Struggling apparel retailer Bebe to shut all stores

Struggling apparel retailer Bebe Stores Inc said on Friday it would close all its stores by the end of May, barely a month after announcing it was exploring strategic alternatives following four years of losses. The company, which had 180 stores at the end of 2016, did not say what its future plans were.

Bebe also plans to liquidate all merchandise and fixtures within the stores, it said in a regulatory filing. (bit.ly/2obl8s3)

Shares of the company, known for its form-fitting dresses and other apparel, hit a 14-month low of $3.02 in morning trading but were later up about 7 percent.

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Bebe could consider filing for bankruptcy to settle favorably with landlords of their stores, Joel Levitin, a partner in law firm Cahill Gordon & Reindel's bankruptcy & restructuring practice, said.

All of the company's stores are leased, according to its annual report.

"If the landlords don't deal with them at all or if they are not able to come to a satisfactory solution, then they may need bankruptcy to reduce the amount of damage claims," Levitin said.

Bloomberg reported last month that Bebe was planning to shut stores and seek a turnaround as an online brand to avoid filing for bankruptcy.

"Because there's the threat of bankruptcy, there should be some ability to negotiate with landlords," Levitin added.

A number of apparel retailers have gone bankrupt in the last couple of years, including Aeropostale and The Limited, due to lackluster demand as they battle stiff competition from Amazon.com and fast-fashion retailers such as H&M and Zara. More retailers are expected to file for bankruptcy this year, according to industry experts.

"We are witnessing a paradigm shift from bricks and mortar stores to online presences. Not everyone will survive," Anthony Michael Sabino, co-founder of law firm Sabino & Sabino P.C. said.

Bebe expects to recognize an impairment charge of about $20 million from the store closures, which will be recorded in the third and fourth quarters. The company will also pay advisers B. Riley & Co and Tiger Capital Group LLC $550,000 and 15 percent of the gross proceeds from the sale of store fixtures.