Bebe Stores Inc. is in reorganization mode, suggesting that toning down the party-girl image wasn’t gaining traction fast enough.
The company on Thursday said it would cut more than 50 positions, primarily in design, merchandising and production areas, so it can “focus on more streamlined lifestyle assortments and increased inefficiencies across business functions.” In addition, Manny Mashouf, the retailer’s non-executive chairman, will become “re-engaged” with the firm, this time working more closely with the design and merchandise teams. The company’s board also has approved a $5 million share repurchase program.
Jim Wiggett, chief executive officer, said, “Following a detailed review of our business, the company made the strategic decision to narrow our merchandise focus and increase our emphasis on lifestyle assortments that most closely align with our customers’ needs. We believe this will position us to maintain a more consistent and better edited offering of fashion that is true to the Bebe brand.”
Mashouf said, “I look forward to collaborating with the teams to create great, innovative, branded product that speaks to the needs of the Bebe woman.”
Mashouf, 77, was chairman and ceo of the company he founded until January 2013, when he relinquished the ceo’s post to Steve Birkhold. At that time, sales were on the decline, as were comparable-store sales. Birkhold resigned in June 2014 after 17 months on the job during a tenure marked by declining sales and persistent losses. Wiggett, a consultant and longtime adviser to Bebe, became interim ceo, and was given the role permanently in December 2014.
To be sure, Mashouf knew what clicked with consumers during the specialty chain’s heyday. And while Mashouf’s role seems limited to just “help guide” the reorganization initiative with the design and merchandising teams, his return isn’t a guarantee of success. Teen retailer Aéropostale is one such example. Julian Geiger, who had been ceo of the teen retailer, rejoined the chain in August 2014 in the same role to right the ship. Aéropostale’s turnaround remains pressured.
Of course, the difficulties that many contemporary brands face, whether at the higher end with the Vince brand or at the younger age range with brands such as Bebe or BCBG, have been exacerbated by the slow recovery of the economy.
A spokeswoman for Bebe said Brigitte Bogart, executive vice president of design, remains with the company and she and her team, along with those from merchandising and production, will be “working together collaboratively with Manny.”
She added that Mashouf “wanted to take on a larger role in the design, merchandising and production areas to support our long-term objectives. As we right-size the Bebe business, we are sharpening our merchandise focus.” The spokeswoman added that the company continues to pursue its “international expansion and wholesale opportunities, and the domestic restructuring of the business will help us to align with this strategy.”
Bebe in August signed an agreement with Longgoal LLC, a Shanghai-based agency, for its entry into Greater China, with plans to open 60 to 150 stores over a five-year period. The first store is slated to open in summer 2016.
As for the company’s stock buyback program, Bebe said it “may be suspended or discontinued at any time.”
Shares of Bebe closed up 3.9 percent on Thursday to 98 cents. The 52-week low is 93 cents and the high is $4. The company disclosed its reorganization plan after the markets closed, which sent shares up 3.4 percent to $1.01 in after-market trading.
Companies often buy back stock to show confidence if management thinks the shares are undervalued, but that typically has the effect of boosting the share price. A Bebe spokeswoman said the program “is a move of confidence in the turnaround strategy the company has in place.”
Given the company’s fourth-quarter results — it narrowed its fourth-quarter loss to $5.2 million, or 7 cents a diluted share, from a net loss of $34.5 million, or 43 cents, in the year-ago quarter – some may argue that the cash to be used to buy back shares perhaps could be put to better use. The spokeswoman said, “Between our current cash and our real estate assets valued at approximately $50 million, the company remains in a strong position fiscally.”
The company expects pre-tax costs associated with the reorganization to be $1.5 million, and anticipates annual cost savings of $4.8 million. The company is maintaining its first-quarter guidance of fiscal 2016. Comparable-store sales are expected to be in the negative midsingle digit range, with gross margin lower than a year ago.
Wiggett said, “We have seen encouraging trends in the business quarter-to-date. Comparable-store sales in September turned positive, and we have largely moved through our underperforming bohemian product.”
He left the door open for more cost reduction maneuvers, though, saying, “As we prepare for the second half of fiscal 2016, we will continue to evaluate our cost structure and capital expenditure requirements.”