bebe Stores, Inc. (BEBE: Quote) announced Friday plans to exit its 2b business as part of the apparel retailer's on-going turnaround plan to drive long term growth and sustainable profitability. The move follows a strategic business review that identified key initiatives towards saving costs.
"The steps we are announcing today build on our turnaround efforts from the past year. Through the closing of our unprofitable 2b brand, and the cost reduction program, we will be better positioned financially and structurally to focus on our core bebe brand," Interim CEO Jim Wiggett said in a statement.
The company is looking to focus on its core bebe brand's retail and outlet stores, e-commerce and international licensing business after exiting the 2b business by the end of fiscal 2014 or July 5, 2014.
It will close 16 2b mall-based stores including e-commerce business, which is expected generate pre-tax losses of about $5 million to $6 million in fiscal 2014, excluding impairment charges.
The company said the cost saving program will also include store closures and the reduction of corporate and field management positions as it realigns to new business strategies. The workforce reduction impacted about 9 percent of non-store employees, and nearly 1 percent of store operations team.
The severance costs are expected to total about pre-tax $3 million during fiscal 2014, as the affected employees are provided a severance package.
"We thank the affected employees for their efforts and dedication. This is a difficult step, but important to the long term success of our brand. As we prepare for the next fiscal year, we continue to evaluate our cost structure, capital expenditure requirements and dividend payments, and we will remain focused on carefully managing expenses and inventories, as well as preserving our cash," Wiggett added.
The job cuts, store closures, business realignment and other initiatives are expected to generate about $9 million to $10 million in total annualized pre-tax savings, beginning with about $4 million in fiscal 2015. The company also anticipates recording pre-tax restructuring charges of about $5 million to $6 million.
Looking ahead to the fourth quarter, the company said it now expects comparable store sales to be in the negative low single digit range, down from the prior forecast for comparable store sales to be flat.
However, the noted that it continues to expect adjusted loss per share to be in the mid-teen range. The company also still projects finished goods inventory per square foot to increase in the mid to high-single digit range.
BEBE closed Friday's regular trading session at $3.15, up $0.02 or 0.64% on a volume of 1.25 million shares.
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by RTT Staff Writer
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