ST. LOUIS - (BUSINESS WIRE) - Feb. 16, 2017 - Build-A-Bear Workshop, Inc. (NYSE:BBW) today reported results for the fourth quarter and fiscal year ended December 31, 2016.
Sharon Price John, Build-A-Bear Workshop President and Chief Executive Officer, commented, “After reporting three consecutive years of comparable sales increases and improved profitability, these results are clearly disappointing.
Through November, consolidated comparable sales were positive despite slightly negative traffic levels. However, similar to industry reported retail trends, our December traffic levels abruptly reversed, which adversely impacted both sales and profit for the quarter and the year. That, along with shifts in licensed product demand particularly related to Star Wars, and changes in media and marketing activities, resulted in an overall decline in store transactions. Additionally, we were unable to offset the traffic trend with added promotions or convert the swing in consumer shopping behavior, including the buying shift to e-commerce, as our internal systems were unable to process the subsequently higher traffic to the website.
“Even with December’s disruption, we believe we are a stronger company than at the beginning of the turn-around in 2013. Our on-going strategies are designed to position Build-A-Bear for the future and are intended to further leverage the continuing power of our brand to grow our business with expanded revenue streams. We are focused on making key operational and marketing corrections. We will also continue to upgrade and diversify our real estate portfolio with our proven Discovery format, including a shift to non-traditional solutions, particularly given the significant number of leases that are coming to term in the next few years. Additionally, as previously reported, we plan to enhance our web platform and upgrade our e-commerce systems in 2017. Finally, although gift card redemption rates were below past levels, more Build-A-Bear gift cards were sold in the fourth quarter versus the prior year, which are expected to be redeemed in stores throughout 2017,” concluded Ms. John.
The Company estimates that the significant movement in the British pound sterling relative to the U.S. dollar had a negative impact on its 2016 revenues and pre-tax income of approximately $9.1 million and $3.1 million, respectively, as compared to the prior year. The transactional impact included in the Reconciliation of Net Income to Adjusted Net Income is a component of the impact on pre-tax income.
In fiscal 2016, capital expenditures were $28.1 million to support the upgrade and repositioning of stores as well as investment in infrastructure. In fiscal 2016, the Company opened 22 locations and converted 24 stores into its Discovery format. The Company finished the year with 57 stores in the Discovery format across geographies. Sales at Discovery stores with prior year comparisons outperformed heritage stores in fiscal 2016. Depreciation and amortization was $16.2 million.
In fiscal 2017, the Company expects to open 20 to 25 new stores, close 5 to 10 stores and remodel 20 to 25 stores into a Discovery format. Capital expenditures are expected to be approximately $20 million to $25 million to support the store activity as well as further infrastructure improvements. Depreciation and amortization is expected to be $16 million to $18 million.
The Company ended the year with 346 stores, including 285 in North America, 60 in Europe and one in China. The Company’s international franchisees ended the year with 92 stores in 11 countries.
As of December 31, 2016, cash and cash equivalents totaled $32.5 million. The Company ended fiscal 2016 with no borrowings under its revolving credit facility. Total inventory at year-end was $51.9 million compared to $53.9 million at 2015 year-end, a decrease of 3.7%.
In May 2016, the Company announced that its Board of Directors had authorized an exploration of a full range of strategic alternatives. No timetable has been set for the Company’s review process. The Company does not expect to comment further or update the market with any additional information on the process unless and until the Board of Directors deems disclosure appropriate or necessary. There is no assurance that this exploration will result in any strategic alternatives being announced or executed.
The Company expects to evolve and continue to execute its strategic plan with key initiatives in the areas outlined below, which are intended to drive long-term shareholder value:
The Company expects to continue to make improvements to its aged store fleet by leveraging its new Discovery format in conjunction with select natural lease events. The Company also expects to continue to diversify stores into non-traditional locations inclusive of its new, lower capital, more flexible “concourse shop” model following initial results of a fourth quarter test. As noted, the Company expects to add 20 to 25 new locations in fiscal 2017 and close 5 to 10 existing locations to finish 2017 with 356 to 366 company-owned retail locations.
Additionally, the Company expects its international franchisees to open approximately 10 stores in 2017, and it intends to add new franchise partners in select markets. Separately, the Company is planning a comprehensive enhancement of its website platform and upgrade of its e-commerce systems in order to capitalize on the changing consumer shopping patterns while expanding its enterprise selling capabilities.
To meet the needs of its core consumer base (boys and girls ages 3 to 12) while systematically building its secondary consumer segments (including collectors, gift-givers and its teen-plus target), the Company plans to continue to develop and expand its offering of successful intellectual property concepts balanced with core products and a comprehensive program of key licensed properties. The Company also expects to continue to expand its plush wholesale/corporate sales initiative and to build on its outbound branded licensed programs.
The Company intends to adjust its marketing programs to elevate and integrate efforts to create more synergy across channels while leveraging its content development strategy, which includes mobile apps, music videos, and other entertainment opportunities to increase engagement, improve efficiency and lead to profitable sales growth.
The Company is focused on improving profitability through the execution of its stated strategies detailed above as well as disciplined expense management and on-going efforts in process and systems upgrades.
Build-A-Bear Workshop will host a live internet webcast of its quarterly investor conference call at 9 a.m. ET today. The audio broadcast may be accessed at the Company’s investor relations website, http://IR.buildabear.com. The call is expected to conclude by 10 a.m. ET.
A replay of the conference call webcast will be available in the investor relations Web site for one year. A telephone replay will be available beginning at approximately noon ET today until midnight ET on February 23, 2017. The telephone replay is available by calling (844)-512-2921. The access code is 13654086.
Celebrating 20 years of business in 2017, Build-A-Bear is a global brand kids love and parents trust that seeks to add a little more heart to life. Build-A-Bear Workshop has approximately 400 stores worldwide where guests can create customizable furry friends, including company-owned stores in the United States, Canada, Denmark, Ireland, Puerto Rico, the United Kingdom and China, and franchise stores in Africa, Asia, Australia, Europe, Mexico and the Middle East. The company was named to the FORTUNE 100 Best Companies to Work For® list for the eighth year in a row in 2016. Build-A-Bear Workshop, Inc. (NYSE:BBW) posted a total revenue of $377.7 million in fiscal 2015. For more information, visit the Investor Relations section of buildabear.com.
This press release contains certain statements that are, or may be considered to be, “forward-looking statements” for the purpose of federal securities laws, including, but not limited to, statements that reflect our current views with respect to future events and financial performance. We generally identify these statements by words or phrases such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “future,” “potential” or “continue,” the negative or any derivative of these terms and other comparable terminology. All of the information concerning the potential outcome of exploring strategic alternatives, our future liquidity, future revenues, margins and other future financial performance and results, achievement of operating of financial plans or forecasts for future periods, sources and availability of credit and liquidity, future cash flows and cash needs, success and results of strategic initiatives and other future financial performance or financial position, as well as our assumptions underlying such information, constitute forward-looking information.
These statements are based only on our current expectations and projections about future events. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements, including those factors discussed under the caption entitled “Risks Related to Our Business” and “Forward-Looking Statements” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 17, 2016 and other periodic reports filed with the SEC which are incorporated herein.
All of our forward-looking statements are as of the date of this Press Release only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or other risks and uncertainties referred to in this Press Release or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the SEC could materially and adversely affect our continuing operations and our future financial results, cash flows, available credit, prospects and liquidity. Except as required by law, the Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
All other brand names, product names, or trademarks belong to their respective holders.
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Voin Todorovic
Investor Relations
Build-A-Bear Workshop
314-423-8000 x5221
Beth Kerley
Media Relations
Build-A-Bear Workshop
bethk@buildabear.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20170216005357/en/
SOURCE Build-A-Bear Workshop, Inc.
Founded in St. Louis in 1997, Build-A-Bear, a global brand kids love and parents trust, seeks to add a little more heart to life.