Retailer Closes, Possibly Converts 48 Stores

BRISBANE, CA-Contemporary women apparel and accessory retailer, bebe stores inc., will discontinue operations of its PH8 division, allowing the company to focus its efforts on improving bebe sales and profitability. It will also allow the company to continue to develop its 2b bebe concept, including the possible conversion of certain current PH8 stores to 2b bebe stores, according to a prepared statement.

The company estimates the total pre-tax cost associated with closing or converting its 48 PH8 stores, will be approximately $17 million. The $17 million number includes an estimated $2 million related to the write-off of the net book value of the stores’ assets and up to $1 million to mark down inventory to the lower of cost or market; both non-cash charges will be recorded in the fourth quarter of fiscal 2010.

The $17 million also includes an estimated $14 million related to future lease liabilities and potential salary expenses, both cash charges which the company expects to record as the stores close, according to a prepared statement. The company will begin to close or convert the PH8 stores during the first fiscal quarter of 2011 and believes all 48 stores will all be closed or converted during fiscal 2011.

The company made this decision based on the approximate after tax loss of $10 million during fiscal 2010, before taking into account costs associated with store impairment charges, according to the release.

Based on preliminary results, the company currently anticipates its 2010 fiscal fourth quarter comparable store sales will be at the low end of the range previously provided and currently remains comfortable with the earnings guidance previously provided.

Bebe launched PH8 to replace bebesport in November 2009 and was said to carry “playfull sexy fashion-forward active street wear.” At the time, chairman and CEO, Manny Mashouf said that “the conversion to PH8 is relevant and timely, especially now, when the market is flat and economy-conscious consumers are looking for new ideas and innovations. With the launch of PH8 we will expand into a new category while remaining true to our bebe brands’ core identity offering modern-thinking women a broader spectrum of special and unique clothes to meet the demands of their varied lifestyles.”