| BUSINESSWEEK ONLINE : MAY 31, 1999 ISSUE | ||||||||
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| SPECIAL REPORT
bebe stores inc.: This Is No Fashion Victim Who would have thought skinny Capri pants would sell in January? Almost nobody. That's why skeptical buyers for bebe stores Inc. ordered a mere 1,000 pair last year--a clear bet that winter fashions wouldn't favor the cropped-leg look. But fashions did. And within a week, 800 pair were sold. For most chains, that unexpected popularity would have spelled disaster. But for bebe (pronounced beebee), a ''vertical'' retailer that makes its own clothing, as Gap Inc. does, the fix was quick and decisive. Execs of the 100-store chain called the Los Angeles factory poised to make bebe suits and switched the order to Capri pants. More than 50,000 pair of the pants were sold. COPYCAT'S MEOW. It's that kind of quick-draw fashion sense and manufacturing savvy that has pushed bebe stores, managed by the husband and wife team of Manny and Neda Mashouf, to No. 6 on our list of fast-growing small companies. While many retailers catering to young women try to set fashions, bebe makes a virtue of openly, and quickly, following someone else's lead. The stores' reputation for sexy, trendy clothing at mall prices has spawned a growing fan club among its target audience of women in their 20s and 30s, including actresses Calista Flockhart and Julia Roberts. The chain's numbers look as good as the slinky dresses in its windows. Sales have grown an average of 31.1% annually over the past three years, to $147 million in 1998. By controlling the manufacturing process, bebe has kept a handle on costs. That has helped propel earnings upward by an average of 105.7% a year over the past three years. Bebe's return on invested capital is also strong at an average annual 37% over the past three years. One reason: The stores boast roughly $800 in sales per square foot per year, more than double most rivals. Key to bebe's success are the Mashoufs. He's a 60-year-old veteran businessman who quit arena and restaurant management to found the retailer almost 30 years ago. In the '80s, he took bebe BEBE beyond its San Francisco base, and today it operates nationwide. She's 36, a former bebe customer. The two met in 1984 when Neda, then a student at San Francisco State, was making layaway payments on a leather jacket in a bebe store. Throughout their courtship and marriage, she worked her way up through the company, starting as a buyer. She now oversees myriad projects for the chain, from merchandising and licensing deals to computer upgrades. She's also a crucial trend-spotter, looking to MTV and VH1 for clues. ''I was and am a bebe girl,'' she says. Customers like the combination of trendy fashion and reasonable prices at the stores, which can be found both in downtown and shopping mall locations. ''You can buy an outfit that will give you a look like Dolce & Gabbana--that cute little look of the moment without spending too much money,'' says Ana Klerkx, 30, a San Francisco customer. ''It's a no-brainer.'' Continuing the company's breathtaking growth may prove more of a headache. Bebe's rise has been helped by the strong economy and consumer confidence. But demand for bebe's decidedly nonessential assortment of cocktail dresses and feather boas could quickly evaporate in less flush times. Bebe's fashion status is also a risk. Successful chains such as Gap try to guard against the fickle nature of the fashion business by appealing to a wide range of customers, something bebe has yet to achieve. ''The retail graveyard is littered with companies that had a meteoric rise and couldn't then attract a broader audience,'' says Candace Corlett, a partner at WSL Strategic Retail, a New York-based consulting firm. To that end, Manny Mashouf is intent on building not just the bebe store but the bebe brand. An E-commerce Web site is up to give bebe wider name recognition. Bebe shoes, watches, and eyewear will begin appearing in high-end department stores this year. Plus, bebe has made its first steps toward going global, with stores in London and Vancouver. ''As we're growing, we realize the opportunities are endless,'' says Mashouf. If the fashion gods are willing. By Gabrielle Saveri in San Francisco _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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Hot Growth Companies TABLE: Hottest of the Hot Friede Goldman Intl.: A Gusher in a Drought bebe stores inc.: This Is No Fashion Victim Mastech Corp.: The Nabobs of Networking Action Performance Cos.: Hot-Rodding His Way to the Top Salton Inc.: Putting a Gizmo in Every Kitchen Maximus Inc.: Welfare Privatizer Where Are They Now? TABLE: The 1997 Winners...And the Losers TABLE: 1999's 100 Top Hot Growth Companies (.pdf) INTERACT E-Mail to Business Week Online | |||
