A year has passed since Gregory Scott ditched Wet Seal Inc.'s Arden B. and ran off with Bebe Stores Inc. The breakup was nasty, but the honeymoon has been very nice.
Bebe, which sells body-clinging clothes for young women, has been wowing Wall Street. Its profit shot up 75% to $24.3 million in its fiscal second quarter and its same-store sales climbed 29.3% in January, the 22nd consecutive monthly gain and the seventh straight month of double-digit advances. What's more, its stock has more than doubled in the last year.
Retail analysts give much of the credit to the chief executive, whose resignation as president of the Arden B. clothing chain spurred Wet Seal to file suit against its rival.
"He's made a huge difference for this organization," said Eric Beder, an analyst with J.B. Hanauer & Co.
Bebe, which is based in Brisbane, Calif., was on an upswing before Scott returned to the company, where he had been vice president of merchandise from 1996 to 2000. But he pushed Bebe in new directions that analysts said had put the chain of 204 Bebe, Bebe Sport and Bebe Outlet stores on stronger footing.
Under Scott, the stores' selection of handbags, scarfs and jewelry -- items that typically come with higher profit margins than Bebe's trademark silky camisoles, slinky skirts or rhinestone-studded jeans -- has been broadened. A new catalog was launched last fall, kicking up Internet sales and pulling more shoppers into stores. Bebe has been moving fresh merchandise onto racks at such speed that markdowns have been at a minimum.
"They're constantly testing the response to different products," said Holly Guthrie, an analyst with Morgan Keegan & Co., who described Bebe's management team as among the strongest in the industry. "From my perspective, it's important to be in the stores every week to monitor what's new."
Now that he has scored so well, Scott, who declined to be interviewed for this story, really has his work cut out.
Bebe is maintaining its momentum as the important spring selling season approaches, but its impressive gains in same-store sales -- key indicator of a retailer's health because they include only stores open for at least a year -- will become more and more difficult to maintain.
"The cautionary note is, 'What is the next rabbit Greg's going to pull out of his hat?' " Beder said. "The risk is going to get higher and higher in terms of expectations on the street."
