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Bebe's JV with Bluestar for Global Licensing Boosts Stock

Zacks Equity Research

A leading name in women’s fashion, Bebe Stores Inc. BEBE, penned a deal to form a joint venture (“JV”) with Bluestar Alliance LLC. The news seems to have boosted investors’ sentiments considerably, as is reflected by a 44.5% surge in bebe’s stock price following the announcement.  

Per the terms of the deal, bebe received slightly above 50% of the JV, for which it put in its trademark and associated intellectual property. On the other hand, Bluestar paid $35 million to bebe and received a little lesser than 50% of the JV.

Bluestar is a privately owned company, which owns, markets and manages a variety of consumer brands, from luxury to mass market. The company’s investment strategy involves identifying and buying renowned brands which can help it to capitalize on their brand equity, alongside solidifying its consumer base.  

The company has been buying out several brands with significant revenues, since its foundation. Bluestar’s existing brand portfolio manages more than 200 licenses, distributing products across different continents of the world.

The joint venture is likely to be beneficial for both the companies. Management at bebe believes that despite having a solid global presence, bebe’s investors are unable to value the company’s real potential and reach. Hence, this licensing strategy would enable bebe to capitalize on its brand value across all categories and networks, internationally.

Further, Bluestar sees tremendous long-term growth prospects in bebe, given the latter’s iconic market presence, robust customer base, multiple networks of distribution and increasing global presence. These factors make Bluestar reasonably confident about leveraging its brand knowhow, alongside exploiting bebe’s niche in miscellaneous markets and thus creating an international modern lifestyle brand.  

Zacks Rank

bebe currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include The Children's Place, Inc. PLCE and Destination XL Group, Inc. DXLG, each with a Zacks Rank #2 (Buy). Another stock worth considering in the related textile-apparel industry is Delta Apparel Inc. DLA, sporting Zacks Rank #1 (Strong Buy).

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