Build-A-Bear Workshop, Inc. (NYSE: BBW), an interactive
entertainment retailer, today reported results for the 2010 third
quarter and first nine months ended October 2, 2010.
“We are pleased to report improved third quarter performance
that included increased total sales, positive comparable store
sales, improvement in gross profit margin, and a significant
reduction in our quarterly loss for the period, as compared to the
third quarter last year,” stated Build-A-Bear Workshop Chairman and
Chief Executive Bear Maxine Clark. “We delivered a 5.3%
increase in North American comparable store sales by both
increasing transactions and growing average ticket and we had
strong performance online with total e-commerce sales up 18.1%,
excluding the impact of foreign exchange. We also successfully
launched our proprietary smallfrys product line. Our European
comparable store sales remained soft, which we are addressing by
increasing our marketing support to re-engage existing Guests and
drive new customers to our stores. Our balance sheet remained
strong at quarter end with $24.7 million in cash while investing
$7.3 million to repurchase 1.1 million shares of our common stock
since the beginning of this year.
We believe we are well positioned to maximize the holiday
season, as we continue to emphasize our product introductions
aligned with powerful marketing,” continued Ms. Clark. “We are also
excited about the opportunity for sales growth from the addition of
our recently announced eleven pop-up stores. We remain confident
that our strategies will help us achieve our number one objective
of increasing value for all Build-A-Bear Workshop stakeholders
through profitable sales growth,” concluded Ms. Clark.
Fiscal 2010 Third-Quarter (13 weeks ended October 2,
2010):
- Total revenues were $100.1 million,
compared to $92.3 million in the fiscal 2009 third quarter (13
weeks ended October 3, 2009). Third quarter total revenues included
$5.8 million from a single wholesale transaction. Net retail sales
were $91.7 million, an increase of $2.0 million, or 2.2% compared
to $89.7 million in last year’s third quarter. Excluding the impact
of foreign exchange, net retail sales increased 3.8%.
- Consolidated comparable store sales
increased 3.1%, including a 5.3% increase in North America
partially offset by a 6.6% decrease in Europe.
- Net retail sales from European
operations totaled $16.0 million in the 2010 third quarter, a
decrease of $1.6 million, or 9.1% compared to $17.6 million in the
2009 third quarter. Excluding the impact of foreign exchange,
European operations net retail sales decreased 3.7%.
- Consolidated e-commerce sales rose
18.1%, excluding the impact of foreign exchange, and included
double digit increases in both North America and the UK resulting
from product launches and new online marketing and promotional
initiatives.
- Third quarter net loss was $1.4
million, or $0.07 per share, compared to the fiscal 2009 third
quarter net loss of $4.8 million, or $0.25 per share. The net loss
for the third quarter of fiscal 2010 included charges of $0.5
million, or $0.03 per share, related to the decision to close a
small number of stores within the fiscal year. The net loss for the
third quarter of fiscal 2009 included a non-cash charge of $2.8
million, or $0.15 per share, resulting from the allocation of
losses related to the company’s minority investment in Ridemakerz,
LLC and a $0.2 million, or $0.01 per share charge, for the Friends
2B Made concept closure.
Fiscal 2010 First Nine-Months (39 weeks ended October 2,
2010):
- Total revenues were $275.7 million,
compared to $272.8 million in the first nine months of fiscal 2009
(39 weeks ended October 3, 2009). For the first nine months of
2010, total revenues included $5.8 million from a single wholesale
transaction. Net retail sales were $264.0 million, a decrease of
$3.4 million, or 1.3% compared to $267.4 million in the first nine
months of fiscal 2009. Excluding the impact of foreign exchange,
net retail sales decreased 0.9%.
- Consolidated comparable store sales
decreased 1.2%, including a 0.5% decrease in North America and a
4.7% decrease in Europe.
- Net retail sales from European
operations totaled $43.9 million in the first nine months of fiscal
2010, a decrease of $2.0 million, or 4.4% compared to $45.9 million
in the first nine months of fiscal 2009. Excluding the impact of
foreign exchange, European operations net retail sales decreased
3.6%.
- Consolidated e-commerce sales rose
9.0%, excluding the impact of foreign exchange, and included
increases in both North America and the UK resulting from product
launches, integrated marketing initiatives and a general trend of
increased online shopping, particularly among European
consumers.
- Net loss for the first nine months was
$8.2 million, or $0.44 per share, from a loss of $11.6 million, or
$0.61 per share in the first nine months of fiscal 2009. The net
loss for the first nine months of fiscal 2010 included (i) a $0.3
million, or $0.02 per share, non-cash impairment charge related to
certain long-term deposits; and (ii) $0.5 million, or $0.03 per
share in charges related to the decision to close a small number of
stores within the fiscal year. The net loss for the first nine
months of fiscal 2009 included (i) a non-cash charge of $3.1
million, or $0.17 per share, resulting from the allocation of
losses related to the Company’s minority investment in Ridemakerz,
LLC; and (ii) a $0.6 million, or $0.03 per share charge for the
Friends 2B Made concept closure.
Stores
Build-A-Bear Workshop ended the 2010 third quarter with 347
company-owned stores – 291 in North America and 56 in Europe. The
Company opened 3 stores, relocated one store and closed two stores
in the third quarter 2010. In the third quarter 2009 the Company
opened one store and relocated one store.
Balance Sheet
The Company ended the 2010 third quarter with a strong balance
sheet. As of October 2, 2010, cash and cash equivalents totaled
$24.7 million, as compared to $27.0 million in cash and cash
equivalents at October 3, 2009. At quarter end, over 60% of the
Company’s cash was held outside of the United States. Total
inventory at quarter-end was $54.7 million, compared to $48.5
million, at October 3, 2009, an increase of 13% primarily driven by
earlier receipt of holiday product, inventory for pop-up store
openings and increased in-transit inventory driven by longer lead
times. The Company remains comfortable with the level and content
of its inventory as it begins the fourth quarter.
During the third quarter, the Company repurchased approximately
680,000 shares of its common stock at a total cost of $4.0 million.
At quarter end, the Company had $23.7 million of availability under
the current stock repurchase program.
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 our investor relations Web site,
http://IR.buildabear.com. The call is expected to conclude by 10
a.m. ET.
The replay of the conference call webcast will be available at
the investor relations Web site for one year. A telephone replay
will be available beginning at approximately noon ET on October 28,
2010, until midnight ET on November 11, 2010. The telephone replay
is available by calling (617) 801-6888. The access code is
66826605.
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. The company currently operates
more than 400 Build-A-Bear Workshop stores worldwide, including
company-owned stores in the U.S., Puerto Rico, Canada, the United
Kingdom, Ireland and France, and franchise stores in Europe, Asia,
Australia, Africa, the Middle East, and Mexico. 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 buildabearville.com®.
The company was named to the 2009 and 2010 FORTUNE 100 Best
Companies to Work For® lists. Build-A-Bear Workshop (NYSE: BBW)
posted total revenue of $394.4 million in fiscal 2009. For more
information, call 888.560.BEAR (2327) or visit the company's
award-winning Web site at buildabear.com®.
Forward-Looking Statements
This press release contains "forward-looking statements" (within
the meaning of the federal securities laws) which represent
Build-A-Bear Workshop expectations or beliefs with respect to
future events. 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 fiscal year ended January 2, 2010, as filed with the SEC, and
the following: general 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 continue to 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 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 be unable to
effectively manage the operations and growth of our company-owned
stores; we may be unable to effectively manage our international
franchises or laws relating to those franchises may change; the
availability and costs of our products could be adversely affected
by risks associated with international manufacturing and trade,
including foreign currency fluctuation; 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 operate our European
company-owned stores profitably; fluctuations in our quarterly
results of operations could cause the price of our common stock to
substantially decline; we may be unable to repurchase shares at all
or 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; we may improperly obtain or be unable to
protect information from our guests in violation of privacy or
security laws or 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; 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 may be unable 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; we may have disputes
with, or be sued by, third parties for infringement or
misappropriation of their proprietary rights; poor global economic
conditions could have a material adverse effect on our liquidity
and capital resources; and we may be unable to recover amounts due
to us from our affiliate, Ridemakerz LLC. These risks,
uncertainties and other factors may adversely affect our business,
growth, financial condition or profitability, or subject us to
potential liability, and cause our actual results, performance or
achievements to be materially different from those expressed or
implied by our forward-looking statements. The company undertakes
no obligation to publicly update or revise any 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.
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 October 2, % of Total
October 3, % of Total 2010 Revenues
2009 Revenues Revenues: Net retail sales $ 91,689
91.6 $ 89,731 97.2 Commercial revenue (1) 7,637 7.6 1,670 1.8
Franchise fees 767 0.8 945 1.0 Total
revenues 100,093 100.0 92,346 100.0
Costs and expenses: Cost of merchandise sold 62,710 62.7 57,630
62.4 Selling, general and administrative 39,113 39.1 39,255 42.5
Store preopening 255 0.3 73 0.1 Store closing — — 250 0.3 Equity
losses from investment in affiliate — — 4,592 5.0 Interest expense
(income), net (83 ) (0.1 ) (44 ) (0.0 ) Total costs and expenses
101,995 101.9 101,756 110.2 Loss before
income taxes (1,902 ) (1.9 ) (9,410 ) (10.2 ) Income tax benefit
(524 ) (0.5 ) (4,647 ) (5.0 ) Net loss $ (1,378 ) (1.4 ) $ (4,763 )
(5.2 ) Loss per common share: Basic $ (0.07 ) $ (0.25 )
Diluted $ (0.07 ) $ (0.25 ) Shares used in computing common per
share amounts: Basic 18,426,860 18,876,697 Diluted 18,426,860
18,876,697 (1) Commercial revenue, previously
referred to as licensing revenue, includes the Company's
transactions with other business partners, mainly through
licensing, entertainment and wholesale activities. Historically,
licensing revenue included immaterial amounts of wholesale revenue.
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 2, % of Total
October 3, % of Total 2010
Revenue 2009 Revenue Revenues: Net
retail sales $ 263,963 95.8 $ 267,354 98.0 Commercial revenue (1)
9,588 3.5 3,336 1.2 Franchise fees 2,112 0.8 2,153
0.8 Total revenues 275,663 100.0
272,843 100.0 Costs and expenses: Cost of merchandise
sold 172,150 62.4 174,021 63.8 Selling, general and administrative
115,048 41.7 113,683 41.7 Store preopening 343 0.1 90 0.0 Store
closing — — 981 0.4 Equity losses from investment in affiliate — —
5,125 1.9 Interest expense (income), net (191 ) (0.1 ) (92 ) (0.0 )
Total costs and expenses 287,350 104.2 293,808
107.7 Loss before income taxes (11,687 ) (4.2 ) (20,965 )
(7.7 ) Income tax benefit (3,511 ) (1.3 ) (9,408 ) (3.4 ) Net loss
$ (8,176 ) (3.0 ) $ (11,557 ) (4.2 ) Loss per common share:
Basic $ (0.44 ) $ (0.61 ) Diluted $ (0.44 ) $ (0.61 ) Shares used
in computing common per share amounts: Basic 18,755,941 18,844,009
Diluted 18,755,941 18,844,009 (1) Commercial revenue,
previously referred to as licensing revenue, includes the Company's
transactions with other business partners, mainly through
licensing, entertainment and wholesale activities. Historically,
licensing revenue included immaterial amounts of wholesale revenue.
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets (dollars in
thousands, except per share data)
October 2, January 2, October 3, 2010
2010 2009 ASSETS Current assets: Cash and cash
equivalents $ 24,660 $ 60,399 $ 27,043 Inventories 54,726 44,384
48,457 Receivables 5,790 5,337 5,124 Prepaid expenses and other
current assets 19,247 19,329 21,545 Deferred tax assets
6,874 6,306 4,243 Total current
assets 111,297 135,755 106,412 Property and equipment, net
90,397 101,044 107,616 Goodwill 33,044 33,780 33,247 Other
intangible assets, net 2,657 3,601 4,037 Investment in affiliate -
- 3,159 Other assets, net 15,476 10,093
10,584 Total Assets $ 252,871 $ 284,273
$ 265,055
LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $ 32,369 $ 32,822
$ 28,134 Accrued expenses 6,202 11,185 4,795 Gift cards and
customer deposits 21,736 29,301 21,157 Deferred revenue
9,952 8,582 7,811 Total current
liabilities 70,259 81,890 61,897
Deferred franchise revenue 1,604 2,027 2,102 Deferred
rent 30,296 34,760 36,298 Other liabilities 794 816 1,222
Stockholders' equity: Common stock, par value $0.01 per
share 196 204 204 Additional paid-in capital 75,349 80,122 78,871
Accumulated other comprehensive loss (8,242 ) (6,336 ) (7,247 )
Retained earnings 82,615 90,790
91,708 Total stockholders' equity 149,918
164,780 163,536 Total Liabilities and
Stockholders' Equity $ 252,871 $ 284,273 $ 265,055
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 2, October 3, October 2,
October 3, 2010 2009 2010 2009
Other financial data: Retail gross margin ($) (1) $
35,406 $ 32,707 $ 98,795 $ 94,691 Retail gross margin (%) (1) 38.6
% 36.5 % 37.4 % 35.4 % Capital expenditures, net (2) $ 3,798 $
2,938 $ 10,208 $ 6,651 Depreciation and amortization $ 6,709 $
7,025 $ 20,338 $ 21,114 Sales over the Internet $ 2,021 $ 1,731 $
6,509 $ 5,966
Store data (3): Number of company-owned
stores at end of period North America 291 291 Europe 56 54
Total stores 347 345 Number of franchised stores at
end of period 58 61 Company-owned store square footage at
end of period North America 844,726 843,382 Europe (4) 80,754
77,520 Total square footage 925,480 920,902
Comparable store sales change (%) (5) North America 5.3 % (16.0 )%
(0.5 )% (18.2 )% Europe (6.6 )% 2.5 % (4.7 )% 5.3 % Consolidated
3.1 % (12.9 )% (1.2 )% (15.0 )% (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, net
represents cash paid for property, equipment, other assets and
other intangible assets. (3) Excludes our webstore and 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, Ireland and France. (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.
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