California Apparel News

Less than one year after debuting PH8, Bebe Stores Inc. announced July 6 it will close the activewear and casual-attire division, which opened in November 2009.

In a company statement, the Brisbane, Calif.–based Bebe said it would close its 48 PH8 locations or convert them to locations of 2b bebe, the retailer’s affordable-fashion and outlet chain, which maintains stores in Camarillo Outlet in Camarillo, Calif., and Desert Hills Outlet in Cabazon, Calif. Bebe runs 18 2b bebe stores in outlet-mall locations and 15 2b bebe stores in non-outlet locations. The process of closing PH8 is scheduled to start in the retailer’s fiscal 2011.

Roth Capital Partners retail analyst Liz Pierce said Bebe’s closure of its PH8 division was a necessary step. “We view the announcement favorably,” she wrote in a July 7 research note. “The division did not appear to be gaining traction, and ... closing it frees up management’s time to focus on the core Bebe brand, which we believe is continuing to show encouraging momentum.” Bebe forecast the price tag for closing PH8 will be $17 million, which includes an estimated $2 million related to the write-off of the net book value of the stores’ assets. The retailer made the decision to close PH8 because of the chain’s losses. PH8 had an after-tax loss of $10 million during fiscal 2010.

PH8 was intended as the budget-conscious, casual replacement for the defunct Bebe Sport division, according to a statement from former Bebe Sport/PH8 President Tara Poseley at the time of PH8’s debut.

“In this new economy, there is a heightened consumer consciousness, and with it comes an increasing demand for clothes that are less about logos and more about great design, quality and comfort,” she had said. In February 2010, Poseley was named president of Kmart Apparel, where she was hired to guide the growth of Kmart’s apparel business. Bebe founder Manny Mashouf converted Bebe Sport because it was underperforming, according to a 2009 conference call.

The news of PH8’s closure rebounds off of tough financial news for Bebe. For the financial quarter that ended April 3, Bebe’s net sales decreased to $114.4 million from $127.7 million for the comparable period of the prior year. It was a decrease of $13.3 million, or 10.4 percent. Its same-store sales for the quarter declined 11.2 percent.

The news of PH8’s closure rebounds from an improving financial picture for Bebe. For the financial quarter that ended July 3, Bebe’s same-store sales declined 3.4 percent compared with a decrease of 29.6 percent in the same period last year. Retail sales for Bebe’s 2010 fourth quarter, which ended July 3, were $119.2 million, a decline of 4.4 percent compared with sales of $124.6 million for the fourth quarter of 2009.—Andrew Asch