Bebe Stores is adding to its home furnishings arsenal that it acquired at the end of 2020, scooping up eight additional Buddy’s Home Furnishings “rent-to-own” franchises from Franchise Group Inc. for an undisclosed sum.
The franchises, located in Kentucky and Indiana, complement Bebe’s existing footprint in the Southeast U.S. and will leverage the fashion retailer’s existing back-office infrastructure, the company said. In total, Bebe now owns and operates 55 Buddy’s stores.
Buddy’s, which has more than 300 stores in the U.S., offers home furnishings, furniture, beds, electronics and appliances on a “rent-to-own” basis, allowing shoppers to pay on a weekly basis to use products like televisions, sofas, washers, dryers and laptops. The brand was certainly outside the typical wheelhouse for Bebe Stores, but CEO and founder Manny Mashouf said it “would be materially accretive to Bebe’s cash flow over time,” and provide a platform for future growth.
It’s important to note that Bebe itself isn’t what it used to be. The women’s fashion seller, known for logo and contemporary dresses, exclusively sells online with the company exiting physical retail in 2017. The brand did open Midtown Manhattan location in March 2018, but the revival was short-lived, as the store closed a year later.
Aside from its own e-commerce presence, Bebe also licenses its brand, distributing its products in approximately 100 international stores and online.
Bebe has 50/50 split ownership of the brand’s intellectual property with Bluestar Alliance as part of the holding company BB Brand Holdings. The firm, which owns, licenses and markets consumer brands including Justice, Hurley, Tahari and Limited Too among others, operates Bebe’s current brand management organization. Bluestar has played the role of acquirer for traditionally struggling brands that couldn’t find their footing as the retail environment evolved, so that they can be pivoted toward a wider consumer base through new channels, largely via licensing agreements.
Buddy’s isn’t the first deal that was separate from Bebe’s fashion offering. Bluestar and Bebe also co-own the Brookstone brand, which the companies acquired in November 2018.
Currently, the Bebe brand has approximately 240 employees.
The Buddy’s acquisition comes as the fashion retailer entered an agreement with creditor SLR Credit Solutions to secure a five-year $25 million loan. The financing was used to retire its existing $22 million secured term loan and for additional growth capital purposes. The new loan will also allow for Bebe to draw down up to $10 million more, if necessary.
“This refinancing allows us to meaningfully lower our cost of capital while providing further financial flexibility to execute on our strategy to deliver future growth from our platform,” said Mashouf in a statement.
Despite the private joint ownership of Bebe’s IP rights, Bebe Stores Inc. is actually public. Alongside the acquisition and refinancing, the company’s board of directors authorized and declared an increase to its quarterly cash dividend on common stock to 15 cents per share, up from the previous quarterly dividend of 6 cents per share implemented during the second quarter of 2020. The positive nature of the dividend raise indicates that the acquisition strategy for Bebe appears to be working.
“The increase in our quarterly dividend represents the strong operating results from our brand licensing properties and our positive outlook for the 47 Buddy’s Home Furnishings rent-to-own franchises we acquired in November 2020, in line with our stated goal of providing a strong dividend to our shareholders,” Mashouf said.