Bebe Stores has completed agreements with its landlords, including Simon Property Group and General Growth Properties, to close all 180 of its stores, lowering costs enough to avoid filing for bankruptcy, unnamed sources told Reuters Thursday.
The women’s apparel retailer will move to operate online, according to the report. Bebe, Simon Property and General Growth Properties did not respond to requests from Reuters for comment.
With some $67 million in cash at the end of last year and little debt, Bebe was able to offer its landlords better terms than they may have received in bankruptcy, according to the report.
Bebe was already in the process of shrinking its store base in February. The apparel retailer closed one store in the second quarter and made plans to close as many 25 bebe and outlet stores in fiscal 2017; and now those plans have expanded to include all stores.
The retailer has been struggling for a while. Second-quarter same-store sales fell 10.5%, compared to a 2.5% decline a year ago, as store traffic improvements were inconsistent and inadequate over the holiday period. For the six months ended Jan. 2, same-store sales decreased 7.4%. Q2 net sales were $101.9 million, a decrease of 16.8% from $122.4 million in the same period last year. Gross margin as a percentage of net sales edged up to 34.4% compared to 34.0% last year, thanks to a reduction in markdowns and promotions.
Bebe, a brand with a solid reputation for chic fashion, hasn’t been the same since the departure of creative director Neda Mashouf, who exited after her 2007 divorce from founder Manny Mashouf, who was president and controlling investor at the time and took over as CEO a little over year ago.
Facing declining mall traffic and other headwinds in the apparel sector, the retailer has also faced pressure from private equity investor Consac LLC, whose president, Ryan Drexler, in 2014 began leaning on bebe to consider a sale or go private, expressing criticism of what he called Manny Mashouf's "questionable" financial holdings. Bebe's fortunes seemed to revive somewhat later that year after naming retail veteran and Jackson Hole Group founder Jim Wigget as CEO, but the company struggled to gain traction, and Wigget stepped down in early 2016.
Last summer the retailer struck a deal with brand management company Bluestar Alliance to develop its wholesale business abroad, where the retailer retains a higher profile than in the U.S. In his second quarter statement, Mashouf said the retailer’s reduction of expenses helped its bottom line. Still, the small improvements weren't enough to save the retailer's stores.
While the fashion retailer was able to avoid bankruptcy, it's unclear how far it will go as an online-only enterprise. Bebe joins several other apparel retailers in contemplating bankruptcy and shuttering stores, including American Apparel, The Limited Stores and Wet Seal.