ST. LOUIS - (BUSINESS WIRE) - May 31, 2018 - Build-A-Bear Workshop, Inc. (NYSE:BBW) today reported results for the first quarter ended May 5, 2018. Given the Company’s previously announced fiscal year-end change, all references to prior year results are based on the recast 13 weeks ended April 29, 2017.
Sharon Price John, Build-A-Bear Workshop President and Chief Executive Officer, commented, “In the first quarter, as we previously shared, we expected to see a sales and profit decline versus the prior year due to adoption of the new revenue recognition standard and the recent closure of our largest, most productive store located in Anaheim, California. Separately, with a less robust movie lineup for the year, we anticipated softness in licensed product performance. And, while we expected continued traffic declines, this headwind was further exacerbated by the unexpected Toys“R”Us liquidation, which according to our analysis eroded sales in nearby locations.
Ms. John continued, “At the same time, we saw ongoing improvements in operational aspects of the business and progress in key areas of our diversification strategy. Specifically, we generated improvements in conversion along with record high levels in both dollars-per-transaction and units-per-transaction while continuing the transformation of the business from that of a traditional in-line, mall-based retailer to a multi-faceted consumer brand. In addition, sales of proprietary product increased, ecommerce business grew at a double-digit pace, and international franchise revenue benefited from our recent China expansion. We also remained focused on rebalancing our store base toward more productive formats and locations. I continue to be encouraged by the overall strategies we have in place that are designed to capitalize on the power of our iconic brand by increasing the lifetime value of our guests and adding margin-enhancing revenue streams to our Company.”
First Quarter 2018 Highlights (13 weeks ended May 5, 2018, compared to the 13 weeks ended April 29, 2017):
Store Activity:
In the first quarter of fiscal 2018, the Company opened 2 locations, closed 4 locations and remodeled or reformatted 7 stores into a Discovery format, ending the quarter with 32% of its store base in an updated Discovery design. As of May 5, 2018, the Company operated 352 corporately-managed locations, including 294 in North America and 58 outside of North America. The Company’s international franchisees ended the quarter with 96 stores in 12 countries.
Balance Sheet:
As of May 5, 2018, cash and cash equivalents totaled $18.9 million. The Company ended the quarter with no borrowings under its revolving credit facility. Total inventory at quarter-end was $49.4 million compared to $55.2 million at the end of the first quarter of 2017, a decrease of 10.5%. In the first quarter of fiscal 2018, capital expenditures totaled $3.0 million and depreciation and amortization were $4.1 million.
Fiscal Year Change:
As previously disclosed, the Company's Board of Directors approved a change in the Company’s fiscal year-end, which previously ended on the Saturday closest to December 31, to the Saturday closest to January 31. This change was effective following the end of the Company’s 2017 fiscal year. As a result of this change, the Company is including a one fiscal month transition period, December 31, 2017 through February 3, 2018, as part of this first quarter press release.
Share Repurchase:
Since December 30, 2017, the Company repurchased 616,141 shares of its common stock for $5.3 million, including 528,228 shares during the transition period and 87,913 shares during the first quarter of fiscal 2018. As of May 5, 2018, the Company had $10.0 million remaining on the share repurchase authorization that was adopted in August 2017.
Accounting Changes Impacting Revenue Recognition:
On December 31, 2017, the Company adopted “Revenue from Contracts with Customers” (Accounting Standard Codification “Topic 606”), as required. While the majority of the Company’s revenues were not impacted by Topic 606, the timing of the recognition of breakage revenue for certain gift cards changed. Upon adoption, the Company recorded a pre-tax cumulative effect increase to retained earnings of approximately $12.3 million representing gift card breakage revenue not previously recognized that was accelerated due to Topic 606. The change will negatively impact the Company’s fiscal 2018 total revenue and pre-tax income by an estimated $3.9 million with the remaining balance of the cumulative effect adjustment predominantly impacting fiscal years 2019 and 2020.
2018 Expectations (52 weeks ended February 2, 2019 compared to the 53 weeks ended February 3, 2018):
The Company is providing guidance for its expectations for fiscal year 2018. On a GAAP basis, the Company currently expects:
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 website for one year. A telephone replay will be available beginning at approximately noon ET today until midnight ET on June 7, 2018. The telephone replay is available by calling (844) 512-2921. The access code is 13680205.
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 over 400 stores worldwide where guests can create customizable furry friends, including corporately-managed stores in the United States, Canada, China, Denmark, Ireland, Puerto Rico, and the United Kingdom, and franchise stores in Africa, Asia, Australia, Europe, Mexico and the Middle East. In 2018, Build-A-Bear was named to the FORTUNE 100 Best Companies to Work For® list for the 10th year in a row. Build-A-Bear Workshop, Inc. (NYSE:BBW) posted total revenue of $357.9 million in fiscal 2017. For more information, visit the Investor Relations section of buildabear.com.
Forward-Looking Statements
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 15, 2018 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
Build-A-Bear Workshop
Investor Relations
314-423-8000 x5221
Beth Kerley
Build-A-Bear Workshop
Media Relations
bethk@buildabear.com
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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.