Press Release
Build-A-Bear Workshop, Inc. Reports a 2.1% Consolidated Comparable Store Sales Increase with Third Quarter Fiscal 2015 Results
- Third quarter consolidated comparable store sales increase 2.1%
- Retail gross margin expands 160 basis points to 45.3% from 43.7% in the 2014 third quarter
-
First nine months pre-tax income rises by
$4.6 million to $8.0 million
Third Quarter Fiscal 2015 Highlights (13 weeks ended
-
Consolidated comparable store sales increased 2.1% and included a 0.2%
increase in
North America and an 8.9% increase inEurope . Third quarter 2015 comparable store sales are compared to the thirteen-week period endedOctober 4, 2014 ; - Retail gross margin expanded 160 basis points to 45.3% from 43.7% in the 2014 third quarter;
-
Pre-tax income was
$1.4 million , a$690,000 decline from the 2014 third quarter; -
Net income was
$1.1 million , or$0.06 per diluted share compared to net income of$1.8 million , or$0.10 per diluted share in the 2014 third quarter; and -
Adjusted net income was
$1.7 million or$0.10 per diluted share compared to adjusted net income of$3.4 million , or$0.19 per diluted share, in the 2014 third quarter. (See Reconciliation of Net Income to Adjusted Net Income.)
“We believe we have a balanced product portfolio planned for the fourth quarter designed to reach all of our key consumer segments. Additionally, we remain focused on executing our long range strategies, which we believe will deliver sustained profitable growth and increased value for our shareholders,” concluded Ms. John.
Additional Third Quarter Fiscal 2015 Highlights (13 weeks ended
-
Total revenues were
$85.6 million compared to$86.7 million in the 2014 third quarter; -
Consolidated net retail sales were
$84.3 million compared to$85.6 million in the 2014 third quarter, as increased comparable store sales and sales from new stores were offset by the negative impact of foreign exchange, the one-week calendar shift due to the 53rd week in fiscal 2014, temporary store closures due to remodels and permanent store closures. Excluding the impact of foreign exchange, consolidated net retail sales rose 0.8% versus the third quarter last year; - Consolidated e-commerce sales rose 4.1% excluding the impact of foreign exchange; and
-
Selling, general and administrative expense (“SG&A”) totaled
$37.6 million , or 44.0% of total revenues, an increase of$1.4 million compared to the 2014 third quarter. The majority of the increase in SG&A reflects investments in marketing, personnel and store activity to advance the Company’s long term strategy.
First Nine Months Fiscal 2015 Highlights (39 weeks ended
-
Total revenues were
$260.0 million compared to$260.9 million in the first nine months of 2014; -
Consolidated net retail sales were
$256.2 million , compared to$257.8 million in the first nine months of 2014, as improved comparable stores sales were offset by the one-week calendar shift due to the 53rd week in fiscal 2014 and the negative impact of foreign exchange. Excluding the impact of foreign exchange, net retail sales increased 1.5% compared to the first nine months of 2014; -
Consolidated comparable store sales increased 4.0% and included a 1.9%
increase in
North America and a 13.1% increase inEurope . Comparable store sales for the first nine months of 2015 are compared to the thirty-nine week period endedOctober 4, 2014 ; - Consolidated e-commerce sales rose 7.9%, excluding the impact of foreign exchange;
- Retail gross margin expanded 300 basis points to 45.3% from 42.3% in the first nine months of 2014;
-
SG&A was
$110.8 million , or 42.6% of total revenues, an increase of$2.8 million compared to the first nine months of 2014; -
Pre-tax income was
$8.0 million , an improvement of$4.6 million compared to the first nine months of 2014; -
Net income was
$7.3 million or$0.42 per diluted share, an improvement of$4.7 million compared to the first nine months of 2014; and -
Adjusted net income was
$8.9 million or$0.51 per diluted share, an improvement from$4.4 million , or$0.25 per diluted share in the first nine months of 2014. (See Reconciliation of Net Income to Adjusted Net Income.)
Store Activity
The Company ended the period with 317 company-owned stores, including
257 in
Balance Sheet
The Company ended the 2015 third quarter with cash and cash equivalents
totaling
In 2015, the Company continues to expect capital expenditures to be
between
Share Repurchase Activity
During the third quarter the Company repurchased approximately 106,000
shares of its common stock for an aggregate amount of
2015 Key Strategic Objectives
To increase shareholder value, the Company expects to continue to execute its “MORE x 4” strategic plan which includes continuous improvement and strategic expansion initiatives in four areas with the progress outlined below:
Expanding into More Places
The Company intends to continue to evolve its real estate portfolio to align with market trends while selectively opening new locations and systematically remodeling its store base. To this end, in the third quarter, the Company opened one new store and remodeled six stores in its new design, which was developed to increase productivity and update the brand look. The Company also advanced its strategy to add non-traditional stores with the opening of five true outlet stores, as well as the expansion of its ongoing partnership with Macy’s in which it expects to open seven shop-in-shops for the holiday season.
The Company expects to strategically expand its international presence
by leveraging the improving strength in its company-owned stores to
restructure and extend its international footprint. In the third
quarter, a
Targeting More People
The Company intends to have continuous growth in its business with the core three to twelve year-old consumer segment, which represents a majority of current revenue. The Company will focus on initiatives that drive trial and increase repeat visits with an evolved segmentation, product development and marketing strategy. In the quarter, the Company successfully reached its older girl segment with the launch of its new proprietary Honey Girls collection, expanded its offering to boys with the initial launch of Star Wars product, and continued to sell Minions, which appealed across all consumer segments.
The Company expects to grow sales to consumers over twelve years old with a focus on key categories, including gift-giving, affinity and collectibles. This consumer segment currently represents more than 20% of sales and has a tendency to over-index on less price-sensitive “gift-able” and online purchases. Therefore, the Company intends to leverage its e-commerce business to efficiently target these consumers. In the quarter, the Company introduced Build-A-Bear Workshop’s Sports Central concept on line and in stores to leverage its powerful licensing relationships which span most major sports leagues and include many major universities.
Developing More Products
The Company intends to make continuous improvements to its products by
developing high impact stories coupled with integrated marketing
programs that tend to garner higher price points, drive add-on purchases
and create “play beyond the plush.” In conjunction with the successful
launch of its proprietary Honey Girls collection, the Company introduced
music videos. Since the collection’s introduction, there have been more
than 2.5 million views of both Build-A-Bear and user generated videos
about the Honey Girls on
The Company also plans to continue to expand its presence and create new
revenue and profit streams by launching wholesale and out-bound
licensing programs to leverage its strong brand equity. These programs
will enable the Company to extend its brand reach with new offerings in
relevant categories and will provide consumers with “products beyond the
plush.” To this end, the Company announced that
Driving More Profitability
The Company intends to make continuing improvements in its value
engineering initiatives to further enhance product margins while
implementing new systems that should facilitate sales growth, increase
efficiency and improve long term profitability. In the quarter, the
Company expanded retail gross margin by 160 basis points to 45.3%. The
Company also delivered pre-tax income of
The Company expects to continue to expand its profitability by prioritizing incremental growth initiatives, like those discussed above, that leverage existing infrastructure, are primarily royalty-based, and/or allow for discrete pricing and are, therefore comparatively margin-accretive.
Today’s Conference Call Webcast
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
About
Founded in
Forward-Looking Statements
This press release contains forward looking statements that involve
risks and uncertainties and the Company’s 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 the Company’s annual report
on Form 10-K for the year ended
- general global economic conditions may 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 improperly obtain or be unable to adequately protect customer information in violation of privacy or security laws or customer expectations;
- 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 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;
- we may not be able to operate our international company-owned profitably;
- 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;
- we may be unable to effectively manage our international franchises or laws relating to those franchises may change;
- we may fail to renew, register or otherwise protect our trademarks or other intellectual property;
- we are subject to risks associated with technology and digital operations;
- we may suffer negative publicity or be sued due to violations of labor laws or unethical practices by manufacturers of our merchandise;
- we may be unable to operate our company-owned distribution center efficiently or our third-party distribution center providers may perform poorly;
- high petroleum products prices could increase our inventory transportation costs and adversely affect our profitability;
- our plans to leverage the Build-A-Bear brand to drive strategic expansion may not be successful;
- our market share could be adversely affected by a significant, or increased, number of competitors;
- 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;
- poor global economic conditions could have a material adverse effect on our liquidity and capital resources;
- 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.
(Financial Tables Follow)
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES | ||||||||||||||||||||
Unaudited Condensed Consolidated Income Statements | ||||||||||||||||||||
(dollars in thousands, except share and per share data) | ||||||||||||||||||||
13 Weeks | 13 Weeks | |||||||||||||||||||
Ended | Ended | |||||||||||||||||||
October 3, | % of Total | September 27, | % of Total | |||||||||||||||||
2015 | Revenues (1) | 2014 | Revenues (1) | |||||||||||||||||
Revenues: | ||||||||||||||||||||
Net retail sales | $ | 84,303 | 98.5 | $ | 85,561 | 98.7 | ||||||||||||||
Franchise fees | 525 | 0.6 | 558 | 0.6 | ||||||||||||||||
Commercial revenue | 795 | 0.9 | 542 | 0.6 | ||||||||||||||||
Total revenues | 85,623 | 100.0 | 86,661 | 100.0 | ||||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of merchandise sold - retail (1) | 46,117 | 54.7 | 48,146 | 56.3 | ||||||||||||||||
Cost of merchandise sold - commercial (1) | 551 | 69.3 | 278 | 51.3 | ||||||||||||||||
Selling, general and administrative | 37,643 | 44.0 | 36,217 | 41.8 | ||||||||||||||||
Interest expense (income), net | (56 | ) | (0.1 | ) | (38 | ) | (0.0 | ) | ||||||||||||
Total costs and expenses | 84,255 | 98.4 | 84,603 | 97.6 | ||||||||||||||||
Income before income taxes | 1,368 | 1.6 | 2,058 | 2.4 | ||||||||||||||||
Income tax expense | 301 | 0.4 | 238 | 0.3 | ||||||||||||||||
Net income | $ | 1,067 | 1.2 | $ | 1,820 | 2.1 | ||||||||||||||
Income per common share: | ||||||||||||||||||||
Basic | $ | 0.06 | $ | 0.10 | ||||||||||||||||
Diluted | $ | 0.06 | $ | 0.10 | ||||||||||||||||
Shares used in computing common per share amounts: | ||||||||||||||||||||
Basic | 16,670,358 | 16,971,416 | ||||||||||||||||||
Diluted | 16,890,722 | 17,132,206 |
(1) | Selected statement of operations data expressed as a percentage of total revenues, except cost of merchandise sold - retail and cost of merchandise sold - commercial that are expressed as a percentage of net retail sales and commercial revenue, respectively. 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) | ||||||||||||||||||||||
39 Weeks | 39 Weeks | |||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||
October 3, | % of Total | September 27, | % of Total | |||||||||||||||||||
2015 | Revenues (1) | 2014 | Revenues (1) | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||
Net retail sales | $ | 256,246 | 98.5 | $ | 257,752 | 98.8 | ||||||||||||||||
Franchise fees | 1,624 | 0.6 | 1,716 | 0.7 | ||||||||||||||||||
Commercial revenue | 2,159 | 0.8 | 1,384 | 0.5 | ||||||||||||||||||
Total revenues | 260,029 | 100.0 | 260,852 | 100.0 | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||
Cost of merchandise sold - retail (1) | 140,288 | 54.7 | 148,785 | 57.7 | ||||||||||||||||||
Cost of merchandise sold - commercial (1) | 1,093 | 50.6 | 637 | 46.0 | ||||||||||||||||||
Selling, general and administrative | 110,815 | 42.6 | 108,062 | 41.4 | ||||||||||||||||||
Interest expense (income), net | (148 | ) | (0.1 | ) | (36 | ) | (0.0 | ) | ||||||||||||||
Total costs and expenses | 252,048 | 96.9 | 257,448 | 98.7 | ||||||||||||||||||
Income before income taxes | 7,981 | 3.1 | 3,404 | 1.3 | ||||||||||||||||||
Income tax expense | 721 | 0.3 | 862 | 0.3 | ||||||||||||||||||
Net income | $ | 7,260 | 2.8 | $ | 2,542 | 1.0 | ||||||||||||||||
Income per common share: | ||||||||||||||||||||||
Basic | $ | 0.42 | $ | 0.15 | ||||||||||||||||||
Diluted | $ | 0.42 | $ | 0.14 | ||||||||||||||||||
Shares used in computing common per share amounts: | ||||||||||||||||||||||
Basic | 16,834,968 | 16,899,245 | ||||||||||||||||||||
Diluted | 17,071,591 | 17,108,910 |
(1) | Selected statement of operations data expressed as a percentage of total revenues, except cost of merchandise sold - retail and cost of merchandise sold - commercial that are expressed as a percentage of net retail sales and commercial revenue, respectively. 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 per share data) | ||||||||||||||||
October 3, | January 3, | September 27, | ||||||||||||||
2015 | 2015 | 2014 | ||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 37,146 | $ | 65,389 | $ | 40,451 | ||||||||||
Inventories | 55,591 | 51,939 | 45,712 | |||||||||||||
Receivables | 8,053 | 11,461 | 10,144 | |||||||||||||
Prepaid expenses and other current assets | 16,651 | 15,611 | 12,188 | |||||||||||||
Deferred tax assets | 1,669 | 1,378 | 998 | |||||||||||||
Total current assets | 119,110 | 145,778 | 109,493 | |||||||||||||
Property and equipment, net | 60,090 | 62,766 | 61,031 | |||||||||||||
Other intangible assets, net | 1,211 | 304 | 365 | |||||||||||||
Other assets, net | 2,893 | 3,206 | 3,976 | |||||||||||||
Total Assets | $ | 183,304 | $ | 212,054 | $ | 174,865 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 29,927 | $ | 38,107 | $ | 28,369 | ||||||||||
Accrued expenses | 14,197 | 24,058 | 13,145 | |||||||||||||
Gift cards and customer deposits | 28,048 | 34,268 | 25,869 | |||||||||||||
Deferred revenue | 2,635 | 2,654 | 4,173 | |||||||||||||
Deferred tax liability | - | - | 856 | |||||||||||||
Total current liabilities | 74,807 | 99,087 | 72,412 | |||||||||||||
Deferred franchise revenue | 782 | 945 | 1,004 | |||||||||||||
Deferred rent | 12,327 | 13,353 | 13,716 | |||||||||||||
Other liabilities | 1,111 | 1,044 | 1,367 | |||||||||||||
Stockholders' equity: | ||||||||||||||||
Common stock, par value $0.01 per share | 169 | 174 | 174 | |||||||||||||
Additional paid-in capital | 59,333 | 69,362 | 68,749 | |||||||||||||
Accumulated other comprehensive loss | (9,272 | ) | (8,698 | ) | (7,524 | ) | ||||||||||
Retained earnings | 44,047 | 36,787 | 24,967 | |||||||||||||
Total stockholders' equity | 94,277 | 97,625 | 86,366 | |||||||||||||
Total Liabilities and Stockholders' Equity | $ | 183,304 | $ | 212,054 | $ | 174,865 |
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||
Unaudited Selected Financial and Store Data | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||
13 Weeks | 13 Weeks | 39 Weeks | 39 Weeks | |||||||||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||||||||
October 3, | September 27, | October 3, | September 27, | |||||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Other financial data: | ||||||||||||||||||||||
Retail gross margin ($) (1) | $ | 38,186 | $ | 37,415 | $ | 115,958 | $ | 108,967 | ||||||||||||||
Retail gross margin (%) (1) | 45.3 | % | 43.7 | % | 45.3 | % | 42.3 | % | ||||||||||||||
E-commerce sales | $ | 2,801 | $ | 2,648 | $ | 8,461 | $ | 7,952 | ||||||||||||||
Capital expenditures, net (2) | $ | 6,785 | $ | 2,511 | $ | 12,864 | $ | 5,681 | ||||||||||||||
Depreciation and amortization | $ | 4,029 | $ | 4,422 | $ | 12,262 | $ | 13,385 | ||||||||||||||
Store data (3): |
||||||||||||||||||||||
Number of company-owned retail locations at end of period | ||||||||||||||||||||||
North America | 257 | 254 | ||||||||||||||||||||
Europe | 60 | 59 | ||||||||||||||||||||
Total company-owned retail locations | 317 | 313 | ||||||||||||||||||||
Number of franchised stores at end of period | 67 | 70 | ||||||||||||||||||||
Company-owned store square footage at end of period (4) | ||||||||||||||||||||||
North America | 700,685 | 707,677 | ||||||||||||||||||||
Europe | 85,925 | 84,789 | ||||||||||||||||||||
Total square footage | 786,610 | 792,466 | ||||||||||||||||||||
Comparable store sales change (%) (5) | ||||||||||||||||||||||
North America | 0.2 | % | 1.0 | % | 1.9 | % | (1.6 | )% | ||||||||||||||
Europe | 8.9 | % | 0.0 | % | 13.1 | % | (3.6 | )% | ||||||||||||||
Consolidated | 2.1 | % | 0.8 | % | 4.0 | % | (2.0 | )% |
(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 represents cash paid for property, equipment, other assets and other intangible assets. | |
(3) | Excludes our webstores. North American stores are located in the United States, Canada and Puerto Rico. In Europe, stores are located in the United Kingdom and Ireland and, beginning in 2015, Denmark. | |
(4) | Square footage for stores located in North America is leased square footage. 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 exclude the impact of foreign exchange. Stores are considered comparable beginning in their thirteenth full month of operation. Comparable store sales percentage changes for 2015 are based on net retail sales as compared to the thirteen and thirty-nine-week periods ended October 4, 2014. |
* 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 income and income 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 Income to Adjusted Net Income | |||||||||||||||||||
(dollars in thousands, except share and per share data) | |||||||||||||||||||
13 Weeks | 13 Weeks | 39 Weeks | 39 Weeks | ||||||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||||||
October 3, | September 27, | October 3, | September 27, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||
Net income | $ | 1,067 | $ | 1,820 | $ | 7,260 | $ | 2,542 | |||||||||||
Foreign exchange losses (1) | 486 | 888 | 1,109 | 724 | |||||||||||||||
Management transition costs(2) | 181 | 688 | 553 | 1,089 | |||||||||||||||
Adjusted net income | $ | 1,734 | $ | 3,396 | $ | 8,922 | $ | 4,355 | |||||||||||
13 Weeks | 13 Weeks | 39 Weeks | 39 Weeks | ||||||||||||||||
Ended | Ended | Ended | Ended | ||||||||||||||||
October 3, | September 27, | October 3, | September 27, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||
Net income per diluted share | $ | 0.06 | $ | 0.10 | $ | 0.42 | $ | 0.14 | |||||||||||
Foreign exchange losses (1) | 0.03 | 0.05 | 0.06 | 0.04 | |||||||||||||||
Management transition costs(2) | 0.01 | 0.04 | 0.03 | 0.07 | |||||||||||||||
Adjusted net income per diluted share | $ | 0.10 | $ | 0.19 | $ | 0.51 | $ | 0.25 |
(1) | Represents the impact of foreign exchange rates on the re-measurement of balance sheet items not denominated in functional currency. Amounts are presented net of applicable income tax. | |
(2) | Represents transition costs related to changes in executive management. Costs include severance, along with benefits and related taxes, relocation, executive search fees, signing bonus and professional fees. Amounts are presented net of applicable income tax. |
View source version on businesswire.com: http://www.businesswire.com/news/home/20151029005453/en/
Source:
Investors:
Build-A-Bear Workshop
Voin Todorovic 314.423.8000
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