By  on December 24, 2008

SAN FRANCISCO — National contemporary women’s fashion retailer Bebe Stores Inc. is looking to leverage its midmarket brand name in a new lower-priced retail concept targeting a younger clientele.

Like other retailers, Bebe has seen sales flag as the economic downturn tightens. In response, the company is testing a concept store, 2b. It targets young sophisticates from 15 to 25 who aspire to shop at Bebe, known for its sexy, edgy twist on fashion trends and whose customers are in their 20s to 40s. Prices are 20 percent to 50 percent lower than Bebe.

Located in Daly City, Calif., near San Francisco, the 4,800-square-foot store is in the regional Serramonte Mall, five miles from Bebe’s corporate headquarters in Brisbane. Macy’s and Target are anchors. Among 2b’s competitors in the mall is Max Rave, owned by BCBG Max Azria, whose midmarket contemporary fashion stores also compete with Bebe. Other young contemporary fashion tenants include Forever 21, Hollister, Hot Topic and Wet Seal.

Chief executive officer Greg Scott said 2b is an offshoot of the company’s successful outlet stores, 2b bebe, where marked-down Bebe inventory is supplemented with new, value-priced merchandise with Bebe styling.

“We knew value [to the consumer] was becoming very important, so we decided to take the value concept and test it in a regional center that might not have a Bebe because of demographics or cotenancy issues,” Scott said.

The 2b store, which opened this month, retains a flashy Bebe-store aesthetic that Scott said was intended to look like a nightclub. The store is hard to miss, with its long display window framed in black and offset by bright marquee lighting and bold graphics, such as an oversize pink heart. The interior is largely black and white.

There’s an emphasis on 2b merchandise with the distinctive Bebe bling logo, like $49  jewel-tone velour hoodies folded on a table in the center of store. There is a wide selection of $49 camisole-style tops with beaded, embroidered or sequin details, to pair with $29 2b skinny jeans or twill hip-huggers. Other fashions include $59 mini safari dresses in various colors and $79 sleeveless sequined flapper dresses.

“You can definitely dress yourself under $100,” Scott said.   

The 2b test comes as same-store sales of the core Bebe brand in October fell 20 percent from a year ago, which Scott said was a surprisingly large drop that coincided with the loss in consumer wealth as stock prices plunged. Bebe does not issue monthly same-store sales reports, but Scott discussed the October results during a quarterly earnings call with analysts. The next call is scheduled for Jan. 8.

Consumers who did shop at one of the company’s 311 U.S. stores also shifted their long-standing preferences from dresses to casual pants, tops, sweaters and jackets. Now, all Bebe dresses are being discounted 50 percent, including $159 leopard minis or the $189 Tropic Temptress Halter.

For the retailer’s latest quarter ending Sept. 30, comp-store sales were off 10.8 percent compared with the same period in 2007, which saw sales decline 9.3 percent.

Wall Street analysts who track Bebe consider the 2b concept territory for the retailer to mine.

“Bebe is a recognizable brand in contemporary fashion,” said Jeffrey Van Sinderen, a retail analyst at B. Riley & Co., Los Angeles. He said this strong identity with a fashion brand gives 2b an edge on many competitors because consumers will want to buy something that’s related to Bebe. In contrast, Van Sinderen said when shoppers buy a fashionable frock at Forever 21, “they aren’t going to wear it because it’s a Forever 21 brand.”

There’s also room in the contemporary fashion market at affordable prices, Van Sinderen said. “We don’t know how long the economy is going to be difficult,” he said.

Analyst Janet Kloppenburg of JJK Research in New York said 2b’s well-edited fashion selection could be a crowd pleaser among shoppers used to scouring competitors’ crammed apparel racks. “It’s probably prudent for Bebe to test the waters on value pricing and see if they can turn it into a bigger bang, longer term,” Kloppenburg said. “It’s great for them to address the aspirational Bebe customer.”

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