bebe Confident In Turnaround Strategies Following First Quarter Results
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
Company repositions merchandise to “bring sexy back;” builds omni-channel functions and new prototype store to increase business
Women’s retailer, bebe, released its first quarter 2014 results on November 5th revealing that the retailer is still experiencing some issues as it battles back to profitability. The lone bright spot in their results is a sequential improvement in comparable store sales, which decreased 2.8 percent, much less than the previous quarters decrease of 7.1 percent The slowing of losses is attributed to improved traffic and conversion levels during the quarter.
According to bebe CEO, Steve Birkhold, “Fiscal first quarter 2014 marks the beginning of our turnaround journey. We saw a favorable response to our new merchandizing strategy, while we continued to clear through legacy merchandise during the quarter. While the retail environment remains difficult, we continue to focus on our turnaround initiatives and remain confident that we are taking the right strategic direction. Looking ahead, we will focus on executing our transitional strategies as we move forward.”
Over the past year, the company has been working on a turnaround strategy for the 37-year-old company that will “guide Bebe back to its roots and go beyond them,” according to CEO Birkhold. In particular, the company is repositioning its merchandising offering to bring back the sex appeal. In a new fall advertising campaign nicknamed “be9to5” featuring Sports Illustrated swimsuit model, Nina Agdal, the company is emphasizing the adventures, romance, and excitement customers crave during the 9 p.m. to 5 a.m. time frame. According to CFO Liyuan Woo, one of the main reasons for customers’ decreasing demand was because the clothing styles weren’t well suited to the customer base. Woo says, “The clothes got more conservative. We really walked away from sexy.”
Similarly, while bebe plans to bring customers back to the styles they desire from the retailer, the store is making several key changes to improve its relationship with customers. For one, the company’s CDO is focusing on building up bebe’s omni-channel functions to increase sales through mobile devices and draw in customers with a loyalty program. The company also hired a senior VP of visual merchandising-in-store marketing, Mikel Bowman, to develop a new bebe prototype store in Short Hills, N.J. The first prototype store is expected to open in Spring 2014, with four more to follow in the upcoming year. Finally, the retailer is reintroducing logo products and bringing sourcing back in house, with the goal of reducing sourcing from outside vendors to 10 percent.
Neither the company nor analysts expect the turnaround to be a quick process, however. For the second quarter, bebe expects the competitive retail market to continue affecting comparable store sales, which they predict will be in the negative mid-single digit range. Analysts from Janney Capital Markets have downgraded shares because of increasing competition, margin pressures, and rising costs over the next year. While the analysts believe the company’s new direction is well thought out, there is some concern the new strategy could limit the target market for bebe products and further affect sales. Time will tell, but early indicators are that the strategy is working. Hopefully next year at this time we will be writing about what a great turnaround bebe made.
Click here to see how bebe is quickly becoming an omni-channel retailer!
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