x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
California | 94-2450490 |
(State or Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number) |
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | x |
Emerging growth company | o |
Page No. | ||
PART I. | ||
ITEM 1. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
PART II. | ||
ITEM 1. | ||
ITEM 1A. | ||
ITEM 2. | ||
ITEM 3. | ||
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ITEM 6. | ||
As of September 30, 2017 | As of July 1, 2017 | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash and equivalents | $ | 11,138 | $ | 17,032 | ||||
Receivables | 8,111 | 5,222 | ||||||
Assets of discontinued operations held for sale | 8,613 | 25,796 | ||||||
Assets of discontinued operations not held for sale | 160 | 818 | ||||||
Prepaid and other | 1,369 | 1,599 | ||||||
Total current assets | 29,391 | 50,467 | ||||||
Equity method investment | 883 | 1,257 | ||||||
Other assets | 598 | 797 | ||||||
Total assets | $ | 30,872 | $ | 52,521 | ||||
Liabilities and Shareholders’ Deficit: | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 10,346 | $ | 15,265 | ||||
Accrued liabilities | 10,842 | 12,013 | ||||||
Bridge loan, net of issue discount | 15,601 | 33,158 | ||||||
Liabilities of discontinued operations | 1,420 | 1,955 | ||||||
Total current liabilities | 38,210 | 62,391 | ||||||
Non-current note payable | 914 | 1,142 | ||||||
Liability for uncertain tax positions | 88 | 88 | ||||||
Total liabilities | 39,212 | 63,621 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ deficit: | ||||||||
Preferred stock-authorized 1,000,000 shares at $0.001 par value per share; no shares issued and outstanding | — | |||||||
Common stock-authorized 14,000,000 shares at $0.001 par value per share; issued and outstanding 8,114,275 and 8,096,090 shares | 8 | 8 | ||||||
Additional paid-in capital | 147,111 | 146,999 | ||||||
Accumulated other comprehensive income | 557 | 573 | ||||||
Accumulated deficit | (156,017 | ) | (158,680 | ) | ||||
Total shareholders’ deficit | (8,340 | ) | (11,100 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 30,872 | $ | 52,521 |
Three Months Ended | ||||||||
September 30, 2017 | October 1, 2016 | |||||||
Net sales | $ | — | $ | — | ||||
Cost of sales, including production and occupancy | — | — | ||||||
Gross margin | — | — | ||||||
Selling, general and administrative expenses | 2,259 | 9,463 | ||||||
Operating loss | (2,259 | ) | (9,463 | ) | ||||
Interest (expense) and other, net | (1,046 | ) | 14 | |||||
Loss from continuing operations, before income taxes | (3,305 | ) | (9,449 | ) | ||||
Income tax provision | — | — | ||||||
Earnings in equity method investment | 1,026 | 450 | ||||||
Loss from continuing operations, net of tax | (2,280 | ) | (8,999 | ) | ||||
Income from discontinued operations, net of tax | 4,942 | 1,221 | ||||||
Net income (loss) | $ | 2,663 | $ | (7,778 | ) | |||
Basic per share amounts: | ||||||||
Net loss from continuing operations, net of tax | $ | (0.28 | ) | $ | (1.12 | ) | ||
Net loss from discontinued operations, net of tax | 0.61 | 0.15 | ||||||
Net income (loss) | $ | 0.33 | $ | (0.97 | ) | |||
Diluted per share amounts: | ||||||||
Net loss from continuing operations, net of tax | $ | (0.28 | ) | $ | (1.12 | ) | ||
Net loss from discontinued operations, net of tax | 0.61 | 0.15 | ||||||
Net income (loss) | $ | 0.33 | $ | (0.97 | ) | |||
Basic weighted average shares outstanding | 8,101 | 8,007 | ||||||
Diluted weighted average shares outstanding | 8,101 | 8,007 | ||||||
Other comprehensive income (loss) | ||||||||
Foreign currency translation adjustments | (16 | ) | 69 | |||||
Other comprehensive income (loss) | (16 | ) | 69 | |||||
Comprehensive income (loss) | $ | 2,647 | $ | (7,709 | ) |
Three Months Ended | |||||||
September 30, 2017 | October 1, 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 2,663 | $ | (7,778 | ) | ||
Adjustments to reconcile net loss to cash used by operating activities: | |||||||
Gain on sale of assets of discontinued operations held for sale | (6,666 | ) | — | ||||
Non-cash compensation expense | 119 | 472 | |||||
Depreciation and amortization | — | 4,268 | |||||
Non-cash charge for asset impairment | — | 764 | |||||
Earnings in equity method investment | (1,026 | ) | (450 | ) | |||
Cash receipt from equity method investment | 1,400 | 600 | |||||
Other | — | (91 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Receivables | 365 | (454 | ) | ||||
Inventories | — | 406 | |||||
Prepaid expenses and other | 437 | (1,052 | ) | ||||
Accounts payable | (7,429 | ) | (312 | ) | |||
Deferred rent and other lease incentives | — | (1,047 | ) | ||||
Accrued liabilities | (1,215 | ) | (3,091 | ) | |||
Net cash used by operating activities | (11,351 | ) | (7,765 | ) | |||
Cash flows from investing activities: | |||||||
Purchase of property and equipment | (83 | ) | (376 | ) | |||
Proceeds from the sale of assets of discontinued operations held for sale | 23,687 | — | |||||
Net cash provided (used) by investing activities | 23,604 | (376 | ) | ||||
Cash flows from financing activities: | |||||||
Proceeds from issuance of common stock | — | 3 | |||||
Repayment of bridge loan | (18,133 | ) | — | ||||
Net cash (used) provided by financing activities | (18,133 | ) | 3 | ||||
Net decrease in cash and equivalents | (5,880 | ) | (8,138 | ) | |||
Effect of exchange rate changes on cash | (14 | ) | (109 | ) | |||
Cash and equivalents: | |||||||
Beginning of period | 17,032 | 55,525 | |||||
End of period | $ | 11,138 | $ | 47,278 |
Three Month Ended | ||||||
September 30, 2017 | October 1, 2016 | |||||
(in thousands) | ||||||
Revenue | $ | 2,894 | $ | 1,338 | ||
Gross Profit | 2,894 | 1,338 | ||||
Net income from continuing operations | 2,051 | 899 | ||||
Net Income | $ | 2,051 | $ | 899 |
Three Month Ended | ||||||
September 30, 2017 | October 1, 2016 | |||||
(in thousands) | ||||||
Net sales | $ | — | $ | 87,238 | ||
Cost of sales, including production and occupancy | (10 | ) | (59,743 | ) | ||
Gross margin | (10 | ) | 27,495 | |||
Selling, general and administrative expenses | (1,566 | ) | (26,257 | ) | ||
Gain on Sale of Assets | 6,666 | — | ||||
Income from discontinued operations, before income tax provision | 5,090 | 1,238 | ||||
Tax provision | (148 | ) | (17 | ) | ||
Income from discontinued operations, net of tax provision | $ | 4,942 | $ | 1,221 |
Lease Termination | Severance | Total | |||||||
(in thousands) | |||||||||
Balance as of July 1, 2017 | $ | 2,024 | $ | 1,772 | $ | 3,796 | |||
Costs incurred in fiscal 2018 | — | 967 | 967 | ||||||
Cash payments made | (252 | ) | (377 | ) | (629 | ) | |||
Balance as of September 30, 2017 | $ | 1,772 | $ | 2,362 | $ | 4,134 |
Description | September 30, 2017 | July 1, 2017 | ||||
(in thousands) | ||||||
Distribution Center | $ | — | $ | 15,622 | ||
LA Studio | 8,613 | 8,613 | ||||
Condominiums | — | 1,561 | ||||
Total | $ | 8,613 | $ | 25,796 |
Description | July 1, 2017 | Using Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||
(Level 1) | (Level 2) | (Level 3) | |||||||||||||
Fair value measurements at reporting date | |||||||||||||||
(In thousands) | |||||||||||||||
Cash equivalents | $ | 236 | $ | 236 | $ | — | $ | — | |||||||
Total | $ | 236 | $ | 236 | $ | — | $ | — |
Three Months Ended | ||||
October 1, 2016 | ||||
(dollar amounts in millions) | ||||
Number of stores identified as at risk and evaluated for impairment | 7 | |||
Number of stores identified as at risk, but not impaired | (3 | ) | ||
Number of stores identified as at risk with impairment | 4 | |||
Total carrying amount of stores identified as at risk prior to any impairment charges taken | $ | 1.7 | ||
Total carrying amount of stores identified as at risk, but not impaired | (0.9 | ) | ||
Total carrying amount of stores identified for impairment | 0.8 | |||
Impairment charges recorded during the period | $ | 0.8 |
Fair Value | |||
(Dollars in thousands) | |||
Cash | $ | 11,138 | |
Weighted average interest rate | 0.00 | % | |
Total | $ | 11,138 |
Exhibit | Description |
10.1(*) | Retention Bonus Letter Agreement, dated August 8, 2017, by and between bebe stores, inc. and Darren Horvath (incorporated by reference from exhibit 10.33 to Registrant’s Annual Report on Form 10-K filed on October 2, 2017). |
31.1 | Section 302 Certification of Chief Executive Officer. |
31.2 | Section 302 Certification of Chief Financial Officer. |
32.1 | Section 906 Certification of Chief Executive Officer. |
32.2 | Section 906 Certification of Chief Financial Officer. |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema |
101.CAL | XBRL Taxonomy Calculation Linkbase |
101.DEF | XBRL Taxonomy Extension Definition Linkbase |
101.LAB | XBRL Taxonomy Extension Label Linkbase |
101.PRE | XBRL Taxonomy Presentation Linkbase |
Exhibit Number | Description |
10.1(*) | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema |
101.CAL | XBRL Taxonomy Calculation Linkbase |
101.DEF | XBRL Taxonomy Extension Definition Linkbase |
101.LAB | XBRL Taxonomy Extension Label Linkbase |
101.PRE | XBRL Taxonomy Presentation Linkbase |
Dated November 14, 2017 | |
bebe stores, inc. | |
/s/ Walter Parks | |
Walter Parks, President, Chief Operating Officer, Chief Financial Officer |
1. | I have reviewed this quarterly report on Form 10-Q of bebe stores, inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
Date: November 14, 2017 | /s/ Manny Mashouf |
Manny Mashouf | |
Chief Executive Officer, Chairman of the Board |
1. | I have reviewed this quarterly report on Form 10-Q of bebe stores, inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
Date: November 14, 2017 | /s/ Walter Parks |
Walter Parks | |
President, Chief Operating Officer, Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 14, 2017 | /s/ Manny Mashouf |
Manny Mashouf | |
Chief Executive Officer, Chairman of the Board |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 14, 2017 | /s/ Walter Parks |
Walter Parks | |
President, Chief Operating Officer, Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 31, 2017 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | bebe stores, inc. | |
Trading Symbol | BEBE | |
Entity Central Index Key | 0001059272 | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Smaller Reporting Company | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 8,115,754 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Sep. 30, 2017 |
Jul. 01, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, shares authorized (in shares) | 14,000,000 | 14,000,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares issued (in shares) | 8,114,275 | 8,096,090 |
Common stock, shares outstanding (in shares) | 8,114,275 | 8,096,090 |
INTERIM FINANCIAL STATEMENTS |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTERIM FINANCIAL STATEMENTS | INTERIM FINANCIAL STATEMENTS The accompanying condensed consolidated balance sheets of the Company as of September 30, 2017 and October 1, 2016, the condensed consolidated statements of operations and comprehensive loss for the three months ended September 30, 2017 and October 1, 2016 and the condensed consolidated statements of cash flows for the three months ended September 30, 2017 and October 1, 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, without audit. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States of America for annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2017. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position at the balance sheet dates and the results of operations for the periods presented have been included. The condensed consolidated balance sheet at July 1, 2017, presented herein, was derived from the audited balance sheet included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2017. Going Concern Uncertainty As of September 30, 2017, the Company's current liabilities exceed its current assets by $8.8 million. The current liabilities include a bridge loan of $15.6 million used to pay lease termination expenses, which matures May 30, 2018. The Company has listed the LA studio for sale and believes it will eventually sell the building for proceeds sufficient to meet its current obligations and its cash flow needs. However, if the LA studio does not sell in the next twelve months and the bridge loan comes due, the Company will be unable to repay the bridge loan at its maturity (May 30, 2018). As a result, the Company has concluded that there is substantial doubt about its ability to continue as a going concern for the next year. Corporate Restructure and Strategic Partnership During the fourth quarter of fiscal 2017, bebe stores, inc. ("bebe" or the “Company”) expanded upon its strategic joint venture arrangement entered into during fiscal 2016, and have closed all retail stores, sold its merchandise, inventory, furnishings, trade fixtures, equipment, improvements in real property, purchase orders related to its website and international wholesale business and is committed to selling its Los Angeles Design Studio. Under this partnership, during fiscal 2016 bebe contributed all of its trademarks, trademark license arrangements and related intellectual property, including domain names, social media accounts and agreements with certain of its international distributors to its joint venture BB Brand Holdings LLC (the “Joint Venture”). The Company's partner in the venture, Bluestar Alliance, LLC (“Bluestar”) continues to leverage its existing brand management organization and infrastructure to develop a wholesale domestic and international lifestyle licensing business for the Joint Venture and will manage its day-to-day operations. Going forward, the Joint Venture will aggressively pursue a licensing strategy designed to capitalize on the value of our brand in all categories and channels on a global scale. The Company expects the Joint Venture to generate long-term, committed royalties from prospective licensees of the bebe brand name. The decision to exit its retail operations was the result of continued operating losses. The Company has agreed to provide transition services to Global Brands Group ("GBG"), an unrelated third party on a short-term basis not expected to go beyond November 30, 2018 for which it will receive a service fee that is expected to cover the Company's costs of providing the services. GBG has entered into a license agreement with the Joint Venture and beginning May 2, 2017 began to operate the website www.bebe.com as well as the international business formerly operated by the Company. In connection with this arrangement, GBG purchased the remaining finished goods inventory of from the Company on May 2, 2017. Included in receivables is $2.6 million due from GBG for services received as of September 30, 2017. The summarized income statement for the three month period ended September 30. 2017 for the Joint Venture is as follows:
The Company authorized the Joint Venture to administer payments to a former landlord pursuant to a note payable in connection with a store closure. The amount of each payment is deducted from the quarterly distribution made to bebe from the Joint Venture. For the three month period ended September 30, 2017, the amount so deducted by the Joint Venture was $228,429. |
FISCAL YEAR |
3 Months Ended |
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Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
FISCAL YEAR | FISCAL YEAR The Company’s fiscal year is a 52 or 53 week period, each period ending on the first Saturday on or after June 30. The three month periods ended September 30, 2017 and October 1, 2016 each include 13 weeks. |
RECENT ACCOUNTING PRONOUNCEMENTS |
3 Months Ended |
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Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS See note 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2017. |
DISCONTINUED OPERATIONS |
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Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS In the fourth quarter of fiscal 2017, as a result of continued operating losses, the Company closed all of its stores and transferred its license to operate its online store and international operations to its equity method investment. The results of the Company's retail operations have been presented as discontinued operations in the accompanying consolidated statements of operations and comprehensive income (loss) for all periods presented and are as follows:
Costs associated with these exit activities are as follows:
The Company anticipates completing lease termination payments by July 1, 2019 and severance payments before December 31, 2018. ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE Assets of discontinued operations held for sale consist of the following, which are stated at the lower of cost or market:
The Company sold its Distribution center and condominiums for net proceeds totaling $23.7 million during the first quarter of fiscal 2018 and recorded a gain on sale totaling $6.7 million, which is included in income from discontinued operations, net of tax. |
ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE |
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ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE | DISCONTINUED OPERATIONS In the fourth quarter of fiscal 2017, as a result of continued operating losses, the Company closed all of its stores and transferred its license to operate its online store and international operations to its equity method investment. The results of the Company's retail operations have been presented as discontinued operations in the accompanying consolidated statements of operations and comprehensive income (loss) for all periods presented and are as follows:
Costs associated with these exit activities are as follows:
The Company anticipates completing lease termination payments by July 1, 2019 and severance payments before December 31, 2018. ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE Assets of discontinued operations held for sale consist of the following, which are stated at the lower of cost or market:
The Company sold its Distribution center and condominiums for net proceeds totaling $23.7 million during the first quarter of fiscal 2018 and recorded a gain on sale totaling $6.7 million, which is included in income from discontinued operations, net of tax. |
FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The Financial Accounting Standards Board has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. As of September 30, 2017, the Company held no financial instruments that are measured at fair value on a recurring basis. The following items are measured at fair value on a recurring basis as of July 1, 2017:
Non-Financial Assets: The Company measures certain non-financial assets and liabilities, including long-lived assets, at fair value on a non-recurring basis. During the three months ended September 30, 2017 and October 1, 2016, the Company recorded impairment charges of approximately $0.0 million and $0.8 million, respectively, related to under-performing stores. The following table presents the Company’s considerations of at-risk assets for the three month period ended October 1, 2016:
The fair market value of these assets was determined using the income approach and Level 3 inputs, which require management to make significant estimates about future operating plans and projected cash flows. Management estimates the amount and timing of future cash flows based on its experience and knowledge of the retail market in which each store operates. The assumptions used in preparing the discounted cash flow model and the related sensitivity analysis around the discounted cash flow model include estimates for weighted average cost of capital 11.0% and annual revenue growth rates (range from 0.0% – 5.0%). The stores not impaired had undiscounted cash flows that exceeded their net carrying amount at a weighted average of 126% for the three month period ended October 1, 2016. The impairment charge is included in loss from discontinued operations, net of tax in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company was not required to measure any other significant non-financial assets and liabilities at fair value. |
INCOME TAXES |
3 Months Ended |
---|---|
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expenses. The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In evaluating whether it is more likely than not that some or all of the Company’s deferred tax assets will not be realized, it considers all available positive and negative evidence, including recent year’s operational results which is objectively verifiable evidence. As a result of its evaluation of the realizability of its deferred tax assets as of September 30, 2017, the Company continues to believe, based upon all available evidence, that it is more likely than not that the majority of its deferred tax assets will continue to not be realized. Accordingly, the tax benefit related to the current quarter losses is not recognized. The Company will continue to maintain a valuation allowance against its deferred tax assets until the Company believes it is more likely than not that these assets will be realized in the future. If sufficient positive evidence arises in the future indicating that all or a portion of the deferred tax assets meet the more likely than not standard, the valuation allowance will be reversed accordingly in the period that such determination is made. |
BRIDGE LOAN |
3 Months Ended |
---|---|
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
BRIDGE LOAN | BRIDGE LOAN The company has received a waiver from its lenders of the requirements of a loan agreement covenant requiring the company to maintain a required level of cash as of certain dates. The waiver is effective through December 31, 2017 as long as the Company maintains at least $10 million of cash and cash equivalents. |
EARNINGS (LOSS) PER SHARE |
3 Months Ended |
---|---|
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is computed as net earnings divided by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur from common shares issuable through the exercise of dilutive stock options. There is no difference between the number of shares used in the basic and diluted earnings per share computations. Excluded from the computation of the number of diluted weighted average shares outstanding were options to purchase 80,003 and 236,887 shares of common stock for the three months ended September 30, 2017 and October 1, 2016, respectively, which would have been anti-dilutive. |
LEGAL PROCEEDINGS |
3 Months Ended |
---|---|
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | LEGAL PROCEEDINGS As of the date of this filing, the Company is involved in ongoing legal proceedings as described below. A former employee filed a complaint against the Company on November 2, 2010, in the Superior Court of California, San Bernardino County (Case No. CIVRS1011823) alleging failure to pay wages, failure to provide meal and rest periods, and other violations of the California Labor Code and Business & Professions Code §17200 et. seq . The plaintiff purported to bring the action on behalf of current and former California bebe stylists and sales associates who are similarly situated. The complaint sought damages, civil penalties, and injunctive relief among other remedies. In June 2016, the parties entered into a settlement agreement conditioned upon final Court approval. In August 2017, the Court preliminarily approved the class action settlement. The parties are in the process of the administration of the settlement with the class members. The Company believes the settlement amounts, accrued in Q4 of fiscal 2017, will not have a material adverse effect on our business, financial condition or results of operations. A customer served the Company with a complaint on January 31, 2014, in the United States District Court for the Northern District of California (Civil Action No. C14-267 DMR) alleging various violations of the Telephone Consumer Protection Act (47 U.S.C. §§227 et seq .) and violations of California’s unfair competition law (California Business and Professions Code §§ 17200, et seq .) stemming from an alleged failure to obtain customer consent prior to sending text messages. The plaintiff purported to bring the action on behalf of others similarly situated. The complaint sought damages and injunctive relief among other remedies. A companion proceeding, previously reported, in the United States District Court for the Northern District of California (Civil Action No. 3:14-CV-01968)) was consolidated with this action. In April 2016, the parties entered into a settlement agreement conditioned upon final Court approval. In July 2017, the Court preliminarily approved the class action settlement. The parties are in the process of the administration of the settlement with the class members. The Company believes the settlement amounts, accrued in fiscal 2017, will not have a material adverse effect on our business, financial condition or results of operations. The Company is subject to various other legal proceedings and claims arising in the ordinary course of business. Regarding all matters referenced herein, the Company intends to vigorously defend itself and has accrued estimated amounts of liability where required, appropriate and determinable. Any such estimates may be revised as further information becomes available. The results of any litigation are inherently uncertain and as such the Company cannot assure that it will be able to successfully defend itself in these proceedings or that any amounts accrued are sufficient. |
INTERIM FINANCIAL STATEMENTS (Policies) |
3 Months Ended |
---|---|
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Interim financial statements | The accompanying condensed consolidated balance sheets of the Company as of September 30, 2017 and October 1, 2016, the condensed consolidated statements of operations and comprehensive loss for the three months ended September 30, 2017 and October 1, 2016 and the condensed consolidated statements of cash flows for the three months ended September 30, 2017 and October 1, 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, without audit. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States of America for annual financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2017. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position at the balance sheet dates and the results of operations for the periods presented have been included. The condensed consolidated balance sheet at July 1, 2017, presented herein, was derived from the audited balance sheet included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2017. |
Fiscal year | The Company’s fiscal year is a 52 or 53 week period, each period ending on the first Saturday on or after June 30. The three month periods ended September 30, 2017 and October 1, 2016 each include 13 weeks. |
Fair value measurements | The Financial Accounting Standards Board has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
Fair value of financial instruments | The fair market value of these assets was determined using the income approach and Level 3 inputs, which require management to make significant estimates about future operating plans and projected cash flows. Management estimates the amount and timing of future cash flows based on its experience and knowledge of the retail market in which each store operates. The assumptions used in preparing the discounted cash flow model and the related sensitivity analysis around the discounted cash flow model include estimates for weighted average cost of capital 11.0% and annual revenue growth rates (range from 0.0% – 5.0%). |
Income taxes | Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expenses. The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In evaluating whether it is more likely than not that some or all of the Company’s deferred tax assets will not be realized, it considers all available positive and negative evidence, including recent year’s operational results which is objectively verifiable evidence. |
Earnings per share | Basic earnings (loss) per share is computed as net earnings divided by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur from common shares issuable through the exercise of dilutive stock options. |
INTERIM FINANCIAL STATEMENTS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized income statement for joint venture | The summarized income statement for the three month period ended September 30. 2017 for the Joint Venture is as follows:
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DISCONTINUED OPERATIONS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Results of discontinued operations | The results of the Company's retail operations have been presented as discontinued operations in the accompanying consolidated statements of operations and comprehensive income (loss) for all periods presented and are as follows:
Assets of discontinued operations held for sale consist of the following, which are stated at the lower of cost or market:
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Costs associated with exit activities | Costs associated with these exit activities are as follows:
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ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of discontinued operations | The results of the Company's retail operations have been presented as discontinued operations in the accompanying consolidated statements of operations and comprehensive income (loss) for all periods presented and are as follows:
Assets of discontinued operations held for sale consist of the following, which are stated at the lower of cost or market:
|
FAIR VALUE MEASUREMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Items Measured at Fair Value on a Recurring Basis | The following items are measured at fair value on a recurring basis as of July 1, 2017:
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Summary of Considerations of At-Risk Assets | The following table presents the Company’s considerations of at-risk assets for the three month period ended October 1, 2016:
|
INTERIM FINANCIAL STATEMENTS - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Oct. 01, 2016 |
Jul. 01, 2017 |
|
Condensed Balance Sheet Statements, Captions [Line Items] | |||
Liabilities in excess of assets | $ 8,800,000 | ||
Bridge loan, net of issue discount | 15,601,000 | $ 33,158,000 | |
Receivables | 8,111,000 | $ 5,222,000 | |
Payment made by Joint Venture | 1,400,000 | $ 600,000 | |
Global Brands Group (GBG) | |||
Condensed Balance Sheet Statements, Captions [Line Items] | |||
Receivables | 2,600,000 | ||
Notes payable payment | BB Brand Holdings LLC | |||
Condensed Balance Sheet Statements, Captions [Line Items] | |||
Payment made by Joint Venture | $ 228,429 |
INTERIM FINANCIAL STATEMENTS - Summarized Income Statement for Joint Venture (Details) - BB Brand Holdings LLC - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 01, 2016 |
|
Schedule of Equity Method Investments [Line Items] | ||
Revenue | $ 2,894 | $ 1,338 |
Gross Profit | 2,894 | 1,338 |
Net income from continuing operations | 2,051 | 899 |
Net Income | $ 2,051 | $ 899 |
DISCONTINUED OPERATIONS - Results of Discontinued Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 01, 2016 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Gain on sale of assets | $ 6,666 | $ 0 |
Income from discontinued operations, net of tax provision | 4,942 | 1,221 |
Retail stores closing and license transfer | Discontinued operations, disposed of by sale | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Net sales | 0 | 87,238 |
Cost of sales, including production and occupancy | (10) | (59,743) |
Gross margin | (10) | 27,495 |
Selling, general and administrative expenses | (1,566) | (26,257) |
Gain on sale of assets | 6,666 | 0 |
Income from discontinued operations, before income tax provision | 5,090 | 1,238 |
Tax provision | (148) | (17) |
Income from discontinued operations, net of tax provision | $ 4,942 | $ 1,221 |
DISCONTINUED OPERATIONS - Costs Associated with Exit Activities (Details) - Discontinued operations $ in Thousands |
3 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Balance as of July 1, 2017 | $ 3,796 |
Costs incurred in fiscal 2018 | 967 |
Cash payments made | (629) |
Balance as of September 30, 2017 | 4,134 |
Lease Termination | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Balance as of July 1, 2017 | 2,024 |
Costs incurred in fiscal 2018 | 0 |
Cash payments made | (252) |
Balance as of September 30, 2017 | 1,772 |
Severance | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Balance as of July 1, 2017 | 1,772 |
Costs incurred in fiscal 2018 | 967 |
Cash payments made | (377) |
Balance as of September 30, 2017 | $ 2,362 |
FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 01, 2016 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Non-cash charge for asset impairment | $ 0 | $ 764 |
Weighted average cost of capital | 11.00% | |
Percentage of undiscounted cash flows exceeded net carrying value | 126.00% | |
Minimum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Annual revenue growth rates | 0.00% | |
Maximum | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Annual revenue growth rates | 5.00% | |
Retail site | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Non-cash charge for asset impairment | $ 0 | $ 800 |
FAIR VALUE MEASUREMENTS - Summary of Items Measured at Fair Value on a Recurring Basis (Details) - Fair value, measurements, recurring $ in Thousands |
Jul. 01, 2017
USD ($)
|
---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | $ 236 |
Total | 236 |
Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | 236 |
Total | 236 |
Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | 0 |
Total | 0 |
Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents | 0 |
Total | $ 0 |
FAIR VALUE MEASUREMENTS - Summary of Considerations of At-Risk Assets (Details) $ in Millions |
3 Months Ended |
---|---|
Oct. 01, 2016
USD ($)
store
| |
Fair Value Disclosures [Abstract] | |
Number of stores identified as at risk and evaluated for impairment | store | 7 |
Number of stores identified as at risk, but not impaired | store | (3) |
Number of stores identified as at risk with impairment | store | 4 |
Total carrying amount of stores identified as at risk prior to any impairment charges taken | $ 1.7 |
Total carrying amount of stores identified as at risk, but not impaired | (0.9) |
Total carrying amount of stores identified for impairment | 0.8 |
Impairment charges recorded during the period | $ 0.8 |
BRIDGE LOAN - Narrative (Details) $ in Millions |
Nov. 13, 2017
USD ($)
|
---|---|
Subsequent Event | Bridge Loan | |
Short-term Debt [Line Items] | |
Debt covenant, minimum required cash balance | $ 10 |
EARNINGS (LOSS) PER SHARE - Narrative (Details) - shares |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 01, 2016 |
|
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
Diluted weighted average shares outstanding (in shares) | 8,101,000 | 8,007,000 |
Common stock | ||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
Diluted weighted average shares outstanding (in shares) | 80,003 | 236,887 |
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