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Bebe Takes Axe to US Store Estate

The womenswear retailer posted a 3.2% drop in comparable store sales in the first quarter ended Oct. 1, slightly better than the 4.1% decrease reported a year ago, but a decline nonetheless. Despite a 9.4% fall in net sales, from last year’s $96.3 million to $87.2 million, Bebe managed to narrow its net loss from $17.1 million to $7.8 million.

“In the first quarter of fiscal 2017 we continue to see sustainable changes in our business,” stated Manny Mashouf, chief executive officer and founder of Bebe, noting that the retailer ended the quarter with inventory and SG&A expenses below the prior year and that gross margin improved because of fewer markdowns and leverage on store occupancy cost.

“We had a very strong denim and leggings business—which we will continue to invest in—offset by weakness in non-apparel and evening dresses. We are working to take advantage of the casual trend taking place and believe we can continue to grow our bottoms business while working to improve our tops business as this is where we believe the fashion direction is taking us,” he explained. “While it is important to consistently get the fashion right, we are also finding it a challenge to offset the extremely high levels of markdowns and promotions realized in the prior year. We are committed to protecting the brand image, reducing markdowns and improving inventory turns and believe both our short-term and long-term success depend on our ability to execute our strategic plan.”

Bebe closed four full-line stores in Q1 and more closures are coming. No new stores will be opened in fiscal 2017 and the retailer will shutter up to 28 stores, both full-line and outlet. Previous plans had pointed to as many as 40 closings.

Looking ahead to Q2, which includes the crucial holiday shopping season, Bebe believes same-store sales will be in the low to mid-single digit negative range, due to less in-store and online promotions and markdowns.