OPERATIONS

Bebe winds down brick-and-mortar operations

BY Deena M. Amato-McCoy

It’s closing time for Bebe — at least, it is for its retail store operations.

The struggling apparel retailer said on Wednesday, June 7, that it has entered into a number of strategic real estate deals that will benefit the company two ways. In addition to shuttering its stores without having to file bankruptcy protection, the company’s brand name and web site will stay in operation — albeit through a new owner.

Bebe reached agreement with substantially all of its retail store landlords to terminate their existing leases. The cost to terminate the leases is estimated to be approximately $65 million.

The fashion retailer also signed an agreement to sell its distribution center in Benicia, California for approximately $22 million. Bebe expects to close the sale of the facility within the next 60 days. The retailer is also actively seeking a buyer for its design center in Los Angeles.

Bebe has also entered into a $35 million loan agreement with GACP Finance CO, LLC, a move that will enable the company to make payments to the retail store landlords pending the closing of the building sales. In addition, Bebe has transferred both the bebe.com URL and its international wholesale agreements into its joint venture with Blue Star Alliance. The venture has executed a royalty agreement with a third party for both operations.

Bebe is also in a Transition Service Agreement (TSA) and Asset Purchase Agreement (APA) with the third party. This firm will provide the sales of certain inventory and bebe.com site management, a move that will enable the company to facilitate the operation of Bebe’s online and wholesale businesses. Going forward, Bebe will collect royalty income through its joint venture, according to the retailer.

The company was advised by its financial advisor B. Riley & Co., a firm that Bebe hired in March to explore strategic alternatives. Like many traditional retailers targeting young women, Bebe blames its struggle on increased competition from Amazon and fast-fashion retailers like H&M.

The more than four-decade-old retailer is the latest mall-based casualty. Earlier this year, The Limited and The Wet Seal also closed all their stores. Most recently, Rue 21 said it would shutter 400 locations.

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OPERATIONS

Study: Shoppers drawn to smart devices stay abreast of security

BY Deena M. Amato-McCoy

A majority of Americans want to use connected devices to make purchases, yet they are keeping a keen eye on securing personal data.

This was according to a new study, “How We Will Pay,” from Visa and pymnts.com. The study was conducted among approximately 2,600 smartphone users aged 18 and older within the United States in May 2017. According to the study, 75% of consumers already have at least one connected device, in addition to their smartphones, computers or tablets. Yet, connected device ownership is on the rise.

The average consumer owns 4.4 connected devices, including game consoles (47%), activity trackers (41%), smartwatches (15%), voice-controlled assistants (14%), connected thermostats (9%) and virtual reality headsets (7%). Additionally, connected consumers make more purchases across more product categories than those with just one connected device. The apparel and footwear categories lead the way.

In 11 out of 19 product categories ranging from healthcare to accessories to food, 50% or more of the consumers studied made online purchases through a device within a week of the study. The top three categories included travel services, household repair and entertainment.

Eighty three percent (83%) of shoppers recognize IoT devices save them time and reduce friction when making purchases — subsequently creating an unattended checkout experience, regardless of device or platform. Within this seamless purchase experience, usage of auto-pay at the pump and in-store top the list (40%).

Despite the speed and convenience provided by connected devices, consumers still place high value on trust and security. Importantly, the more connected a consumer is, the greater their concern is about their financial safety. Their top concerns: data privacy, (more than 75%), and order verification and accuracy (69%).

Respondents also place a greater trust in banks and networks to enable payment via connected devices. Over 65% cited card issuers and bank card networks as the institutions they trust most to enable those experiences. This was over retail channels, social networks and mobile device manufacturers, the study revealed.

“The category of payment-enabled devices is still in very early days, yet this research shows just how much consumer interest and understanding is starting to build for what these experiences can offer,” said Jim McCarthy, executive VP, innovation and strategic partnerships, Visa. “As we work with our banking partners to make it easier to put payment credentials onto devices, a few new consumer use cases will inevitably break-through and start to really change the game.”

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Sears makes amends with top supplier

BY Deena M. Amato-McCoy

The public feud between Eddie Lampert, chairman and CEO of Sears Holdings, and a top supplier seems to have been resolved.

In his May 15 blog, Lampert took aim at some of the chain’s vendors in a blog post. It read:

“There have been examples of parties we do business with trying to take advantage of negative rumors about Sears to make themselves a better deal – a deal that is unilaterally in their interest. In such a case, we will not simply roll over and be taken advantage of – we will do what’s right to protect the interests of our company and the millions of stakeholders we serve.”

Lampert also called out — and then sued — One World Technologies, a China-based subsidiary of Techtronic Industries in the blog. He accused the company, which is the maker of Craftsman tools, of trying to cut a deal "that is unilaterally in their interest.”

On June 5, Lampert updated the blog post with a notice that said the dispute has been solved. “The matter has been resolved to the mutual satisfaction of both parties and we look forward to continuing our relationship with One World,” according to the post.

While the matter has been resolved, Sears continues to struggle. While the embattled retailer reported its first quarterly profit since 2015, it attributed this gain largely to the sale of its Craftsman brand, and lower expenses due to its $1.25 billion cost-cutting plan.

Overall, Sears posted net income of $244 million in its first fiscal quarter ended April 29, compared with a loss of $471 million in the year-ago period. However, Sears posted a loss of $230 million when adjusted for special items, compared with a loss of $199 million a year earlier.

As for revenues, the company continues to bleed. Revenue fell 20.3% to $4.3 billion in the quarter, down from $5.4 billion last year. The retailer said the year-over-year decline was primarily driven by having fewer Kmart and Sears full-line stores in operation, as well as an 11.9% drop in same-store sales.

The embattled chain also revealed on Wednesday, May 31, that its Kmart division was the victim of a security incident. This was the chain’s second attack in less than three years.

To read the full blog and update, click here.

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