Build-A-Bear Workshop, Inc. (NYSE: BBW), an interactive
entertainment retailer, today reported results for the second
quarter and first six months ended June 30, 2012.
Second Quarter 2012 Highlights (13 weeks ended June 30,
2012):
- Consolidated net retail sales of $79.0
million represented a 1.8% decrease compared to $80.4 million in
2011, excluding the impact of foreign exchange;
- Consolidated comparable store sales
declined 1.7% and included a 1.8% decrease in North America and a
1.3% decrease in Europe. Second quarter 2012 net revenue and
comparable store sales were negatively impacted by the shift of the
Easter holiday and associated school vacations, which moved sales
into this year’s first quarter;
- Consolidated e-commerce sales rose
5.5%, excluding the impact of foreign exchange. This comes on top
of a 22.8% increase in the fiscal 2011 second quarter; and
- Pre-tax loss of $8.3 million improved
from a pre-tax loss of $10.7 million in the fiscal 2011 second
quarter.
Maxine Clark, Build-A-Bear Workshop’s Chief Executive Bear
commented, “Our first six months results show our progress toward
our goals with positive comparable store sales in North America, a
sequential improvement in quarterly trend in Europe and strong
growth in our e-commerce sales. The execution of our key
strategies, including disciplined expense control, has driven a
solid improvement in our operating performance in the first half of
2012. While the economic environment continues to be challenging,
particularly in Europe, we believe the key components of our
strategy are on track to post further improvement in sales
productivity and profitability.
“In just over a month, we will open our first newly imagined
store design in St. Louis with five additional stores opening in
major US markets in the following weeks. The new store merges
Build-A-Bear Workshop’s hands-on bear-making process with the power
of technology to provide a magical new experience for our Guests,”
concluded Ms. Clark.
Additional Second Quarter 2012 Details:
- Total revenues were $80.4 million
compared to $81.8 million in the 2011 second quarter, a decrease of
1.8%, excluding the impact of foreign exchange;
- Retail gross margin was 35.0%, an 80
basis point decline from retail gross margin of 35.8% in the 2011
second quarter;
- Selling, general and administrative
expense (“SG&A”) was $37.1 million, or 46.1% of revenues, a 180
basis point improvement excluding $1.5 million in consulting costs
from the 2011 second quarter;
- Tax benefit was $0.8 million at an
effective rate of 9.1% compared to a tax benefit of $4.0 million at
an effective rate of 37.4% in the 2011 second quarter; and
- Net loss was $7.6 million or $0.46 per
share compared to $6.7 million or $0.37 per share in the fiscal
2011 second quarter. Net loss in 2012 was negatively impacted by
(i) $0.14 per share related to changes in the effective tax rate;
and (ii) $0.04 per share resulting from a change in share count due
to repurchases that were made in the second half of 2011. Last
year's net loss was negatively impacted by $0.05 per share related
to the Company’s consulting project.
First Six Months 2012 (26 weeks ended June 30, 2012):
- Total revenues were $176.8 million
compared to $177.8 million in 2011, a decrease of 0.4%, excluding
the impact of foreign exchange;
- Consolidated net retail sales of $174.2
million were flat compared to $174.6 million in 2011, excluding the
impact of foreign exchange;
- Consolidated comparable store sales
were essentially flat and included a 1.1% increase in North America
and a 6.0% decrease in Europe;
- Consolidated e-commerce sales rose
7.6%, excluding the impact of foreign exchange. This comes on top
of an increase of 9.5% in the first six months of 2011;
- Retail gross margin was 37.7%, a 30
basis point improvement from the first six months of 2011;
- SG&A was $77.2 million, or 43.7% of
revenues, a 70 basis point improvement excluding $3.0 million in
consulting costs from the first six months of 2011;
- Pre-tax loss of $9.4 million improved
from a pre-tax loss of $14.3 million in the first six months of
fiscal 2011;
- Tax benefit was $0.9 million at an
effective rate of 9.2%, compared to a tax benefit of $5.4 million
at an effective rate of 37.6% for the first six months of 2011;
and
- Net loss was $8.6 million or $0.53 per
share, compared to $8.9 million, or $0.50 per share in the first
six months of fiscal 2011. Net loss in 2012 was negatively impacted
by (i) $0.17 per share related to changes in the effective tax
rate; and (ii) $0.05 per share resulting from a change in share
count due to repurchases that were made in the second half of 2011.
Last year’s net loss was negatively impacted by $0.10 per share
related to the Company’s consulting project.
Balance Sheet
The Company ended the 2012 second quarter with a strong balance
sheet and no borrowings under its revolving credit facility. As of
June 30, 2012 cash and cash equivalents totaled $26.5 million, the
majority of which was domiciled outside the U.S. Total inventory at
quarter end was $47.0 million. Inventory per square foot increased
3.3%, as compared to the prior year period.
In 2012, the Company expects to close approximately ten stores
including certain temporary and seasonal locations. The Company
also expects to remodel or open approximately 20 stores, with six
of the stores in its new design. The Company expects capital
expenditures to be $20 million to $23 million in fiscal 2012 to
support the refresh and repositioning of stores and investment in
infrastructure. Depreciation and amortization is expected to be
approximately $22 million.
Stores
At quarter end the Company operated 345 company-owned stores –
287 in North America and 58 in Europe, as compared to 289 in North
America and 53 in Europe at the end of the fiscal 2011 second
quarter. The Company’s international franchisees opened five
stores, net of closures, to end the first six months of the year
with 84 stores in 14 countries.
2012 Objectives
To increase long-term shareholder value, the Company continues
to expect to:
- Introduce a new store design to
enhance the bear-making experience and drive store traffic and
sales. The Company expects to open six of these stores starting in
September.
- Improve store productivity and
profitability by closing select stores during the year,
transferring a percentage of the sales to other stores in the same
markets. The Company will also reduce the square footage of other
stores by relocating them within the same malls.
- Increase shopping frequency by
increasing new Guest traffic to its stores by rebalancing its
marketing messages to include both product and brand, and by
refreshing its loyalty program to increase Guest retention.
- Reinforce Build-A-Bear Workshop as a
top destination for gifts, capitalizing on its 15th birthday
occasion to take this initiative to an entirely new level.
- Increase the Company’s global
presence with the anticipated opening of ten to twelve
international franchise locations, net of closures in 2012.
- Improve cost efficiencies with
approximately $7 to $9 million in savings in fiscal 2012, a portion
of which will offset expected product cost increases and support
sales-driving marketing initiatives.
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.
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 2, 2012. The telephone replay is available by
calling (858) 384-5517. The access code is 397181.
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 fourth year in a row in 2012. Build-A-Bear Workshop
(NYSE: BBW) posted total revenue of $394.4 million in fiscal 2011.
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 December 31, 2011, 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 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 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 not be able to operate our company-owned
stores in the United Kingdom and Ireland profitably; 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 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; we may lose key personnel, be unable to hire
qualified additional personnel, or experience turnover of our
management team; 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. 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
June 30, % of Total July 2, % of Total
2012 Revenues (1) 2011 Revenues
(1) Revenues: Net retail sales $ 78,989 98.2 $ 80,391 98.2
Commercial revenue 705 0.9 736 0.9 Franchise fees 716
0.9 714 0.9 Total revenues
80,410 100.0 81,841 100.0 Costs
and expenses: Cost of merchandise sold 51,704 64.9 51,926 64.0
Selling, general and administrative 37,075 46.1 40,685 49.7
Interest expense (income), net (63 ) (0.1 ) (105 )
(0.1 ) Total costs and expenses 88,716 110.3
92,506 113.0 Loss before income taxes (8,306 )
(10.3 ) (10,665 ) (13.0 ) Income tax benefit (755 ) (0.9 )
(3,990 ) (4.9 ) Net loss $ (7,551 ) (9.4 ) $ (6,675 ) (8.2 )
Loss per common share: Basic $ (0.46 ) $ (0.37 ) Diluted $
(0.46 ) $ (0.37 ) Shares used in computing common per share
amounts: Basic 16,458,889 17,839,349 Diluted 16,458,889 17,839,349
(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 30, % of Total July 2, % of Total
2012 Revenues (1) 2011 Revenues
(1) Revenues: Net retail sales $ 174,189 98.5 $ 174,550 98.1
Commercial revenue 1,081 0.6 1,841 1.1 Franchise fees 1,513
0.9 1,440 0.8 Total revenues
176,783 100.0 177,831 100.0
Costs and expenses: Cost of merchandise sold 109,170 62.3
110,151 62.4 Selling, general and administrative 77,201 43.7 81,996
46.1 Interest expense (income), net (149 ) (0.1 ) (1
) (0.0 ) Total costs and expenses 186,222 105.3
192,146 108.0 Loss before income taxes
(9,439 ) (5.3 ) (14,315 ) (8.0 ) Income tax benefit (871 )
(0.5 ) (5,388 ) (3.0 ) Net loss $ (8,568 ) (4.8 ) $ (8,927 )
(5.0 ) Loss per common share: Basic $ (0.53 ) $ (0.50 )
Diluted $ (0.53 ) $ (0.50 ) Shares used in computing common per
share amounts: Basic 16,248,884 17,964,763 Diluted 16,248,884
17,964,763
(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 30, December
31, July 2, 2012 2011 2011
ASSETS Current assets: Cash and cash equivalents $ 26,450 $
46,367 $ 34,742 Inventories 47,029 51,860 46,156 Receivables 4,935
7,878 4,606 Prepaid expenses and other current assets 13,604 17,854
22,580 Deferred tax assets 469 419
7,585 Total current assets 92,487 124,378 115,669
Property and equipment, net 73,518 77,445 81,225 Goodwill
32,643 32,306 33,542 Other intangible assets, net 595 655 1,043
Other assets, net 6,704 6,787
15,070 Total Assets $ 205,947 $ 241,571 $
246,549
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $ 24,253 $ 41,032 $ 33,280
Accrued expenses 7,227 12,128 6,818 Gift cards and customer
deposits 22,848 28,323 23,487 Deferred revenue 5,568
5,285 6,852 Total current liabilities
59,896 86,768 70,437
Deferred franchise revenue 1,301 1,436 1,571 Deferred rent
22,075 23,867 26,606 Other liabilities 257 257 375
Stockholders' equity: Common stock, par value $0.01 per share 174
174 192 Additional paid-in capital 66,060 65,402 72,979 Accumulated
other comprehensive loss (9,082 ) (10,165 ) (7,580 ) Retained
earnings 65,266 73,832 81,969
Total stockholders' equity 122,418
129,243 147,560 Total Liabilities and
Stockholders' Equity $ 205,947 $ 241,571 $ 246,549
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 30,
July 2, June 30, July 2, 2012
2011 2012 2011 Other financial
data: Retail gross margin ($) (1) $ 27,666 $ 28,774 $ 65,677 $
65,351 Retail gross margin (%) (1) 35.0 % 35.8 % 37.7 % 37.4 %
E-commerce sales $ 2,191 $ 2,089 $ 5,316 $ 4,963 Capital
expenditures, net (2) $ 4,525 $ 3,815 $ 8,304 $ 6,137 Depreciation
and amortization $ 5,273 $ 6,206 $ 10,636 $ 12,730
Store
data (3): Number of company-owned stores at end
of period North America 287 289 Europe 58 53
Total stores 345 342 Number of franchised stores at
end of period 84 70 Company-owned store square footage at
end of period North America 818,959 835,019 Europe (4)
83,742 76,481 Total square footage 902,701
911,500 Comparable store sales change (%) (5) North America
(1.8 )% 8.3 % 1.1 % (2.0 )% Europe (1.3 )% 1.3 %
(6.0 )% (1.7 )% Consolidated (1.7 )% 7.1 % (0.1 )%
(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, 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.
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