bebe stores, inc.

400 Valley Drive
Brisbane, California 94005-1210
U.S.A
.
Telephone: (415) 715-3900
Toll Free: (877) 232-3777
Web site: http://www.bebe.com

Private Company
Incorporated:
1976
Employees: 83
Sales: $318.85 million (2017)
NAICS: 448120 Women's Clothing Stores

bebe stores, inc., based in Brisbane, California, is a leading fashion retailer. The company once operated a large network of retail stores throughout the United States. Nevertheless, after encountering financial difficulties, bebe completed a major restructuring in 2017, closing all its U.S. brick-and-mortar locations (more than 150 stores) and laying off 700 employees. Bluestar Alliance, LLC, an apparel licensing company, subsequently acquired a 50 percent equity stake in the brand via a joint venture named BB Brand Holdings LLC, and bebe began generating revenue primarily from licensing and online sales. In 2018 bebe's products were also sold via approximately 70 stores outside the United States. However, a new concept store opened its doors that year in New York City, near the Empire State Building, in what could signify a rebirth of the company's domestic retail operations.

ORIGINS AND EARLY YEARS

The bebe concept was created by Manny Mashouf, a former entertainment executive who specialized in restaurant and arena management. During the mid-1970s Mashouf saw an opportunity to profit from the growing niche market of women's wear designed specifically for the younger, trend-conscious consumer, so he opened the first bebe store in San Francisco in 1976. Mashouf chose the name bebe because it encapsulated many of the images he wanted the clothing to project. The name was a play on the phrase “to be or not to be” from Hamlet, and was also Turkish for “woman” and French for “baby.” The name (pronounced “bee-bee”) was also unique for its pithy sound, representing the sharp and youthful originality the company wanted to portray.

The store was a success, focusing primarily on suits for younger, urban working women. For its first several years, bebe remained a single boutique, not branching out in Northern California until after several years in business. Mashouf, as director of the company, was at first conservative in his approach to expansion, choosing to focus on the financial health of a handful of stores before opening new locations. The strategy worked, and the company grew slowly but steadily in the Northwest throughout the 1980s.

COMPANY PERSPECTIVES

bebe is the go-to destination for chic, contemporary fashion.

NATIONAL GROWTH

By the beginning of the 1990s bebe was ready to begin competing with national chains. Its stores had developed a loyal customer base that could find trendy looks at a fraction of the cost of more expensive lines such as Donna Karan and Ralph Lauren. Unlike other chains such as The Gap and Banana Republic, the company made no secret of its dedication to a single niche market, the young, stylish woman with a sizable chunk of disposable income.

As the overall U.S. economy began to pick up and large, exclusive malls developed at a faster pace nationwide, the company had its first opportunity to grow from a successful regional chain to a nationally recognized label. In 1994 bebe began an aggressive expansion campaign and within 18 months had opened 38 stores in strategically located malls across the nation. New stores catered directly to youthful, sexy women, with prices ranging from $30 for a simple, tight T-shirt to $150 for a flashy, short cocktail dress.

To augment its expansion plans, the company launched major advertising spreads in popular magazines such as Vogue, Cosmopolitan, and Harper's Bazaar, reflecting bebe's vampy, trendy image. Models wore sheer, silky gowns with feather boas draped in seductive poses. The unique, highly sexualized image worked, and bebe's name recognition and profits soared.

MARRIAGE OF FASHION AND FAME

During the mid-1990s, after its initial national growth, bebe took the unusual step of actively seeking out name recognition through not only its print advertising campaigns but through celebrity exposure as well. If the bebe label was seen on the stars its customer base admired, both brand identity and sales would increase exponentially. Such was the case in 1995 when a phenomenally successful television show, Melrose Place, showcased several young, attractive television stars, whose distinctive wardrobes were mimicked across the nation. When one of the show's top stars, Heather Locklear, wore a bebe outfit, she ushered in a new era of advertising and sales far more effective than bebe's traditional ads.

After bebe's appearance on Melrose Place the label began showing up on other celebrities, all of whom appealed to the same customer base. Among them were Drew Barrymore, Alicia Silverstone, and Brooke Shields (who wore bebe on her television show Suddenly Susan), models Cindy Crawford and Christy Turlington, as well as Jennifer Lopez, Madonna, and Julia Roberts. The trend of presenting labels on specific television shows continued for the next several years, with bebe's wares making regular appearances on shows such as Party of Five, Beverly Hills 90210, The Practice, and Ally McBeal.

Consequently, while bebe capitalized on this new form of exposure, the relationship between clothes and entertainment proved to be an increasingly vital element to a show's success as well. In one episode of Ally McBeal, the entire plotline revolved around the controversial length of the skirt worn by the show's star, Calista Flockhart. The skirt was made by bebe, and orders for the skirt and others in the line went up around the country immediately after the program aired.

FURTHER EXPANSION

Unlike high fashion and bridge labels such as Donna Karan or Ralph Lauren, bebe was not an innovator when it came to designs and trends. Instead, the key to the company's success was found in its ability to quickly and accurately mimic and expand on key styles from season to season. When Donna Karan came out with sheer, wispy dresses for one season, bebe followed with similar designs within a matter of weeks. By following up a design or trend quickly, bebe allowed its fashion-conscious customers to keep up with the dizzying vicissitudes of the retail trade.

Through imitating high-fashion labels and offering its merchandise at usually less than half of what a customer would pay for more upscale names, bebe had carved out an important place for itself in the growing niche market of trendy women's wear in the late 1990s. The company had managed to make its products appealing to both the label-obsessed celebrity and the image-obsessed consumer without sacrificing quality.

KEY DATES
1976:
Manny Mashouf opens the first bebe boutique in San Francisco.
1994:
The company begins an aggressive expansion campaign.
1998:
The company goes public and adds online shopping to its offerings.
2005:
The company's flagship store on Rodeo Drive in Beverly Hills, California, opens.
2006:
bebe celebrates 30 years.
2014:
The company does away with its 2b brand to cut costs.
2015:
bebe extends its reach to China.
2017:
The company closes all its retail stores and delists from the Nasdaq.
2018:
A new concept store opens in New York City.

Considering the pace at which the trendier end of the retail market moved, the company's “test and reorder” philosophy became a vitally important aspect of its fiscal health. This process also ensured that bebe's merchandise would be constantly changing, revolving around the capricious demands of the fashion-conscious consumer, and enabled the company to keep up with trends from season to season and, in some cases, from region to region. A distinctive part of bebe's image, paradoxically, became its chameleon-like ability to change quickly, although the company never strayed far from its core devotion to snug-fitting, sexy apparel.

By the late 1990s bebe had evolved dramatically from the single, career suit–oriented boutique of less than two decades earlier, with the company gaining enough fiscal strength to go public in June 1998. The company made an initial public offering of stock at $11 a share, with 2.5 million shares sold. After the company's appearance on the Nasdaq, Mashouf maintained 88 percent ownership and continued to play an active role in the company's designs and expansion as its chief executive.

bebe had always marketed itself to younger women, primarily in their 20s, but after its tremendous expansion the company began to appeal to an even younger age group by offering less-expensive, logo-emblazoned shirts, sweaters, and jackets. The introduction of such merchandise not only brought in an expanded customer base but made the company's name more visible. In addition, while still focusing on suits and dresses as its primary inventory, bebe had also added lingerie and more-casual wear to its collections.

NEW DIRECTIONS

In late 1998 bebe signed licensing agreements with Genender International Inc. (to produce inexpensively priced but fashionable watches) and Titan Industries (to design a footwear collection), both slated to be sold in bebe stores and upscale department stores. The company also contracted with California Design Studio to produce an eyewear collection with frames priced from $50 to $150. In addition, bebe took its wares online, offering select items to internet shoppers.

By May 1999 bebe had opened 11 stores in as many weeks, reaching the milestone of successfully operating 100 stores. Two of these stores bore international addresses, with one in Kent, England, and the other in Vancouver, British Columbia. The popularity of the newest locations inspired the company to look into other international locations, such as other European countries and Israel and other Asian countries.

bebe's almost fairy tale–like success was not, however, without risk, as it appealed to a highly limited customer base and was frequently criticized for its small sizing of clothes, into which only a small percentage of the U.S. female population could fit. Nevertheless, such criticism did not affect the slew of imitators who began offering similarly styled clothes in the same price range. Abercrombie & Fitch catered to thin, leggy teenagers with jeans and T-shirts, while Juicy Couture, Diesel, and Lucky Brand marketed designer-label chic to young women and teenagers, the same demographic as bebe.

Although sales were relatively stable, by 2003 bebe experienced a downturn in both its stock pricing and quarterly same-store sales. Some analysts blamed the company's seeming abandonment of its original customers, young, impossibly thin career women, instead steering merchandise toward casual and sport clothing for younger shoppers, including teenagers who were primarily interested in logo T-shirts and jeans. Despite the criticism, bebe managed to finish the fiscal year in June 2003 with sales of $323.55 million for its 180 stores (153 bebe, 9 bebe Sport, 18 bebe outlet) in the United States and Canada, as well as through online sales and 16 international stores.

ONWARD AND UPWARD

In 2004 bebe weathered an executive shakeup when its newly hired chief executive, Gregory Gemette of American Eagle Outfitters, was sued for breach of contract as he defected to rival bebe. The resulting lawsuit made founder and Chairman Mashouf move away from Gemette, leaving bebe vulnerable for a time before new president and CEO Gregory Scott, who had been with the company from 1996 to 2000 as senior vice president of merchandising, came back to take the reins in February.

Scott's reappearance at bebe ushered in a new era of focused control on bebe's core customers and image. Jazzy separates for professional women were ramped up, while casuals and sportswear were scaled back. Accessories such as bags, sunglasses, and jewelry were still available, while bebe's popular footwear line was expanded. In addition, Scott restructured operations for tighter control, and the results were positive. In 2004 sales climbed to $372.26 million, and by the following year, sales had mushroomed to $509.53 million, with double-digit gains in net profit, helped in part by the opening of a huge flagship store on Rodeo Drive in Beverly Hills.

By 2006, the year of bebe's 30th anniversary, the company waxed nostalgic. Not only did Locklear's Melrose Place micromini and jacket ensemble make a comeback but bebe had returned to its marketing strategy of featuring popular television actresses. Mischa Barton of The OC fame, represented the company's bebe line in 2006 and 2007, and was replaced by Ugly Betty and X-Men actress Rebecca Romijn in 2007. Another new “face” was signed in 2007 as well, for bebe Sport, and the impact was immediate and enormous. Actress Eva Longoria of Desperate Housewives became the perfect poster woman for bebe Sport's sexy sportswear. Longoria's looks, personality, and diminutive size quickly boosted bebe Sport's image and bottom line, helping propel overall sales to $579.07 million for 2006 and $670.91 million for 2007.

As the new century's first decade came to a close, bebe and its ever-popular sibling, bebe Sport, continued to prosper by offering teens and young professional women contemporary separates and sportswear at “affordable luxury” prices. Always looking to stay ahead of its rivals, bebe initiated a deal with Tara Subkoff (cofounding designer of indie label Imitation of Christ) in 2008 for a new collection and signed with Skechers, based in Manhattan Beach, California, for a bebe Sport footwear line. The company also opened two new stores in Chicago and a new store in Honolulu. A number of older locations underwent renovations in 2008 and 2009 in California, New Jersey, and New York.

LEADERSHIP CHANGES

In 2009 bebe took a hit as CEO Scott left the company for the second time, amid a rather catastrophic economic downturn. With close to 300 North American locations and stores in Asia, the Middle East, Puerto Rico, Russia, South Africa, and the Virgin Islands, bebe and bebe Sport continued to offer fashion-conscious, savvy female shoppers luxurious clothes at prices lower than traditional designer duds. With the future of many higher-end fashion stores in peril, bebe seemed to be in capable hands with founder Mashouf back at the helm of his retail empire.

bebe continued to expand its offerings. In 2010 the company introduced a line of leather handbags and accessories. Additionally, after debuting its signature bebe sheer fragrance in 2009, a lighter version was introduced the following year. As social media and online, mobile, and omni-channel shopping grew in importance, in 2012 the company hired former Google business development executive Ben Baum to head its digital efforts. Subsequently, bebe moved its e-commerce operations in-house.

At the beginning of 2013, bebe had grown to include 250 stores. At that time, Mashouf transitioned to nonexecutive chairman. Subsequently, the company hired former Lacoste North America and Diesel USA CEO Steve Birkhold to serve as its top executive. The appointment, however, was short-lived. In the wake of lackluster financial performance, Birkhold resigned in mid-2014, after holding the CEO position for only 17 months. Subsequently, adviser Jim Wiggett took the reins on an interim basis before assuming the position permanently in December.

HARD TIMES

In early 2016 Mashouf once again took the reins as bebe's CEO. Additionally, the company named Walter Parks as chief operating officer and interim chief financial officer. Additional restructuring resulted in the elimination of nearly 15 percent of the company's staff in areas such as merchandising, production, support, design, and information technology. Taking a long-term focus, Mashouf sought to guide a leaner organization to success in a challenging economic environment. For the year, bebe sustained a net loss of $27.48 million on net sales of $393.59 million. This compared with a net loss of $27.67 million on net sales of $428 million in 2015.

It also was in 2016 that bebe established a licensing joint venture with Bluestar Alliance, LLC. In December of that year, the company announced a one-for-ten reverse stock split. Nonetheless, bebe continued to struggle financially in 2017, sustaining a $5.23 million loss during the second quarter. In March of that year the company announced that, to avoid bankruptcy, it would close all its retail stores (more than 150 locations), resulting in the elimination of 700 jobs. Subsequently, bebe's stock price plummeted nearly 47 percent, falling to about $3 per share.

As part of its restructuring efforts, bebe struck a deal to sell its distribution center in Benicia, California, for $21.7 million. Additionally, the company put its Los Angeles design studio up for sale. Ultimately, Bluestar Alliance acquired a 50 percent equity stake in the bebe brand, and the companies' BB Brand Holdings LLC joint venture assumed ownership of bebe's intellectual property, trademarks, and trademark license arrangements, which would continue to generate royalties from licensing the bebe name.

After striking deals to terminate leases at most of its stores at a cost of about $70.9 million, bebe completed its reorganization in June 2017. At that time, the company struck a deal with Global Brands Group Holding Limited to relaunch its e-commerce operations, as well as its international brick-and-mortar retail locations. Bluestar Alliance continued to manage the bebe brand.

DELISTING FROM NASDAQ

In December 2017 bebe announced that it would voluntary delist its common stock from the Nasdaq Capital Market. Subsequently, the company's stock began trading over the counter on the OTCQB Market. On January 16, 2018, B. Riley Financial Inc. announced it had secured a 29 percent ownership stake in bebe after converting its loan with the company into shares of common stock. Additionally, B. Riley gained two of the five seats on bebe's board of directors. After delisting from the Nasdaq, bebe proceeded to voluntarily deregister as a reporting company with the Securities and Exchange Commission in February.

In March 2018 bebe opened a new concept store in New York City, near the Empire State Building. The location featured a “personalization bar,” at which consumers could customize items, including jackets and jeans, with embroidery, patches, and Swarovski crystals. Additionally, the store included facilities for consumers to have their makeup and hair done on-site, and a lounge for hosting fashion-related educational events. Although the future remained to be seen, bebe and its partners were hopeful that the New York location could signify a rebirth of the company's brick-and-mortar domestic retail operations.

Rachel H. Martin
Updated, Nelson Rhodes; Paul R. Greenland

PRINCIPAL SUBSIDIARIES

bebe stores (Canada), inc.; bebe studio, inc.; bebe management, inc.; bebe studio realty, LLC.

PRINCIPAL COMPETITORS

Donna Karan International Inc.; Guess?, Inc.; Juicy Couture, Inc.

FURTHER READING

“Bebe Stores Announces Completion of Reorganization.” India Retail News, June 7, 2017.

“Bebe Stores Announces Rejoining of Manny Mashouf as CEO, Names Walter Parks COO.” RTT News, February 19, 2016.

“Bebe to Revive eCommerce with Global Brands Partnership.” Zacks, June 17, 2017.

Bedolla, Stephanie. “B. Riley Financial Inc. Has Acquired 29 Percent of Bebe Stores Inc. for $16.9 Million, the Company Announced Jan. 16.” San Fernando Valley Business Journal, January 22, 2018, 31.

Kaplan, Julee. “Bebe Teams with Subkoff.” WWD, January 31, 2008, 16.

Rittenhouse, Lindsay. “Bebe Could Be the Latest Struggling Retailer to Finally Go Bust.” TheStreet, March 21, 2017.

“US: CEO Gregory Scott Leaves Bebe Stores.” just-style.com , January 12, 2009.

Wilson, Marianne. “Bebe Is Back: Fashion Retailer Rebounds with ‘Lifestyle’ Concept.” Chain Store Age, May–June 2018.

Wright, Beth. “Bebe to De-list from Nasdaq in Cost Saving Move.” just-style.com , December 11, 2017.

———. “Bebe Voluntarily Deregisters from SEC.” just-style.com , March 1, 2018.