Bebe Is Closing All Its Stores, The Latest Casualty In Retail

Bebe Is Closing All Its Stores, The Latest Casualty In Retail

Bebe is closing all its stores, the latest brick-and-mortar retailer to get dumped by customers who would rather shop with their phones than their feet. Bebe Stores, which models itself as a purveyor of "unique, sophisticated and timelessly sexy" clothing for women, said it plans to close the stores by the end of May, according to a regulatory filing.

The company had hinted that something like this could happen. Bebe said in an SEC filing last month that it was "exploring strategic alternatives." Earlier this month, the company said it planned to close 28 stores and was trying to figure out what to do with the rest of them. Before that announcement, Bebe had 168 stores in the United States and Canada.

Bebe has plenty of company in the struggling brick-and-mortar retail industry. Macy's, JCPenney and Sears once ruled the shopping malls, but now they're closing hundreds of stores and cutting thousands of jobs. Luxury retailer Neiman Marcus said earlier this month that it might sell itself, after ditching its plans for an IPO in January amid sorry sales.

So who's the winner? Amazon, the behemoth of online retail, is seizing market share from more traditional retailers, though bargain-hunters are keeping T.J. Maxx and Dollar General in business.

US retailers closing shop at an alarming rate

American retailers are closing stores at a record pace this year as they feel the fallout from decades of overbuilding and the rise of online shopping. Teen retailer Rue21 announced plans to close about 400 of its 1100 locations. "There is no reason to believe that this will abate at any point in the foreseeable future," said Mark Cohen, the director of retail studies for Columbia Business School and a former executive at Sears Canada.

Up to April 6, closings have been announced for 2880 retail locations this year, including hundreds of locations being shut by national chains such as Payless ShoeSource and RadioShack. That is more than twice as many closings as announced during the same period last year, according to Credit Suisse. Based on the pace so far, the brokerage estimates retailers will close more than 8600 locations this year, which would eclipse the number of closings during the 2008 recession.

At least 10 retailers, including apparel seller Limited Stores, electronics chain Hhgregg and sporting goods chain Gander Mountain, have filed for bankruptcy protection so far this year. That compares with nine retailers that declared bankruptcy, with at least $US 50 million ($66m) liabilities, for all of 2016.

The seeds of the industry's current turmoil date back nearly three decades, when retailers, in the throes of a consumer buying spree and flush with easy money, rushed to open new stores. The land grab wasn't unlike the housing boom that was also under way at that time. "Thousands of new doors opened and rents soared," Richard Hayne, chief executive of Urban Outfitters, told analysts last month. "This created a bubble, and like housing, that bubble has now burst."

The over-storing, including the influx of fast-fashion and off-price chains, resulted in a brutally competitive landscape that made it difficult for retailers to raise prices. "A pair of men's dress pants costs less today than they did a decade ago," Manny Chirico, chief executive of Calvin Klein and Tommy Hilfiger parent PVH, said recently. As retailers rushed to expand their physical footprint, the internet was gearing up to do to apparel companies what it had already done to booksellers: sap profits and eliminate what little pricing power these chains commanded.

Despite the view that shoppers prefer to try on clothing in physical stores, apparel and accessories are expected this year to overtake computers and consumer electronics as the largest e-commerce category as a percentage of total online sales, according to eMarketer.

Helena Cawley, 37, said she used to be a "diehard" department-store shopper. But with two small children, the Manhattan entrepreneur doesn't have time to visit physical stores the way she once did. "I buy much more online now," she said. "With free returns & free shipping, it's so easy."

But that shift has come at a high cost to retailers. It is less profitable to do business online than in a brick-and-mortar store, largely due to the higher shipping, customer acquisition and technology costs of the digital world. Retail margins on average fell to 9% last year from 10.5% in 2012, according to consulting firm Alix Partners. Over that period, e-commerce sales increased to 15.5% of total sales from 10%. The internet has also made it easier for consumers to comparison shop, thereby erasing any pricing leverage retailers may have had. "The internet has acted as the great price equaliser," said Joel Bines, the co-head of Alix's retail practice. To be sure, retailing has gone through shake-outs before, whether it was the superstores such as Wal-Mart Stores, Target and Kmart that killed mom-and-pop shops, or category killers like Barnes & Noble and Toys "R" Us that did the same to smaller booksellers and toy chains.

And even today, there are chains that continue to grow, such as off-price retailer TJX, which is opening hundreds of stores under its Marshalls, T.J. Maxx and HomeGoods banners, as it steals market share from Macy's and other department stores. "This is not the end of retailing as we know it," Mr Bines said. "People are not going to stop going to stores."

Others have given up waiting for a recovery that seems always out of reach and are settling into what appears to be the new normal. "We're planning as if the environment is not going to improve," Jerry Storch, chief executive of Saks Fifth Avenue and Lord & Taylor parent Hudson's Bay, told analysts earlier this month.