policy, we may invest in taxable and tax
exempt instruments. In addition, the policy establishes limits on credit quality, maturity, issuer and
type of instrument. Marketable securities are classified as available for sale. We do not
use derivative financial instruments in our investment portfolio.


All
highly liquid investments with a maturity of three months or less at the date of purchase
are considered to be cash equivalents. The remaining investments are considered short-term
marketable securities if maturities range between four and twelve months or long term
marketable securities if maturities are over twelve months.


The
following table lists our cash equivalents and long-term
marketable securities at December 31, 2003:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                |  |  |                        | 2003    |   |   | Fair Value | 
|------------------------------- |  |  | ---------------------- | ------- | - | - | ---------- | 
|                                |  |  |                       
|                                |  |  | (Dollars in thousands) |        
|Cash equivalents                |  |  | $                      | 173,709 |   | $ | 173,709    | 
|Weighted average interest rate  |  |  |                        | 1.24    | %
|Long term marketable securities |  |  |                        | 7,875   |   |   | 7,875      | 
|Weighted average interest rate  |  |  |                        | 1.77    | %
|Total                           |  |  | $                      | 181,584 |   | $ | 181,584    | 

|15
|--

---

|The
interest payable on our bank line of credit is based on variable interest rates and
therefore affected by changes in market interest rates. If interest rates rose .400
percentage points, a 10% change from the banks reference rate as of December 31,
2003, our results from operations and cash flows would not be affected since we have no outstanding borrowings.


Foreign Currency Risks


We
enter into a significant amount of purchase obligations outside of the U.S. which are
settled in U.S. Dollars and, therefore, have only minimal exposure to foreign currency
exchange risks. We also operate a subsidiary with a base currency other than the U.S.
Dollar. This subsidiary represented approximately two percent of total revenues for the
quarter ended December 31, 2003 and, therefore, presents only minimal exposure to foreign
currency exchange risks. We do not hedge against foreign currency risks and believe that
foreign currency exchange risk is immaterial.





ITEM 4.  CONTROLS AND PROCEDURES



Under
the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our
disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this quarterly report. No significant
changes were made to our internal controls during our most recent quarter that have materially affected,
or are reasonably likely to materially affect, our internal controls over financial reporting.





PART II OTHER INFORMATION




ITEM 1.  LEGAL PROCEEDINGS



From
time to time, we may be involved in litigation relating to claims arising out of our
operations. As of the date of this filing, we are currently involved in several ongoing
legal proceedings; however, none of these proceedings are expected, individually or in the
aggregate, to have a material adverse effect on our business, financial condition or
results of operations.


Along with approximately one hundred and seven other parties, we were named in a class action suit filed on April 17, 2003, in Los
Angeles Superior Court (case No. BC294155) concerning the substance of one of the questions on our employment application.
Plaintiffs are seeking compensatory, statutory and injunctive relief. The case was dismissed on January 28, 2004, based on a
misjoinder of Defendants. A similar complaint has been filed on January 30, 2004, against bebe as an individual
Defendant, but bebe has not yet been served.


Three
former employees filed suit on November 20, 2003, in San Mateo Superior Court (case No. CIV435794) against bebe alleging their
misclassification under California law as exempt employees. The plaintiffs seek to certify this matter as a
class action made up of former and present bebe store managers and co-managers. Plantiffs are seeking compensatory,
statutory and injunctive relief.


A former employee sued bebe in the Superior Court of the State of California, County of San Diego, claiming
unpaid wages and unfair business practices. The complaint was filed on January 20, 2004 . The plaintiff
purports to bring the action on behalf of a class of California employees who hold or have held the position
of Co-Manager or others similarly designated . The lawsuit seeks compensatory, statutory and injunctive relief.



We
intend to defend ourselves vigorously against the above claims.



ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS


Not applicable.




ITEM 3.  DEFAULTS UPON SENIOR SECURITIES


Not applicable.


16
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


bebe stores, inc. held
its annual meeting of shareholders at its headquarters in Brisbane, California on December 8, 2003. Of the 25,791,239 shares outstanding
as of the record date, 24,635,877 shares were represented by proxy at the meeting. Proxies were solicited by bebe pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended. At the meeting, bebe's shareholders voted on the following
matters:


(1)  Proposal to elect six
directors to hold office for a one-year teram and until their successors are elected and qualified.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                  |  |  | For        |  | Withheld | 
| | ---------------- |  |  | ---------- |  | -------- | 
| |                  |  | 
| | Manny Mashouf    |  |  | 24,295,861 |  | 340,016  | 
| | Neda Mashouf     |  |  | 24,348,144 |  | 287,733  | 
| | Barbara Bass     |  |  | 24,198,280 |  | 437,597  | 
| | Corrado Federico |  |  | 24,198,281 |  | 437,596  | 
| | Caden Wang       |  |  | 24,351,592 |  | 284,285  | 
| | Cynthia Cohen    |  |  | 24,351,587 |  | 284,290  | 

|(2)  Proposal to
approve certain provisions of the 1997 Stock Plan, as amended, in order to preserve our ability to deduct in full certain plan-related
compensation under Section 162(m) of the Internal Revenue Code.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For        |  | Withheld |  | Abstain | 
| | ---------- |  | -------- |  | ------- | 
| |            |  |          |  |        
| | 23,484,285 |  | 383,450  |  | 20,600 

|(3)  Proposal to amend the 1997 Stock Plan to increase
the maximum number of shares reserved for issuance under the Stock Plan by 1,000,000 shares from 4,330,000 shares to 5,330,000 shares.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For        |  | Withheld  |  | Abstain | 
| | ---------- |  | --------- |  | ------- | 
| |            |  |           |  |        
| | 21,218,907 |  | 2,650,228 |  | 19,200 

|(4)  Proposal to ratify the
appointment of Deloitte & Touche LLP as our independent auditors for the fiscal year ending June 30, 2004.
|--------------------------------------------------------------------------------------------------------------------------------------

| | For        |  | Withheld |  | Abstain | 
| | ---------- |  | -------- |  | ------- | 
| |            |  |          |  |        
| | 24,244,559 |  | 388,292  |  | 3,026  

|ITEM 5.  OTHER INFORMATION


Not applicable.



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


     (a)    
          Exhibits. The following is a list of exhibits filed as part of this Report on
          Form 10-Q.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Exhibit |  | Description                                          
|------- |  | -----------------------------------------------------
|        |  |                                                      
|31.1    |  | Section 302 Certification of Chief Executive Officer.
|31.2    |  | Section 302 Certification of Chief Financial Officer.
|32.1    |  | Section 906 Certification of Chief Executive Officer.
|32.2    |  | Section 906 Certification of Chief Financial Officer.

(b)    
          Reports on Form 8-K.

|Date of Report   |  | Items |  | Description                                                                                               
|---------------- |  | ----- |  | ----------------------------------------------------------------------------------------------------------
|                 |  |       |  |                                                                                                           
|October 9, 2003  |  | 7, 9  |  | The Company issued a press release announcing September 2003 sales and updated first quarter guidance.    
|October 23, 2003 |  | 7, 12 |  | The Company issued a press release announcing its results for the fiscal quarter ended September 30, 2003.
|November 6, 2003 |  | 7, 12 |  | The Company issued a press release announcing October 2003 sales.                                         
|December 4, 2003 |  | 7, 12 |  | The Company issued a press release announcing November 2003 sales.                                        

|17
|--

---

|SIGNATURE


Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Dated February 13, 2004bebe stores, inc./s/  Walter Parks______________________________________
Walter Parks, Chief Financial Officer
| | -------------------------------------------------------------------------------------------------------------------------------------

---

|EXHIBIT INDEX
|-------------

|Exhibit |  | Number      |  | Description                             
|------- |  | ----------- |  | ----------------------------------------
|        |  |             |  |                                         
|31.1    |  | Section 302 |  | Certification of Chief Executive Officer
|31.2    |  | Section 302 |  | Certification of Chief Financial Officer
|32.1    |  | Section 906 |  | Certification of Chief Executive Officer
|32.2    |  | Section 906 |  | Certification of Chief Financial Officer

---

|EXHIBIT 31.1


SECTION 302
CERTIFICATION OF CHIEF EXECUTIVE OFFICER


I, Manny Mashouf, certify
that:
|-----------------------------------------------------------------------------------------------------

| | 1. | I have reviewed this Form 10-Q of bebe stores, inc.;
| | -- | ----------------------------------------------------

| | 2. | Based on my knowledge, this quarterly report does not contain any untrue
                    statement of a material fact or omit to state a material fact necessary to make
                    the statements made, in light of the circumstances under which such statements
                    were made, not misleading with respect to the period covered by this report;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Based on my knowledge, the financial statements, and other financial information
                    included in this quarterly report, fairly present in all material respects the
                    financial condition, results of operations and cash flows of the registrant as
                    of, and for, the periods presented in this report;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | The registrants other certifying officer and I are responsible for
                    establishing and maintaining disclosure controls and procedures (as defined in
                    Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) | Designed such disclosure controls and procedures, or caused such disclosure
          controls and procedures to be designed under our supervision, to ensure that
          material information relating to the registrant, including its consolidated
          subsidiaries, is made known to us by others within those entities, particularly
          during the period in which this report is being prepared;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Evaluated the effectiveness of the registrants disclosure controls and
          procedures and presented in this report our conclusions about the effectiveness
          of the disclosure controls and procedures, as of the end of the period covered
          by this report based on such evaluation; and
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Disclosed in this report any change to the registrants internal control
          over financial reporting that occurred during the registrants most recent
          fiscal quarter (the registrants fourth fiscal quarter in the case of an
          annual report) that has materially affected, or is reasonably likely to
          materially affect, the registrants internal control over financial
          reporting; and
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | The registrants other certifying officer and I have disclosed, based on
                    our most recent evaluation of internal control over financial reporting, to the
                    registrants auditors and the audit committee of the registrants
                    board of directors (or persons performing the equivalent functions):
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) | All significant deficiencies and material weaknesses in the design or operation
          of internal control over financial reporting which are reasonably likely to
          adversely affect the registrants ability to record, process, summarize and
          report financial information; and
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrants internal control over
          financial reporting.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: February 13, 2004 | /s/ Manny MashoufManny MashoufPresident and Chief Executive Officer
|----------------------- | -------------------------------------------------------------------

---

|EXHIBIT 31.2


SECTION 302
CERTIFICATION OF CHIEF FINANCIAL OFFICER


I, Walter Parks, certify
that:
|----------------------------------------------------------------------------------------------------

| | 1. | I have reviewed this Form 10-Q of bebe stores, inc.;
| | -- | ----------------------------------------------------

| | 2. | Based on my knowledge, this quarterly report does not contain any untrue
                    statement of a material fact or omit to state a material fact necessary to make
                    the statements made, in light of the circumstances under which such statements
                    were made, not misleading with respect to the period covered by this report;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Based on my knowledge, the financial statements, and other financial information
                    included in this quarterly report, fairly present in all material respects the
                    financial condition, results of operations and cash flows of the registrant as
                    of, and for, the periods presented in this report;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | The registrants other certifying officer and I are responsible for
                    establishing and maintaining disclosure controls and procedures (as defined in
                    Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) | Designed such disclosure controls and procedures, or caused such disclosure
          controls and procedures to be designed under our supervision, to ensure that
          material information relating to the registrant, including its consolidated
          subsidiaries, is made known to us by others within those entities, particularly
          during the period in which this report is being prepared;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Evaluated the effectiveness of the registrants disclosure controls and
          procedures and presented in this report our conclusions about the effectiveness
          of the disclosure controls and procedures, as of the end of the period covered
          by this report based on such evaluation; and
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Disclosed in this report any change to the registrants internal control
          over financial reporting that occurred during the registrants most recent
          fiscal quarter (the registrants fourth fiscal quarter in the case of an
          annual report) that has materially affected, or is reasonably likely to
          materially affect, the registrants internal control over financial
          reporting; and
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | The registrants other certifying officer and I have disclosed, based on
                    our most recent evaluation of internal control over financial reporting, to the
                    registrants auditors and the audit committee of the registrants
                    board of directors (or persons performing the equivalent functions):
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) | All significant deficiencies and material weaknesses in the design or operation
          of internal control over financial reporting which are reasonably likely to
          adversely affect the registrants ability to record, process, summarize and
          report financial information; and
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrants internal control over
          financial reporting.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: February 13, 2004 | /s/ Walter ParksWalter ParksChief Financial Officer
|----------------------- | ---------------------------------------------------

---

|EXHIBIT 32.1


CERTIFICATION PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002


In
connection with the Quarterly Report of bebe stores, inc. (the Company) on
Form 10-Q for the quarter ended December 31, 2003, as filed with the Securities and
Exchange Commission on the date hereof (the Report), I, Manny Mashouf, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:


     (1)       
          The Quarterly Report fully complies with the requirements of section 13(a) of
          the Securities Exchange Act of 1934 (15 U.S.C. 78m); and


     (2)       
          The information contained in the Report fairly presents, in all material
          respects, the financial condition and results of operations of the Company.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: February 13, 2004 | /s/ Manny MashoufManny MashoufChief Executive Officer
|----------------------- | -----------------------------------------------------

|A
signed original of this written statement required by Section 906 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange
Commission.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|EXHIBIT 32.2


CERTIFICATION PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002


In
connection with the Quarterly Report of bebe stores, inc. (the Company) on
Form 10-Q for the quarter ended December 31, 2003, as filed with the Securities and
Exchange Commission on the date hereof (the Report), I, Walter Parks, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:


     (1)       
          The Quarterly Report fully complies with the requirements of section 13(a) of
          the Securities Exchange Act of 1934 (15 U.S.C. 78m); and


     (2)       
          The information contained in the Report fairly presents, in all material
          respects, the financial condition and results of operations of the Company.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: February 13, 2004 | /s/ Walter ParksWalter ParksChief Financial Officer
|----------------------- | ---------------------------------------------------

|A
signed original of this written statement required by Section 906 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange
Commission.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---