Here's the skinny on
The specialty apparel chain has developed a brand so pointed it could fit on the head of a pin, dressing actresses like
, the nymphlike star of television's
, in its short skirts and form-fitting tops.
The focus on thin women ages 18 to 34 has resulted in sales that make Bebe the envy of its peers. The Brisbane, Calif.-based company boasts sales per square foot of $720, which exceed even its most dynamic rivals.
On April 20, Bebe said earnings for the third quarter ended March 31 rose 66.4% to $5.4 million, or 21 cents a share, from $3.2 million, or 13 cents per share, a year earlier. Sales gained 38% to $46 million from $33.3 million. And sales at stores open at least a year, an important measure of a retailer's health, jumped 26%.
"From the day this company went public, it has surprised on the upside," says Adel Weisman, analyst and portfolio manager with
Roanoke Asset Management
, which owns Bebe shares.
The stock recently hit a 52-week high of 50, although it has since backpedaled some, closing Friday down 2 1/4 at 38 1/2.
But because Bebe sells trendy apparel to fickle young women, Weisman says, "The question looming in everyone's mind is: When will they disappoint, and what will trigger that?"
The company is up against tough numbers that leave little room for error. For the past 10 quarters, same-store sales have grown in the high double digits -- a pace that Bebe management admits is unsustainable. Even though the company has warned analysts and investors that growth will moderate, it's uncertain how momentum investors, who historically bail at the first sign of trouble, will react to the slowdown when it finally occurs. As
analyst Michael Glover puts it: Even if Bebe beats analyst expectations, any sales growth short of what the company has achieved in the past could still disappoint some investors. (He rates the stock a buy and his firm hasn't done underwriting for Bebe.)
Wooing the Stars
Bebe has come along way since founder Manny Mashouf opened the first store in San Francisco in 1976. Mashouf, who owns roughly 86% of the 25.7 million shares outstanding, serves as president and chief executive. Today, in a khaki-crazy world, Bebe's body-hugging clothes stand out. The Bebe Girl wears black pencil skirts and fitted v-neck sweaters. She turns up her nose at baggy jeans and loose-fitting shirts.
"Our fit is very body conscious," explains Heather Vandenberghe, Bebe's director of marketing.
Vandenberghe says she was given a mandate when she started working for Bebe three years ago to woo the entertainment industry. Since then, the company has dressed actresses like
, the star of sitcom
, and supplied clothes to the casts of
Party of Five
Bebe isn't alone in using product placements to build its brand. And despite skeptics who say there's little correlation between tie-ins and sales, other marketers insists the publicity can work wonders.
Jennifer Nerad, director of marketing for
Creative Enterprise Services
, a product-placement firm, remembers working at
when it released the film
. "We had to open up a separate phone line to handle all the calls from women who wanted to know where they could buy the black dress that Demi Moore wore," she says.
Likewise, Vandenberghe says even though TV shows don't credit the companies that supply clothes, customers recognize the Bebe look and come into stores requesting specific outfits they saw on their favorite program.
"Bebe knows exactly who they're going after," says Candice Corlett, a partner of retail consulting firm
, which hasn't done work for Bebe. "It's only the
That tight focus may prove smart when a company has just 96 stores. But as Bebe grows -- the company expects to open some 15 stores a year until it reaches about 200 -- expanding that niche may prove a challenge. In wooing the skinny girl (Flockhart has been the subject of anorexia rumors, which she has denied), Bebe has intentionally shunned those of the more substantial build. And in a country that counts roughly one-fourth of females ages 20 to 34 years as overweight, according to the government, that's no small group to exclude.
"I was in the mall with my daughter," Corlett recounts. "She's 14 and of an athletic build. She won't fit into Bebe's clothes. She walks right past them to
. That's the risk of an exclusive brand identity. It's self-limiting."
And there are those like Marilyn Wann, author and editor of
, a book and magazine for the overweight. "The very small sizes amaze me," says the 270-pound Wann, who adds that she's a happy size 28. "Why would anyone want to be a size 0? It's like erasing women from existing at all."
Vandenberghe says the company is filling a need. "There's a market for the really petite woman who has a hard time finding clothes. We can't be all things to all people."
Nevertheless, Bebe has had so many complaints from customers about its snug fit that the company recently bumped up its sizing.
Women of any size soon will get the chance to slip into Bebe when the company introduces shoes and eyewear, two products that aren't form fitting, later this year.
But even as Bebe stretches its legs, the company's gutsy performance since going public last June has, in effect, zipped it into one of its tight black dresses that leaves little room for lumps.
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