Public perception is a brand and for Bebe the image of the sausage-dress-wearing, pouting model is its — perhaps—troublesome reality.
The company reported another tough quarter Thursday, with little shared with Wall Street in the way of specifics to right the business, sending its shares down 31 percent Friday. Bebe is a little over two months into a new executive team that brought back founder Manny Mashouf as chief executive officer in hopes of resurrecting a brand once known for quality fabrications and designs aimed at the woman who goes to a wedding looking to stand out. Now on its third ceo in less than two years, the question is whether improvement in the business lies with its founder — the former restaurateur who worked until blisters on his feet sent him to the hospital and down a new career path — and what he’ll be able to do with a retailer that’s operating in an incredibly tough business environment.
The full summer collection will be in all doors by Thursday — a mix of breezy maxidresses and tailored jumpsuits — and represents the first expression of the brand under the new management team in a move aimed at restoring Bebe through product assortment improvements set to become more pronounced in June and July. The campaign, themed around St. Tropez, includes subtle improvements in fabrication and craftsmanship, said Mashouf, who sat down exclusively with WWD last week.
Mashouf, who came back in February following the departures of former ceo Jim Wiggett and chief financial officer Liyuan Woo, said he was initially reluctant to return. But he appeared energized by the prospects of breathing new life into the company that, as he said, had lost its point of view, strayed from its DNA, skewed too young and was overassorted.
“It was pretty obvious that the management did not have the same perception of what the brand should be or where it should go,” Mashouf said, adding certain campaigns executed under past management were “not right for the brand” and “awareness was diluted.”
Under Wiggett, who declined to comment, the goal was to tell a brand story that sought to introduce a new store design and have people turn to Bebe for more than just party clothes.
Wiggett was named permanent ceo in December 2014 and at the time described the state of the turnaround as being in the late teens with confidence in the product but kinks still being ironed out on the store footprint. The atmosphere at the company’s Los Angeles design studio at the time was positive when WWD was invited to tour the office.
“The designers feel like they’ve been set free, which is wonderful. The management team is very, very focused on the new vision and where we’re going because it was a strategy that was already in development,” Wiggett said at the time. “All I did was focus it and get rid of some of the noise around it so we could really pick up the pace.”
But during this time and before Wiggett’s arrival, Mashouf viewed the company’s general path as eroding the brand’s equity. And while the latest ceo is confident the team is on the right track with the summer product, change for Bebe is not likely to happen soon.
The company, in guidance reported Thursday, said it expects same-store sales in the current quarter to fall in the mid- to high-single digit range. It’s also projecting a net loss in the range of $6.4 million to $9.6 million.
Mashouf said in Bebe’s earnings release, “We are evaluating several different channel expansion opportunities as well as evaluating several potential sources of liquidity through the leveraging of our assets,” although he declined to discuss what that meant when asked about the statement during the interview.
While improved product is one tactic being explored, Bebe is looking at wholesale product licensing and shop-in-shop concepts globally. The real estate portfolio will also shrink, Mashouf said.
Bebe’s average store footprint of 4,000 to 5,000 square feet in key markets will be smaller and closures will occur as leases expire at underperforming doors.
“The [store count] sweet spot has been changing,” Mashouf said. “To give you an example, about 2005, 2006 I wanted to reduce the number of Bebe brick-and-mortar stores. We were approaching 260 stores. I really wanted 150. I thought 100-plus was excessive and it forced us to go into markets that were moderate and we had to dilute the strength of our merchandising mix in order to appeal to those extra 100 stores….My idea 10 years ago was 150. Five years ago my sweet spot was 100.”
Today that magic number is 50, Mashouf said, as he went on to talk about the slowdown in foot traffic at malls, competition from discounters and higher rents.
Bebe must also contend with Greenwich, Conn., investment firm Prentice Capital Management LP, whose founder Michael Zimmerman has made very public his dissatisfaction with the lack of transparency from the board on what it intends to do to restore shareholder value in letters to Bebe filed with the Securities and Exchange Commission.
“I have been puzzled, as well as our president and cfo Walter, what are the real intentions of Mr. Zimmerman because I sat here with Walter, sitting over there on the speaker, and we called him and we talked to him over an hour and we told him that we’re not just sitting around doing nothing,” Mashouf said. “We are doing anything and everything that…can be done.”
Zimmerman’s last request for the company to produce a list of current stockholders is something the company will comply with, Mashouf confirmed.
Zimmerman declined comment.
As for Zimmerman’s calls that the company fully explore its strategic options, including a merger or sale, Mashouf said the company has seen a few offers, but they undervalued Bebe.
“So we refused and we felt like with all the things we have the opportunity to do, it’s going to add so much more value that someday, when we decide to sell, it’s going to bring a lot more to the minority shareholders,” he said. “How could I not consider the best interest of the company that I benefit the most from? I’m not in [a] conflict of interest. I’m not a hired hand who had come in for a big severance package with millions of shares regardless of what happens and getting a hefty salary. What happens to the company affects me more than anybody else in this world.”