Bringing the Sexy Back: Bebe Outlines Turnaround Strategy
Contemporary mall retailer Bebe Stores Inc., headquartered in the San Francisco Bay Area, hired a new slate of executives earlier this year to orchestrate a turnaround. The first order of business is bringing back the sex appeal.
“The clothes got more conservative,” said Liyuan Woo, Bebe’s chief financial officer, during an analysts/investors day hosted by the retailer on Sept. 12 in New York. “We really walked away from sexy.”
During the investors day, Steve Birkhold, Bebe’s chief executive officer, formally introduced the slate of executives as well as new strategies to reinvigorate the 37-year-old retailer, which has with a fleet of 235 stores—with namplates Bebe, Bebe.com, 2b Bebe and 2bstores.com—across America, Puerto Rico, Canada and the U.S. Virgin Islands. The new initiatives will guide Bebe back to its roots and go beyond them, Birkhold said.
“Repositioning our merchandising [offering], we clearly know that the key reason a girl shops at Bebe is to find something sexy to go out in. So although we sell lots of other products and she comes to our store for a lot of other reasons, clearly we have to over-index on our greatest strength.”
Birkhold told investors that Bebe will bring back the sex appeal with an emphasis on body-conscious styles and clothes for going out as well as with new omni-channel marketing, new physical prototype stores, new merchandising and sourcing, and an overhaul of the Bebe LA Design Studio in Los Angeles.
Under the guidance of founder Manny Mashouf, Bebe rose to prominence in the 1980s and 1990s as the go-to place at the mall for contemporary women’s fashions with a playful, risqué edge. The retailer suffered during the Great Recession, and Mashouf, who currently serves as chairman of the board, hired Birkhold in January to bring Bebe back to its place at the top of the mall.
The old spirit of Bebe informed the recently unveiled fall 2013 ad campaign, starring Sports Illustrated swimsuit model Nina Agdal. Nicknamed “be9to5,” the campaign’s theme is that the Bebe woman’s “9 to 5” is actually 9 p.m. to 5 a.m., a time marked by romance, fun and adventure.
But the retailer has got a lot of ground to cover in its comeback. The fourth-quarter results were released Aug. 29, and net sales were $119.2 million, which was a 9.4 percent decrease from $131.5 million last year. The fourth quarter’s same-store sales showed a 7.1 percent decrease compared with a 2.5 percent decrease in the same quarter last year.
Business declined throughout the fiscal year. Net sales for the fiscal 2013 year were $484.7 million, a decrease of 8.7 percent from 530.8 million last year. Same-store sales decreased 8.8 percent, compared with an increase of 5.3 percent in the prior fiscal year.
For the first quarter of the fiscal 2014 year, Bebe forecast same-store sales to be in the negative low to mid-single-digit range.
While the retailer’s cash and investments were listed as $180 million in an Aug. 29 financial release, Birkhold said the sales performance declined during a year of great change for the brand. However, he was encouraged by consumer reaction to some of the first new products made under the direction of the executives who joined the retailer earlier this year.
Wall Street analyst Jeff Van Sinderen said Bebe’s recent results came in above consensus estimates, and he reiterated a “buy” rating for Bebe’s stock, which he follows for Los Angeles–based financial-services firm B. Riley & Co.
In an Aug. 30 research note, Van Sinderen wrote that Bebe was making progress with its new team and new merchandising. “As merchandise content improves … and with a new ad campaign/branding initiative, we believe that consumer interest in the brand is being renewed.”
While Bebe aims to continue its tradition of being a contemporary clothier for fun and romance, the way to contact its customer has changed. Ben Baum was named Bebe’s chief digital officer in November 2012. After serving as chief of business development for multichannel retail at Google, Baum told the audience at the recent investors day that he considered Bebe a 37-year-old start-up; it was burgeoning with possibilities. In building Bebe’s omni-channel functions, he was focusing on increasing sales traffic from mobile devices and also to bring back the retailer’s most loyal consumers with a strong loyalty program.
For the physical part of the Bebe omni-channel experience, Birkhold recently hired Mikel Bowman for the newly created position of senior vice president of visual merchandising–in-store marketing. Bowman, former vice president of visual merchandising and store design for Lacoste (Birkhold formerly served as chief executive officer for Lacoste), will develop a new Bebe prototype store at The Mall at Short Hills in Short Hills, N.J. The prototype store will be unveiled in spring 2014. The retailer will open four other prototype stores in the upcoming year. Birkhold also forecast that Bebe will open more outlet stores in the near future.
Another new executive, Katrina Glusac, joined Bebe in April as its chief merchandising officer. She told the investors-day audience that the retailer had increased its speed-to-market capabilities and that it had reintroduced logo product. It was testing T-shirts with the Bebe logo, and it was reintroducing proprietary prints.
Birkhold noted that Bebe would bring much of its sourcing in house. In the past, Bebe sourced 30 percent of its work from outside vendors. Its goal was to bring 10 percent of its sourcing from outside vendors.
“We’re still going to work with our outside vendors to give us great, unique products, but the merchants and the designers will make sure that everything has a Bebe take on it.”
Birkhold also told the investors that changing seating arrangements would make Bebe’s Los Angeles design studio a catalyst for ideas. The merchandising, design, production and technical departments were formerly separated. In early September, these individual departments were put on the same floor, without separations. “So they are living, breathing the products,” Birkhold said of the new arrangement.