Why Bebe's Gamble on Kim Kardashian's Jewels is a Losing Proposition

(MoneyWatch) 

Maybe Manny Mashouf, CEO of Bebe (BEBE), has a secret crush on Kim Kardashian. Otherwise why would he (and chief merchandising officer Kathy Lee) sign Kardashian to do a collaborative jewelry line for the fashion chain? Especially after the voluptuous reality show star failed to make an impact with her Bebe capsule collection.

Actually, that's an understatement. Since the 'Bebe-Kardashians' collection (a joint design effort among the three Kardashian sisters) debuted during New York Fashion Week sales and comps for the retailer have continued their double-digit downward spiral. For its fiscal 2010 third quarter, sales were down 12.5 percent, and comps decreased 11.2 percent. While that's a little less of a slump than 2009's 18.2 percent decrease in comps, it's still not good.

But Mashouf and company are soldiering on, partly betting on Kim Kardashian's ubiquitous presence in supermarket tabloids (which carry the bulk of the company's 'As Seen In' editorial spotlights, as opposed to traditional fashion magazines) which hit squarely at a middle market shopper. To further appeal to this buyer, the prices for the baubles and bangles will retail between $25 - $250 with many pieces in the $100 range.

Bebe execs are probably too dazzled by Kardashian's choice of design partner to care that she'll also be creating a signature line with the same three themes to be sold at other retailers. Indeed, Pascal Mouawad's star power is well-known as he's worked with the likes of Heidi Klum and Nicole Richie.

But once the jewels are snapped back into their velvet boxes and the smoulder from Kardashian's sexy presence clears, will team Bebe realize that Mouwad's strategy to place the line in "major department stores, those with 200 to 500 doors, and some specialty boutiques," will actually erode Bebe's sales potential?

Someone better throw a bucket of cold water over Bebe's brass, and soon. Otherwise, Kardashian's going to take all those sales (conservatively estimated by Mouwad to be in the $10 million zone for the first year) and turn them into tidy profits -- for her own sweet self.

Image via Wikimedia Commons CC 3.0