MANAGEMENT PRESENTATION - June 2015 - Jefferies
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OVERVIEW • Established in1976, bebe is an iconic contemporary accessible brand with strong brand equity and a distinct offering of apparel and accessories • Designs, develops and produces contemporary women’s apparel and accessories under the bebe, BEBE SPORT names • The Company is currently executing a turnaround plan and implementing a number of merchandising and operational initiatives • Operates approximately165 bebe retail stores and 36 bebe outlet stores in the U.S., U.S. Virgin Islands, Puerto Rico and Canada. Company is in advanced negotiations with landlords to maintain store locations and rent • Runs e-commerce business @bebe.com • Distributes and sells bebe branded product through licensees in approximately 20 countries 2
INVESTMENT HIGHLIGHTS Historically high margin and bottom-line accretive vertical apparel business in the process of turnaround and with ample future growth potential Distinctly positioned with merchandise designed to suit the lifestyle of a confident and feminine woman Upgraded management team led by highly experienced executives and strong design and merchandising talent Turnaround strategy underway with tangible progress Solid and scalable retail store operations, technology and supply chain Premier store locations primarily in A and B malls Focus on growth strategies in international, domestic wholesale, outlets and e-commerce 3
BRAND POSITIONING bebe skews trendier and more fashion-forward than most of its competitors, and strives to provide value 4
THE bebe WOMAN • Wears her confidence – likes to be noticed and instills confidence in the woman who wears it • Lives a “24/7” lifestyle, constantly juggling work and her social life • Embodies power and glamour, is ageless and stands out from the crowd • Considers herself a trendsetter and puts her own spin on the latest fashions • Prefers clothing that accentuates her curves; bebe is sexy • Looks for value and uniqueness when she shops • Diverse customer demographics including fast growing ethnicities 5
EXPERIENCED MANAGEMENT TEAM Elevated and empowered executive team with upgraded design and merchandising front-end leadership Name & Title Year Joined bebe Prior Experience Years in Industry Jim Wiggett – CEO 2014 Founder of The Jackson Hole Group, prior 40+ retail experience in Macys, Duty Free and managing multiple brands under LVMH Liyuan Woo – CFO 2010 M&A and financial advisory to private equity 17+ and strategic corporations at Deloitte Brigitte Bogart –EVP, Design Re-joined 2013 Design director during bebe peak years, prior 25+ entrepreneur and experience with many brands such as Laundry by Shelli Segal and Guess etc. Mary Jimenez –SVP, GMM Re-joined 2014 Head of bbsp during bebe peak years, prior 25+ head of merchandising at Marciano, a division of Guess and previously worked for LVMH Denise Cox –SVP , Production 2009 SVP at Haggar Clothing Co.; production and 25+ sourcing positions at VF Corporation Susan Powers – SVP, Stores 2007 VP of Store Operations at Chico's/White 25+ House Black Market, Wet Seal and BCBG Erik Lautier – EVP, Chief Digital Officer 2014 Head of eCommerce at Lacoste and Edun 15+ (LVMH); significant experience in startups and digital strategy consulting Richard Pierson – SVP, International 2010 VP of International at Tommy Hilfiger and 23+ Guess prior to joining bebe with 17 years of international expansion experience 6
STRONG BRAND HERITAGE WITH AMPLE UPSIDE For over 40 years, bebe has been a well known value oriented fashion brand. Brand messaging has been inconsistent, which confirms upside potential 7
SIX PRONGED TURNAROUND STRATEGY 1. Product Distinction 2. Brand messaging Increase product distinction with a contemporary, Align marketing campaign from accessible, fashion merchandised offering traditional to new media, focused on designed to suit the lifestyle of this confident, messaging that speaks to the bebe sexy, feminine, and sophisticated woman woman 6. Long term growth 3. Domestic Wholesale Expansion of branded product into ROI-based investment for sustained other retail operations long-term growth 5. International 4. Outlets Maintain international presence through company turnaround Refine outlets so product and messaging better Strategically plan growth initiatives as we learn from our US align with the bebe brand successes 9
PRODUCT DISTINCTION • Continue to revamp the design, merchandising, production and marketing processes to ensure consistent delivery of a cohesive fashion assortment throughout 8 seasons representing strong collections in multiple lifestyles that reflect our customer – Distinct offering falls into lifestyle categories – Maintain core competency in dresses and party while building out the tops assortment and accessories – Focus on outfits, layers, and special occasion. Expanding her special occasion offerings will improve AUR, UPT and ADS – Continue to build on the success of accessories and seeking other incremental opportunities • Merchandise calendar assumes 6-weeks, 8-seasons design with collaboration from merchandising and marketing on outfitting to ensure a coherent offering, consistent messaging, and cost savings – Initiated the full roll out of localized lifestyle outfitting ― Consistency in planning, designing, merchandising, and floor presentation • Shift from IMU focused pricing to quality and value oriented pricing 10
BRAND MESSAGING • Redefining brand message to reflect the essence of the bebe woman across all channels • Building brand relevance in social media through Facebook, Instagram and Pinterest ― Act as a fashion resource ― Starting a social impact campaign • Upgrading loyalty and CRM platforms which segments customers into distinct groups with targeted approach in product and messaging ― Using an email service that enables one-to-one cross-channel marketing ― Outlet CRM: § Reconnect with outlet marketing team § Align messaging to ensure consistency with bebe brand • Launched standalone iPad/iPhone version of digital catalog 11
DOMESTIC WHOLESALE • Opportunity to introduce the brand to customer base with product that is distinct; reinforces the DNA of the brand, and supports the overall perceptions of the brand • Includes multiple merchandise categories such as handbags, shoes, intimates, and accessories etc. • bebe product will be featured both in branded shop- in-shops, as well as within wholesale partners' presentations 12
OUTLETS • Rebranded all stores as ‘bebe’ to reinforce the single brand focus ― Eliminated 2b product and optimized the mix of bebe MFO, logo. and clearance products transferred from main stores • Maintain the casual offering successes under the bebe label ― Maximize the made for outlet opportunity with brand approved bebe product that increases customer awareness while delivering incremental revenue ― Creates an opening price-point for the bebe line, which leads into mid-priced product in bebe stores and the higher range of product in key lines • Strategically incorporate non-apparel product into outlets ― Goal of 20% store penetration by 2016 • Increase top line and bottom line while retaining brand equity and integrity ― Increase Average AUR, IMU% and GM% ― Pop-up locations to eliminate MDs • Goal is to add 38 new outlets by FY 2018 for a total outlet portfolio of approximately 70 outlet locations 13
INTERNATIONAL GROWTH • The bebe brand has found success internationally by serving a sophisticated, branded customer, and offering an aspirational product • Enhanced product assortments. Branding efforts are receiving a positive response from the consumer • Currently in 25 countries with 10 partnerships and working to build store count through our brand transition ― Position our partners for future success when brand has strategy and positioning back in alignment ― Monitor US selling and successes and then build on those internationally 14
Financial Highlights Strictly Private and Confidential
FISCAL YEAR FINANCIAL HIGHLIGHTS FY14 FY13 FY12 July 5, 2014 July 3, 2013 June 30, 2012 Net Sales $425.1 $463.2 $519.8 Gross Margin 32.5% 33.3% 40.2% SG&A as % of sales 46.5% 42.6% 36.0% Operating Income (Loss) ($59.7) ($43.0) $21.8 Income (Loss) from Continuing Operations ($59.2) ($69.1) $13.2 EPS from Continuing Operations ($0.75) ($0.84) $0.16 EBITDA after one-time items ($28.7) ($7.2) $41.8 Stores at end of period 207 242 252 Actual to 40% Margin Delta $31.9 $31.1 • Margin drain, significant SG&A increase coupled with sales productivity issues were main factors for a disappointing FY13 & FY14 • FY15 is a reset year for margin level and store counts 16
9-MONTHS FY15 INCOME STATEMENT SUMMARY April, 3 April 5, 2015 2014 From Continuing Operations (In millions) (unaudited) (In millions) Net Sales $323.7 $321.5 Gross Margin 108.9 106.1 SG&A 129.0 141.7 Net Loss (None-GAAP) $18.4 $32.5 Net Losses Per Share (None-GAAP) 0.24 0.41 Normalized EBITDA ($6.4) ($17.9) • Updated guidance of ‘low-single digit sales comp’ and ‘low- single digit loss per share range’ 17
IMAGES EXPLAIN THE NUMBERS - OVERTLY SEXY FY14 & Q1 FY15 18
INTRODUCTION OF THE FALL COLLECTION – WEAR YOUR CONFIDENCE! 19
FOLLOWED BY HOLIDAY PRESENTATION – NO LABEL REQUIRED 20
FOLLOWED BY SPRING COLLECTION – MORE CASUAL LIFESTYLES 21
bebe LIFESTYLES - OUTFITTING FOR EVERY ASPECT OF HER DAY SPECIAL PARTY DRESSY BUSINESS LOGO BBSP OCCASSION CASUAL CHIC 22
bebe LIFESTYLES MAP • Largest offering in the Dressy Casual lifestyle - versatile pieces that can be worn day to night • Protecting our heritage of Party and Business Chic at higher price points Price High SP. OCC. 3% BUSINESS PARTY CHIC 20% 20% DRESSY CASUAL 40% Core BBSP 2% LOGO 10% Opening End Use Day Night 23
THE NEW EXCITEMENT IN DRESSY CASUAL OFFERINGS FALL 2015 24
THE NEW EXCITEMENT IN DRESSY CASUAL OFFERINGS FALL 2015 25
THE NEW SPECIAL OCCASION OFFERINGS FALL 2015 26
BUSINESS CHIC LIFESTYLE OFFERINGS FALL 2015 27
NEW STORE CONCEPT DRIVES SALES AND MARGIN • bebe is currently positioned in 170 of the 312 defined A and B volume malls • Elevate the bebe brand and shopping experience through windows and in store merchandising • New store concept currently rolled out to 8 bebe stores. Comparable performance indicates 5-8% margin gain and increase in sales per SF • Plan to roll out the concept to all new and relocated stores • Strategically pre-plan floor sets, fixture and marketing needs by partnering with merchandising, marketing, and design teams • Improve window display and in-store marketing in partnership with marketing team • Non-apparel table testing successful with planned 50% rollout by March 2015 28
NEW STORE CONCEPT – INTRODUCTION SUMMER 2014 29
NEW STORE CONCEPT – INTRODUCTION SUMMER 2014 30
NEW STORE CONCEPT – INTRODUCTION SUMMER 2014 31
NEW STORE CONCEPT – INTRODUCTION SUMMER 2014 32
NEW STORE CONCEPT – INTRODUCTION SUMMER 2014 33
BALANCE SHEET AND CASH FLOW SUMMARY April, 4 April 5, 2015 2014 (In millions) (unaudited) (In millions) (unaudited) Cash and Investments $76.9 $139.0 Merchandise Inventories 32.6 31.9 Property and Equipment, net 93.9 96.1 Total Assets $225.2 $292.1 Total Liabilities 69.1 72.8 Shareholders’ Equity $156.1 $219.3 • Planned CAPEX of $18M for FY15 and directionally lower for FY16 • Planned Dividend payments of $0 for Q3 and Q4 FY15 34
SHORT TERM TURNAROUND & LONG TERM GROWTH • Driving increased store productivity through focused merchandising and marketing initiatives as well as new store concept rollout and visual presentation to ensure global-level leverage • Focus on high quality sales through improved product offering, better managed promotions, and disciplined approach to inventory management • Managing and planning for investments in inventory, SG&A, and CapEx Ø Managing inventory in line with test and react strategy and ensure
FORWARD LOOKING STATEMENTS Certain statements in this presentation are "forward-looking statements" made pursuant to the safe- harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and are subject to various risks and uncertainties that may cause actual results to differ materially from those that we expected. The statements in this presentation, other than historical information, contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ from anticipated results. Wherever used, the words “expect,” “plan,” “anticipate,” “believe” and similar expressions identify forward-looking statements. Any such forward-looking statements are subject to risks and uncertainties. Some of these risks include, without limitation, miscalculation of the demand for our products, effective management of our growth, decline in comparable store sales performance, ongoing competitive pressures in the apparel industry, changes in the level of consumer spending or preferences in apparel, loss of key personnel, difficulties in manufacturing, disruption of supply, adverse economic conditions, and/or other factors that may be described in the Company's annual report on Form 10-K and/or other filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement. 36
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