Build-A-Bear Workshop, Inc. Reports Increased Sales and Improved Operating Performance in Second Quarter Fiscal 2013

Consolidated net retail sales increase $1.4 million while operating 31 fewer stores than last year
Consolidated comparable store sales increase 7.3%

ST. LOUIS--(BUSINESS WIRE)--Jul. 25, 2013-- Build-A-Bear Workshop, Inc. (NYSE: BBW), an interactive entertainment retailer, today reported results for the second quarter and twenty-six weeks ended June 29, 2013.

Second Quarter 2013 Highlights (13 weeks ended June 29, 2013):

  • Consolidated net retail sales were $80.4 million while operating 31 fewer stores compared to $79.0 million in the fiscal 2012 second quarter, an increase of 2.2%, excluding the impact of foreign exchange;
  • Consolidated comparable store sales increased 7.3% and included an 8.6% increase in North America and a 1.7% increase in Europe;
  • Consolidated e-commerce sales rose 5.2%, excluding the impact of foreign exchange;
  • Net loss was $6.2 million, or $0.38 per share, an improvement from a net loss of $7.6 million, or $0.46 per share in the fiscal 2012 second quarter; and
  • Adjusted net loss was $5.4 million, or $0.33 per share, an improvement from an adjusted net loss of $7.5 million, or $0.46 per share, in the 2012 second quarter. (See Reconciliation of Net Loss to Adjusted Net Loss.)
  • Sharon Price John, Build-A-Bear Workshop's Chief Executive Officer and Chief President Bear commented, "We continued to show progress in the second quarter with increased comparable store sales, growth in total sales on a lower store count and expansion in gross profit margin, as compared to last year. Our brand marketing, product and real estate initiatives led to our third consecutive quarter of positive comparable store sales in North America. This, along with a reduction in promotional activity, resulted in improved operating performance for the quarter and first half of the year.
  • "We are intently focused on executing our plans for the balance of this year," stated Ms. John. "As we move forward and solidify our longer term strategies, we will leverage the strength of the Build-A-Bear Workshop brand to return to profitability and build a platform for sustainable growth. We believe we have opportunities to evolve our business model to increase the lifetime value of our guests and further improve our efficiencies."
  • Additional Second Quarter 2013 Details:
  • Total revenues were $81.9 million while operating 31 fewer stores compared to $80.4 million in the 2012 second quarter, an increase of 2.3%, excluding the impact of foreign exchange;
  • Retail gross margin expanded 180 basis points to 36.8% from 35.0% in the 2012 second quarter, primarily driven by leverage in occupancy cost and reduced promotional activity; and
  • Selling, general and administrative expense ("SG&A") was $36.9 million, or 45.1% of total revenues, including $0.9 million in management transition and store closing expenses. This compares to $37.1 million, or 46.1% of total revenues in the fiscal 2012 second quarter.

First Six Months 2013 (26 weeks ended June 29, 2013):

  • Total revenues were $186.2 million compared to $176.8 million in the first six months of 2012, an increase of 5.5%, excluding the impact of foreign exchange;
  • Consolidated net retail sales were $183.3 million, compared to $174.2 million in the first six months of fiscal 2012, an increase of 5.4%, excluding the impact of foreign exchange;
  • Consolidated comparable store sales increased 9.0% and included a 9.7% increase in North America and a 5.9% increase in Europe;
  • Consolidated e-commerce sales rose 6.3%, excluding the impact of foreign exchange;
  • Retail gross margin expanded 170 basis points to 39.4% from 37.7% in the first six months of 2012 primarily driven by leverage in occupancy costs and reduced promotional activity, partially offset by higher product costs in the first quarter;
  • SG&A was $80.6 million, or 43.3% of revenues, a 40 basis point improvement from the first six months of 2012, including $3.2 million in management transition and store closing expenses as well as incremental marketing expenses in the first quarter;
  • Net loss was $6.2 million or $0.38 per share, an improvement from a net loss of $8.6 million, or $0.53 per share in the first six months of fiscal 2012; and
  • Adjusted net loss was $3.1 million or $0.19 per share, an improvement from an adjusted net loss of $8.0 million, or $0.49 per share in the first six months of fiscal 2012. (See Reconciliation of Net Loss to Adjusted Net Loss.)

Store Activity

During the quarter, the Company closed ten stores to end the period with 323 company-owned stores - 263 in North America and 60 in Europe. (See Company-Owned Store Activity Schedule.) The Company remodeled four stores in its new design format. The Company's international franchisees ended the quarter with 90 stores in 14 countries. The Company continues to expect to close an additional 20 to 35 stores in fiscal 2013 and 2014, along with limited, opportunistic store openings, to reach its optimal store count of 225 to 250 stores in North America. These select store closures are expected to transfer approximately 20% of sales to other stores in the same markets, which is consistent with the average transfer rate of the stores closed since 2012.

Balance Sheet

The Company ended the 2013 second quarter with a strong balance sheet and no borrowings under its revolving credit facility. As of June 29, 2013, cash and cash equivalents totaled $28.1 million, over half of which was domiciled outside the U.S. Total inventory at quarter end was $48.1 million compared to $47.0 million at quarter end 2012. Inventory per square foot increased 11.5%, as compared to the prior year period. The Company expects capital expenditures to be $19 to $22 million in fiscal 2013 to support the refresh and repositioning of stores and investment in infrastructure. Depreciation and amortization is expected to be approximately $20 million.

Accomplishments toward Long Term Objectives

:

  • Introduce a new store design - At quarter end, the Company operated 11 newly imagined stores which continued to drive average same store sales increases of over 20% in the second quarter. The Company expects to operate approximately 30 locations in this new store format by the end of 2013 with an additional 20 to 25 locations planned in 2014.
  • Improve store productivity and profitability - The Company has closed 38 stores since the beginning of 2012 transferring over 20% of those sales to other stores in the same markets. In addition, the Company reduced the square footage of 16 other stores since the beginning of 2012 by remodeling and moving them to smaller locations within the same malls.
  • Increase shopping frequency - The Company reintroduced brand building TV advertising in its U.S. markets beginning in mid-October 2012 and rebalanced the mix of marketing in Europe to drive customer traffic, further engage existing guests and attract new guests to its stores. This contributed to an improvement in sales trend with comparable store sales increasing 9.7% in North America and 5.9% in Europe in the first six months of 2013.
  • Reinforce Build-A-Bear Workshop as a top destination for gifts - The Company capitalized on its brand advertising to drive the gift of experience which led to a 30% increase in the issuance of gift cards at its stores on a consolidated basis during last year's peak fourth quarter gifting period, followed by a 20% increase in the first six months of 2013. This contributed to increased retail sales in the first half of 2013 as the cards were redeemed.
  • Optimize the Company's global presence - The Company's franchisees operated 90 international locations as of June 29, 2013. The Company expects its franchisees to open a total of 8 to 12 locations in fiscal 2013 which are likely to be offset by select closures.
  • Improve cost efficiencies - The Company continues to expect to realize cost savings of $5 million to $10 million in fiscal 2013, which include expense reduction initiatives and savings from closed stores which will primarily be realized in the remainder of the year.

Today's Conference Call Webcast

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 Web site, 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 August 8, 2013. The telephone replay is available by calling (858) 384-5517. The access code is 412352.

About Build-A-Bear Workshop, Inc.

Build-A-Bear Workshop, Inc. is the only global company that offers an interactive make-your-own stuffed animal retail-entertainment experience. There are more than 400 Build-A-Bear Workshop stores worldwide, including company-owned stores in the U.S., Puerto Rico, Canada, the United Kingdom and Ireland, and franchise stores in Europe, Asia, Australia, Africa, the Middle East, Mexico and South America. Founded in St. Louis in 1997, Build-A-Bear Workshop is the leader in interactive retail. Brands include make-your-own Major League Baseball® mascot in-stadium locations, and Build-A-Dino® stores. Build-A-Bear Workshop extends its in-store interactive experience online with its award winning virtual world Web site at bearville.com®. The company was named to the FORTUNE 100 Best Companies to Work For® list for the fifth year in a row in 2013. Build-A-Bear Workshop (NYSE: BBW) posted total revenue of $380.9 million in fiscal 2012. For more information, call 888.560.BEAR (2327) or visit the company's award-winning Web site at buildabear.com®.

Forward-Looking Statements

The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. These risks and uncertainties include, without limitation, those detailed under the caption "Risk Factors" in our annual report on Form 10-K for the year ended December 29, 2012, as filed with the SEC, and the following:

  • general global economic conditions may continue to deteriorate, which could lead to disproportionately reduced consumer demand for our products, which represent relatively discretionary spending;
  • customer traffic may decrease in the shopping malls where we are located, on which we depend to attract guests to our stores;
  • we may be unable to generate interest in and demand for our interactive retail experience, or to identify and respond to consumer preferences in a timely fashion;
  • our marketing and on-line initiatives may not be effective in generating sufficient levels of brand awareness and guest traffic;
  • we may be unable to generate comparable store sales growth;
  • we may be unable to effectively operate or manage the overall portfolio of our company-owned stores;
  • we may not be able to operate our company-owned stores in the United Kingdom and Ireland profitably;
  • we may be unable to renew or replace our store leases, or enter into leases for new stores on favorable terms or in favorable locations, or may violate the terms of our current leases;
  • the availability and costs of our products could be adversely affected by risks associated with international manufacturing and trade, including foreign currency fluctuation;
  • our products could become subject to recalls or product liability claims that could adversely impact our financial performance and harm our reputation among consumers;
  • we may lose key personnel, be unable to hire qualified additional personnel, or experience turnover of our management team;
  • we are susceptible to disruption in our inventory flow due to our reliance on a few vendors;
  • high petroleum products prices could increase our inventory transportation costs and adversely affect our profitability;
  • we may be unable to effectively manage our international franchises or laws relating to those franchises may change;
  • we may improperly obtain or be unable to adequately protect customer information in violation of privacy or security laws or customer expectations;
  • we may suffer negative publicity or be sued due to violations of labor laws or unethical practices by manufacturers of our merchandise;
  • we may suffer negative publicity or negative sales if the non-proprietary toy products we sell in our stores do not meet our quality or sales expectations;
  • we may be unable to operate our company-owned distribution center efficiently or our third-party distribution center providers may perform poorly;
  • our market share could be adversely affected by a significant, or increased, number of competitors;
  • we may fail to renew, register or otherwise protect our trademarks or other intellectual property;
  • poor global economic conditions could have a material adverse effect on our liquidity and capital resources;
  • we may have disputes with, or be sued by, third parties for infringement or misappropriation of their proprietary rights;
  • fluctuations in our quarterly results of operations could cause the price of our common stock to substantially decline; and
  • we may be unable to repurchase shares of our common stock at the times or in the amounts we currently anticipate or the results of the share repurchase program may not be as beneficial as we currently anticipate.

All other brand names, product names, or trademarks belong to their respective holders.

   
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
                           
      13 Weeks             13 Weeks      
      Ended             Ended      
      June 29,     % of Total       June 30,     % of Total
      2013     Revenues (1)       2012     Revenues (1)
Revenues:                          
Net retail sales   $ 80,395       98.2       $ 78,989       98.2  
Commercial revenue     750       0.9         705       0.9  
Franchise fees     757       0.9         716       0.9  
Total revenues     81,902       100.0         80,410       100.0  
Costs and expenses:                          
Cost of merchandise sold     51,169       63.1         51,704       64.9  
Selling, general and administrative     36,901       45.1         37,075       46.1  
Interest expense (income), net     (55 )     (0.1 )       (63 )     (0.1 )
Total costs and expenses     88,015       107.5         88,716       110.3  
Loss before income taxes     (6,113 )     (7.5 )       (8,306 )     (10.3 )
Income tax expense (benefit)     105       0.1         (755 )     (0.9 )
Net loss   $ (6,218 )     (7.6 )     $ (7,551 )     (9.4 )
                           
Loss per common share:                          
Basic   $ (0.38 )           $ (0.46 )      
Diluted   $ (0.38 )           $ (0.46 )      
Shares used in computing common per share

amounts:

             
Basic     16,460,474               16,458,889        
Diluted     16,460,474               16,458,889        
 

(1) Selected statement of operations data expressed as a percentage of total revenues, except cost of merchandise sold which
is expressed as a percentage of net retail sales and commercial revenue. Percentages will not total due to cost of
merchandise sold being expressed as a percentage of net retail sales and commercial revenue and immaterial rounding.

 

 

                             
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
                             
        26 Weeks             26 Weeks      
        Ended             Ended      
        June 29,     % of Total       June 30,     % of Total
        2013     Revenues (1)       2012     Revenues (1)
Revenues:                            
Net retail sales     $ 183,326       98.5       $ 174,189       98.5  
Commercial revenue       1,223       0.7         1,081       0.6  
Franchise fees       1,618       0.9         1,513       0.9  
Total revenues       186,167       100.0         176,783       100.0  
Costs and expenses:                            
Cost of merchandise sold       111,640       60.5         109,170       62.3  
Selling, general and administrative       80,636       43.3         77,201       43.7  
Interest expense (income), net       (106 )     (0.1 )       (149 )     (0.1 )
Total costs and expenses       192,170       103.2         186,222       105.3  
Loss before income taxes       (6,003 )     (3.2 )       (9,439 )     (5.3 )
Income tax expense (benefit)       202       0.1         (871 )     (0.5 )
Net loss     $ (6,205 )     (3.3 )     $ (8,568 )     (4.8 )
                             
Loss per common share:                            
Basic     $ (0.38 )           $ (0.53 )      
Diluted     $ (0.38 )           $ (0.53 )      
Shares used in computing common per share

amounts:

               
Basic       16,345,882               16,248,884        
Diluted       16,345,882               16,248,884        
     

(1) Selected statement of operations data expressed as a percentage of total revenues, except cost of merchandise sold which
is expressed as a percentage of net retail sales and commercial revenue. Percentages will not total due to cost of
merchandise sold being expressed as a percentage of net retail sales and commercial revenue and immaterial rounding

     

 

   
   
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES  
Unaudited Condensed Consolidated Balance Sheets  
(dollars in thousands, except share and per share data)  
               
    June 29,   December 29, June 30,  
    2013   2012   2012  
ASSETS  
Current assets:              
Cash and cash equivalents   $ 28,061     $ 45,171     $ 26,450    
Inventories     48,134       46,904       47,029    
Receivables     6,866       9,428       4,935    
Prepaid expenses and other current assets     13,115       14,216       13,604    
Deferred tax assets     269       987       469    
Total current assets     96,445       116,706       92,487    
               
Property and equipment, net     68,273       71,459       73,518    
Goodwill     -       -       32,643    
Other intangible assets, net     611       633       595    
Other assets, net     3,258       3,304       6,704    
Total Assets   $ 168,587     $ 192,102     $ 205,947    
               
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:              
Accounts payable   $ 33,897     $ 38,984     $ 24,253    
Accrued expenses     8,547       11,570       7,227    
Gift cards and customer deposits     24,744       30,849       22,848    
Deferred revenue     4,892       4,800       5,568    
Total current liabilities     72,080       86,203       59,896    
               
Deferred franchise revenue     1,057       1,177       1,301    
Deferred rent     18,099       20,843       22,075    
Other liabilities     570       742       257    
               
               
Stockholders' equity:              
Common stock, par value $0.01 per share     173       171       174    
Additional paid-in capital     67,225       66,112       66,060    
Accumulated other comprehensive loss     (8,949 )     (7,683 )     (9,082 )  
Retained earnings     18,332       24,537       65,266    
Total stockholders' equity     76,781       83,137       122,418    
Total Liabilities and Stockholders' Equity   $ 168,587     $ 192,102     $ 205,947    

 

                   
                   
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES  
Unaudited Selected Financial and Store Data  
(dollars in thousands, except square foot data)  
                               
          13 Weeks     13 Weeks     26 Weeks     26 Weeks  
          Ended     Ended     Ended     Ended  
          June 29,     June 30,     June 29,     June 30,  
          2013     2012     2013     2012  
                               
Other financial data:                          
   

Retail gross margin ($) (1)

  $ 29,563     $ 27,666     $ 72,252     $ 65,677    
    Retail gross margin (%) (1)     36.8 %     35.0 %     39.4 %     37.7 %  
    E-commerce sales   $ 2,289     $ 2,191     $ 5,628     $ 5,316    
    Capital expenditures, net (2)   $ 5,209     $ 4,525     $ 9,016     $ 8,304    
    Depreciation and amortization   $ 4,761     $ 5,273     $ 9,677     $ 10,636    
                               
Store data (3):                          
    Number of company-owned stores at end of period                        
    North America - Traditional                 257       285    
    North America - Non-traditional                 6       11    
    Total North America                 263       296    
    Europe                 60       58    
    Total stores                 323       354    
                               
    Number of franchised stores at end of period               90       84    
                               
    Company-owned store square footage at end of period                      
    North America - Traditional                 728,639       817,486    
    North America - Non-traditional                 9,759       18,120    
    Total North America                 738,398       835,606    
    Europe (4)                 86,331       83,631    
    Total square footage                 824,729       919,237    
                               
    Comparable store sales change (%) (5)                          
    North America     8.6 %     (1.8 )%     9.7 %     1.1 %  
    Europe     1.7 %     (1.3 )%     5.9 %     (6.0 )%  
    Consolidated     7.3 %     (1.7 )%     9.0 %     (0.1 )%  
                               
(1)  

Retail gross margin represents net retail sales less retail cost of merchandise sold. Retail gross
margin percentage represents retail gross margin divided by net retail sales.

 
(2)  

Capital expenditures, net represents cash paid for property, equipment, other assets and other
intangible assets.

 
(3)  

Excludes our webstore and pop-up, seasonal and event-based locations. North American stores are
located in the United States, Canada and Puerto Rico. In Europe, stores are located in the United
Kingdom and Ireland.

 
(4)   Square footage for stores located in Europe is estimated selling square footage.  
(5)  

Comparable store sales percentage changes are based on net retail sales and stores are considered
comparable beginning in their thirteenth full month of operation.

 

 

 
 

* Non-GAAP Financial Measures

 
In this press release, the Company's financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the Company provides historic earnings (loss) and earnings (loss) per diluted share adjusted to exclude certain costs and accounting adjustments, which are non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the Company's business and provide useful information to both management and investors by excluding certain items that may not be indicative of the Company's core operating results. These measures should not be considered a substitute for or superior to GAAP results.
                   
                   
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Reconciliation of Net Loss to Adjusted Net Loss
(dollars in thousands, except share and per share data)
                   
      13 Weeks   13 Weeks   26 Weeks   26 Weeks
      Ended   Ended   Ended   Ended
      June 29,   June 30,   June 29,   June 30,
      2013   2012   2013   2012
Net loss     $ (6,218 )   $ (7,551 )   $ (6,205 )   $ (8,568 )
                   
Management transition costs(1)       506       -       2,251       -  
Store closing costs (2)       340       40       904       128  
Losses from investment in affiliate(3)       -       -       -       475  
Adjusted net loss     $ (5,372 )   $ (7,511 )   $ (3,050 )   $ (7,965 )
                   
                   
      13 Weeks   13 Weeks   26 Weeks   26 Weeks
      Ended   Ended   Ended   Ended
      June 29,   June 30,   June 29,   June 30,
      2013   2012   2013   2012
Net loss per share     $ (0.38 )   $ (0.46 )   $ (0.38 )   $ (0.53 )
                   
Management transition costs(1)       0.03       -       0.14       -  
Store closing costs (2)       0.02       0.00       0.05       0.01  
Losses from investment in affiliate(3)       -       -           0.03  
Adjusted net loss per share     $ (0.33 )   $ (0.46 )   $ (0.19 )   $ (0.49 )
                   

(1) Represents management transition costs related to the change in
Chief Executive. Costs include severance, along with benefits and related taxes,
executive search fees, signing bonus and professional fees.

(2) Represents the net impact related to the closing of stores, including asset impairment and
disposal charges and severance costs along with adjustments to lease related liabilities.

(3) Represents non-recurring charge related to the Company's investment in Ridemakerz.

 

   
   
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES  
Company-Owned Store Activity  
                                     
      2013  
                                     
      Twenty-six Weeks   Fifty-two Weeks - Projected  
      December 29,           June 29,   December 29,           December 28,  
      2012   Opened   Closed   2013   2012   Opened   Closed   2013  
North America                                    
Traditional     283   -   (26)   257   283   4   (35)   252  
Non-traditional     8   -   (2)   6   8   -   (2)   6  
      291   -   (28)   263   291   4   (37)   258  
                                     
Europe     60   -   -   60   60   -   -   60  
Total     351   -   (28)   323   351   4   (37)   318  
                                     
                                     
      2012  
                                     
      Twenty-six Weeks   Fifty-two Weeks  
      December 31,           June 30,   December 31,           December 29,  
      2011   Opened   Closed   2012   2011   Opened   Closed   2012  
North America                                    

Traditional

    287   1   (3)   285   287   2   (6)   283  
Non-traditional     11   1   (1)   11   11   1   (4)   8  
      298   2   (4)   296   298   3   (10)   291  
                                     
Europe     58   -   -   58   58   2   -   60  
Total     356   2   (4)   354   356   5   (10)   351  
                                     

The Company's long term store real estate goal is to bring its stores back to best in class productivity and profitability. Today, the Company believes that the optimal number of Build-A-Bear Workshop stores in North America is between 225 to 250 and 60 to 70 in the United Kingdom and Ireland for a total of 285 to 320 stores. The Company currently expects to reach this level with the closure of 60 to 70 stores in fiscal 2012 through 2014, primarily in North America, along with limited, opportunistic store openings. Locations to close and the timing of the closures are subject to ongoing negotiations and overall economic considerations as market repositioning and optimization plans are continually reevaluated.

Source: Build-A-Bear Workshop, Inc

.

###

Share this Story:

Comments:

comments powered by Disqus

Franchise News Room »


News By Industry »


Featured Opportunities

Quaker Steak & Lube®
Founded in 1974 in Sharon, PA, the award-winning casual dining restaurant chain has expanded over 55 locations throughout the United States and Canada
Lightbridge Academy
Lightbridge Academy has a way of making parents and children feel like they’re special. Here, they are surrounded by a Circle of Care that’s more...
Anytime Fitness
Align with the world leader in fitness. Recurring-revenue business model, multi-club ownership potential. Don’t just join a franchise, join a...
Liberty Tax Service
The fastest-growing income tax preparation franchise in North America.
Which Wich® Superior Sandwiches
Which Wich is changing the franchising game with our fun, personalized, and incredibly attractive business approach.

Subscribe to Franchising.com Express

A Franchise Update Media Production
Franchise Update Media | P.O. Box 20547 // San Jose, CA 95160 // PH. (408) 402-5681
Copyright © 2001 - 2017. All Rights Reserved.

In Loving Memory Of Timothy Gardner (1987-2014)