By and  on January 12, 2009

Gregory Scott’s rocky five-year tenure as chief executive officer of Bebe Stores Inc. has ended.

The company said late Friday that Scott had resigned to pursue other interests and that founder and chairman Manny Mashouf would assume Scott’s responsibilities as ceo. The company appointed Cynthia Cohen as the board’s lead independent director.

“We appreciate the contributions Greg has made to the progress of the company and wish him well,” said Mashouf.

Scott joined Bebe as ceo five years ago after serving as president of Wet Seal’s Arden B. division. Beginning in 1996, he had spent four years with Bebe as vice president of merchandising. He’s also worked with Laundry by Shelli Segal, Ann Taylor and Henri Bendel in his career, which began at Macy’s West.

In 2005, Scott, then a year into his tenure, told the WWD/DNR CEO Summit that Bebe had the potential to double into a $1 billion business. In the fiscal year ended last July, sales reached $687.6 million, up 2.5 percent from the prior year and down 7.6 percent on a comparable-store basis. While it’s continued to position itself as “sleek and sexy” in its merchandising and a favorite of youthful film and music stars, some consider the brand diluted by attempts to expand the business beyond its original sensual contemporary domain, particularly with its emphasis on the Bebe Sport division.

In a research note titled “CEO Departure a Key Opportunity,” in which he maintained his “buy” rating and $10 price target on the retailer, Eric Beder, analyst at Brean Murray, Carret & Co., wrote, “Although Greg was responsible for a number of key positives for the company, over the last few years Bebe has continued to lag in virtually every performance level. When combined with a revolving door at the chief merchant position, a number of mystifying expansion decisions and the dreadful December quarter numbers, we believe Bebe’s board finally had enough.

“We urge management to use this opportunity to aggressively close nonperforming stores and refocus the company on cutting-edge fashion offerings that drive business,” he said.

Last week, the company said comparable-store sales declined 20.1 percent in its second quarter ended Jan. 3 as net sales slid 12.7 percent to $176.3 million. Quarterly earnings guidance was lowered 7 cents, to a range of 5 to 9 cents.

An “unfocused fashion component” had contributed to eight consecutive quarters of same-store sales declines, according to Beder, with part of the problem being instability in the executive ranks. Dana Jozwick, who joined the company last spring as chief merchant for the Bebe division from a similar post at Wet Seal, only lasted five months in the post.

Scott has been credited with “elevating the higher-margin accessories category from a small piece of the business to a major top- and bottom-line driver,” according to Beder.

Beder urged Mashouf to “aggressively reduce Bebe Sport by either closing stores or converting them to Bebe or Bebe accessory stores. The Bebe Sport concept is outdated and unfocused, at best, and not worthy of management’s limited time right now.”

The analyst also argued for granting autonomy to a chief merchant once one is appointed, stating that merchandising exclusives with the likes of Tara Subkoff, who originated the Imitation of Christ brand, and the Pussycat Dolls had served as “stopgaps” but hadn’t energized the business.

Like many retailers, Bebe has had difficulties tracking the moving target of the contemporary customer. That uncertainty has been reflected in the choice of older spokeswomen, such as actresses Rebecca Romijn and Eva Longoria Parker for Bebe and Bebe Sport, respectively.

At the same time, however, the company recently reached back toward the junior market with its 2b concept store.

Bebe, based in Brisbane, Calif., has 312 stores, including 215 Bebe units and 64 under the Bebe Sport name. The company’s shares ended the day at $5.98, down 47 cents, or 7.3 percent. Their 52-week high and low are $13.83, reached Feb. 26, and $4.57, reached Nov. 21, respectively.

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