Bebe to Close All of Its Stores

April 21, 2017 by Douglas A. McIntyre

Source: Thinkstock
Contemporary fashion retailer Bebe Stores Inc. (NASDAQ: BEBE) will close all of its stores, which number 173, according to the company’s recent filings. It has set a deal to sell all its inventory. The company said it was not clear yet how large a loss the decision would trigger.

The company’s fortunes have been disintegrating recently. In the most recent quarter, revenue was $101.9 million, a drop of 16.8% from $122.4 million reported in the same period the year before. Same-store sales for the quarter that ended December 31, 2016, plunged 10.5%. In March, Bebe management and its board said they would explore “strategic alternatives” and hired financial advisor B. Riley and an unnamed real estate advisor to assist in a restructuring.

In a new SEC filing, the company announced:

On April 18, 2017, bebe stores, inc. entered into a Consulting Agreement with Great American Group, LLC, an affiliate of B. Riley & Co., the Company’s financial advisor, and Tiger Capital Group, LLC , to, among other things, sell (i) all merchandise and inventory owned by the Company and certain of its subsidiaries located in its existing retail stores (the “Stores”) and (ii) certain furnishings, trade fixtures, equipment and improvements to real property with respect to the Stores. We may incur a loss in connection with this sale of our merchandise and inventory, but we cannot estimate such loss at this time.

Consultant will be paid $550,000 in consideration for its services, plus reimbursement for certain expenses, and will receive an additional fee of 15% of the gross proceeds generated from the sale of the furnishings, trade fixtures, equipment and improvements to real property. The Agreement also contains customary representations, warranties, covenants and indemnities by the Company and Consultant.

The Company currently anticipates that it will close all the Stores by the end of May 2017. The Company expects to recognize an impairment charge of approximately $20 million, net of deferred rent and other credits, as a result of closing the Stores. This impairment charge will be recorded in the third and fourth quarters of fiscal year 2017.

Bebe was founded in 1976. Its name was drawn from the Shakespeare phrase from Hamlet, “To be or not to be.”

Bebe’s shares traded at $66 in mid-2014. The price has dropped to $3.

Bebe is a victim of retail migration to e-commerce. The trend has recently affected Macy’s, Gap and other major retailers that have closed stores in the past year.