Build-A-Bear Workshop, Inc. (NYSE: BBW), an interactive
entertainment retailer, today reported results for the third
quarter and first nine months ended September 29, 2012.
Third Quarter Fiscal 2012 Highlights:
- Consolidated net retail sales of $84.3
million represented an 11.9% decrease compared to $95.4 million in
2011, excluding the impact of foreign exchange;
- Consolidated comparable store sales
decreased 11.1% which included an 11.8% decrease in North America
and a 7.9% decrease in Europe;
- Achieved cost savings of $1.0 million;
on track to achieve approximately $7.0 million of savings in fiscal
2012; and
- Net loss was $4.3 million, or $0.26 per
share compared to net income of $0.9 million, or $0.05 per diluted
share in the fiscal 2011 third quarter. Net loss in 2012 was
negatively impacted by (i) $0.14 per share related to changes in
the effective tax rate; and (ii) $0.02 per share resulting from a
change in share count due to repurchases that were made in the
fourth quarter of 2011.
Maxine Clark, Build-A-Bear Workshop’s Chief Executive Bear
commented, “Clearly we are disappointed with the quarter’s results.
We were up against a difficult comparison from last year when
product tied to the theatrical release of the Smurfs led to
incremental traffic and transaction growth throughout the quarter.
However, we made progress on our key strategies which build on the
foundation for our future.
“Sales in our new store design have exceeded our expectations,
and this success allows us to add elements or in some cases fully
remodel our most productive stores. At the same time, we expect to
improve our profitability by closing an additional 50 to 60
underperforming locations over the next two years to reach our
optimal count of 225 to 250 stores. We recently launched our brand
building TV advertising which will reinforce our store experience,
and we expect the classic theme of our holiday merchandise to lead
to a solid performance in the fourth quarter,” Ms. Clark
concluded.
Additional Fiscal 2012 Third-Quarter Details (13 weeks ended
September 29, 2012):
- Total revenues were $86.0 million,
compared to $97.4 million in the fiscal 2011 third quarter, a
decrease of 12.0%, excluding the impact of foreign exchange.
- Consolidated e-commerce sales declined
7.6%, excluding the impact of foreign exchange compared to an
increase of 20.3% in the fiscal 2011 third quarter.
- Pre-tax loss of $4.5 million compares
to a pre-tax income of $1.9 million in the fiscal 2011 third
quarter.
- Tax benefit was $0.2 million at an
effective rate of 4.5% compared to a tax expense of $1.0 million at
an effective rate of 54.2% in the 2011 third quarter.
Fiscal 2012 First Nine-Months (39 weeks ended September 29,
2012):
- Total revenues were $262.8 million,
compared to $275.2 million in the first nine months of fiscal 2011,
a decrease of 4.5%, excluding the impact of foreign exchange.
- Consolidated net retail sales were
$258.5 million compared to $269.9 million in the first nine months
of fiscal 2011, a decrease of 4.2%, excluding the impact of foreign
exchange.
- Consolidated comparable store sales
decreased 4.0%, including a 3.4% decrease in North America and a
6.7% decrease in Europe.
- Consolidated e-commerce sales rose
2.6%, excluding the impact of foreign exchange which comes on top
of an increase of 12.8% in the first nine months of fiscal
2011.
- Pre-tax loss was $13.9 million compared
to a pre-tax loss of $12.5 million in the first nine months of
fiscal 2011.
- Tax benefit was $1.1 million at an
effective rate of 7.7%, compared to a tax benefit of $4.4 million
at an effective rate of 35.2% for the first nine months of fiscal
2011.
- Net loss was $12.8 million, or $0.79
per share compared to net loss of $8.1 million, or $0.45 per share
in the first nine months of fiscal 2011. Net loss in 2012 was
negatively impacted by (i) $0.24 per share related to changes in
the effective tax rate; and (ii) $0.07 per share resulting from a
change in share count due to repurchases that were made in the
fourth quarter of 2011. Last year’s net loss was negatively
impacted by $0.11 per share related to the Company’s consulting
project.
Balance Sheet
The Company ended the 2012 third quarter with a strong balance
sheet and no borrowings under its revolving credit facility. As of
September 29, 2012, cash and cash equivalents totaled $22.1
million, the majority of which was domiciled outside of the U.S.
Total inventory at quarter end was $54.9 million. Inventory per
square foot was flat with the prior year period.
Stores
The Company expects capital expenditures to be approximately $18
million in fiscal 2012 to support the update and repositioning of
stores as well as investment in infrastructure. In fiscal 2012, the
Company will close nine stores, including certain non-traditional
locations, and remodel 14 stores, including five stores in its new
design. The Company will open five new stores across geographies
including one store in its new design. Depreciation and
amortization is expected to be approximately $21 million.
The Company currently plans to close an additional 50 to 60
stores in fiscal 2013 and 2014 to reach its optimal store count of
225 to 250 stores. These select store closures are expected to
transfer approximately 20% of sales to other stores in the same
markets.
During the quarter, the Company closed three stores across
geographies. At quarter end, the Company operated 283 traditional
stores and ten non-traditional stores in North America and 58
traditional stores in Europe. (See Company-Owned Store Activity
Schedule.) The Company’s international franchisees opened
three stores, net of closures, ending the quarter with 87 stores in
14 countries.
Accomplishments Toward 2012 Objectives:
- Introduce a new store design –
The Company opened the first three newly imagined stores with sales
that exceeded expectations and is on track to have six stores
opened by the end of fiscal 2012. These new stores elevate the
experience of making a stuffed animal and position the Company to
achieve higher sales.
- Improve store productivity and
profitability – In the 2012 fiscal year, the Company will close
nine stores, transferring a portion of the sales to other stores in
the market and will reduce the square footage of 11 other stores by
remodeling and moving them to smaller locations within the same
malls.
- Increase shopping frequency –
The Company reintroduced brand building TV advertising beginning in
mid-October to drive customer traffic, further engage existing
guests and attract new guests to its stores.
- Reinforce Build-A-Bear Workshop as a
top destination for gifts – The Company will capitalize on its
brand advertising to remind Guests about the gift of experience and
has expanded third-party outlets for gift cards during the peak
gifting season in the fourth quarter.
- Increase the Company’s global
presence – In the 2012 fiscal year, the Company has opened two
stores in the UK and anticipates the opening of 14 international
franchise locations, net of closures.
- Improve cost efficiencies – The
Company is on track to achieve cost savings of approximately $7
million in fiscal 2012, a portion of which has offset expected
product cost increases and will support sales-driving marketing
initiatives in the fourth quarter.
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.
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 November 1, 2012. The telephone replay is available
by calling (858) 384-5517. The access code is 401557.
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 September 29, % of Total
October 1, % of Total 2012 Revenues
(1) 2011 Revenues (1) Revenues: Net
retail sales $ 84,263 98.0 $ 95,378 97.9 Commercial revenue 908 1.1
1,160 1.2 Franchise fees 800 0.9 872 0.9
Total revenues 85,971 100.0 97,410
100.0 Costs and expenses: Cost of merchandise sold 53,887
63.3 57,572 59.6 Selling, general and administrative 36,573 42.5
38,013 39.0 Interest expense (income), net (36 ) (0.0 ) (40 ) (0.0
) Total costs and expenses 90,424 105.2 95,545
98.1 Income (loss) before income taxes (4,453 ) (5.2 ) 1,865
1.9 Income tax expense (benefit) (201 ) (0.2 ) 1,011 1.0
Net income (loss) $ (4,252 ) (4.9 ) $ 854 0.9
Earnings (loss) per common share: Basic $ (0.26 ) $ 0.05
Diluted $ (0.26 ) $ 0.05 Shares used in computing common per
share amounts: Basic 16,473,114 17,378,486 Diluted 16,473,114
17,396,144
(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)
39 Weeks 39 Weeks Ended Ended
September 29, % of Total October 1, % of
Total 2012 Revenues (1) 2011
Revenues (1) Revenues: Net retail sales $
258,452 98.4 $ 269,929 98.1 Commercial revenue 1,989 0.8 3,002 1.1
Franchise fees 2,313 0.9 2,312 0.8
Total revenues 262,754 100.0 275,243 100.0
Costs and expenses: Cost of merchandise sold 163,057 62.6
167,723 61.5 Selling, general and administrative 113,774 43.3
120,011 43.6 Interest expense (income), net (185 ) (0.1 ) (41 )
(0.0 ) Total costs and expenses 276,646 105.3 287,693
104.5 Loss before income taxes (13,892 ) (5.3 )
(12,450 ) (4.5 ) Income tax benefit (1,072 ) (0.4 ) (4,377 ) (1.6 )
Net loss $ (12,820 ) (4.9 ) $ (8,073 ) (2.9 ) Loss per
common share: Basic $ (0.79 ) $ (0.45 ) Diluted $ (0.79 ) $ (0.45 )
Shares used in computing common per share amounts: Basic 16,323,630
17,781,943 Diluted 16,323,630 17,781,943
(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 per share data)
September
29, December 31, October 1, 2012
2011 2011 ASSETS Current assets: Cash and cash
equivalents $ 22,145 $ 46,367 $ 25,106 Inventories 54,885 51,860
56,258 Receivables 4,721 7,878 4,889 Prepaid expenses and other
current assets 13,569 17,854 20,646 Deferred tax assets 487
419 7,624 Total current assets
95,807 124,378 114,523 Property and equipment, net 73,754
77,445 78,965 Goodwill 33,876 32,306 32,614 Other intangible
assets, net 510 655 836 Other assets, net 7,218
6,787 15,625 Total Assets $ 211,165
$ 241,571 $ 242,563
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 35,151 $ 41,032 $ 38,544 Accrued expenses 5,981
12,128 6,039 Gift cards and customer deposits 21,180 28,323 21,670
Deferred revenue 5,455 5,285
6,803 Total current liabilities 67,767
86,768 73,056 Deferred franchise
revenue 1,238 1,436 1,504 Deferred rent 20,955 23,867 25,139 Other
liabilities 257 257 366 Stockholders' equity: Common
stock, par value $0.01 per share 174 174 182 Additional paid-in
capital 66,782 65,402 68,999 Accumulated other comprehensive loss
(7,020 ) (10,165 ) (9,506 ) Retained earnings 61,012
73,832 82,823 Total stockholders'
equity 120,948 129,243 142,498
Total Liabilities and Stockholders' Equity $ 211,165
$ 241,571 $ 242,563
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
September 29, October 1, September 29,
October 1, 2012 2011 2012 2011
Other financial data: Retail gross margin ($) (1) $
30,771 $ 38,381 $ 96,448 $ 103,732 Retail gross margin (%) (1) 36.5
% 40.2 % 37.3 % 38.4 % E-commerce sales $ 2,256 $ 2,452 $ 7,572 $
7,416 Capital expenditures, net (2) $ 5,103 $ 3,759 $ 13,407 $
9,896 Depreciation and amortization $ 5,196 $ 5,884 $ 15,832 $
18,614
Store data (3): Number of company-owned stores
at end of period North America - Traditional 283 287 North America
- Non-traditional 10 12 Total North America 293 299
Europe 58 56 Total stores 351 355
Number of franchised stores at end of period 87 76
Company-owned store square footage at end of period North America -
Traditional 808,925 831,531 North America - Non-traditional 14,160
21,046 Total North America 823,085 852,577 Europe (4)
83,631 81,661 Total square footage 906,716
934,238 Comparable store sales change (%) (5) North
America (11.8 )% 0.7 % (3.4 )% (1.1 )% Europe (7.9 )% 3.0 % (6.7 )%
0.0 % Consolidated (11.1 )% 1.1 % (4.0 )% (0.9 )%
(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)
North American stores are located in the
United States, Canada and Puerto Rico. In Europe, stores are
located in the United Kingdom and Ireland. Non-traditional stores
include ballpark, zoo, hospital, airport and temporary locations.
Excludes our webstores.
(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.
BUILD-A-BEAR
WORKSHOP, INC. AND SUBSIDIARIES
Company-Owned Store Activity
2012 Thirty-nine Weeks Ended September 29,
2012 Fifty-two Weeks Ended December 29, 2012 - Projected
December 31, September 29, December 31,
December 29, 2011 Opened Closed
2012 2011 Opened Closed 2012
North America Traditional 287 1 (5 ) 283 287 2 (6 ) 283
Non-traditional 11 1 (2 ) 10 11 1 (3 ) 9 298 2 (7 ) 293 298 3 (9 )
292 Europe 58 - - 58 58 2 - 60 Total
356 2 (7 ) 351 356 5 (9 ) 352
2011
Thirty-nine Weeks Ended October 1, 2011 Fifty-two Weeks
Ended December 31, 2011 January 1, October 1,
January 1, December 31, 2011 Opened
Closed 2011 2011 Opened Closed
2011 North America Traditional 290 - (3 ) 287 290 2 (5 ) 287
Non-traditional 15 1 (4 ) 12 15 2 (6 ) 11 305 1 (7 ) 299 305 4 (11
) 298 Europe 54 3 (1 ) 56 54 5 (1 ) 58 Total 359 4 (8
) 355 359 9 (12 ) 356 Our long term
store real estate goal is to bring our stores back to best in class
productivity and profitability. Today we believe that the optimal
number of Build-A-Bear Workshop stores in North America is between
225 to 250 and approximately 70 in the United Kingdom and Ireland
for a total of 295 to 320 stores. We expect to reach this level
within the next two years with the closure of 50 to 60 stores.
Build A Bear Workshop (NYSE:BBW)
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Build A Bear Workshop (NYSE:BBW)
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