- First six months pre-tax income of
$1.3 million, a $7.3 million improvement from a pre-tax loss of
$6.0 million in the first six months of fiscal 2013
- Company ends the second quarter with
$41.8 million in cash and no debt
Build-A-Bear Workshop, Inc. (NYSE:BBW) today reported results
for the 2014 second quarter and twenty-six weeks ended June 28,
2014.
Second Quarter 2014 Highlights (13 weeks ended June 28,
2014):
- Consolidated net retail sales were
$75.4 million while operating 10 fewer stores at quarter’s end
compared to $80.4 million in the fiscal 2013 second quarter, a
decrease of 7.7%, excluding the impact of foreign exchange;
- Consolidated comparable store sales
decreased 4.9% and included a 4.0% decrease in North America and an
8.1% decrease in Europe;
- Retail gross margin expanded 220 basis
points to 39.0% from 36.8% in the 2013 second quarter;
- Pre-tax loss was $4.0 million, an
improvement from a pre-tax loss of $6.1 million in the 2013 second
quarter;
- Net loss was $4.3 million, or $0.25 per
share, an improvement from a net loss of $6.2 million, or $0.38 per
share in the fiscal 2013 second quarter; and
- Adjusted net loss was $4.3 million, or
$0.25 per share, an improvement from an adjusted net loss of $5.4
million, or $0.33 per share, in the 2013 second quarter. (See
Reconciliation of Net Income (Loss) to Adjusted Net Income
(Loss).)
Sharon John, Build-A-Bear Workshop’s Chief Executive Officer
commented, “I am pleased that our disciplined approach to the
execution of our strategies produced our sixth consecutive quarter
of improved operating performance. The second quarter is
historically our smallest in terms of revenue, and therefore, it
was critical to stay focused on our goal to improve profitability.
For the first six months, we have delivered pre-tax income of $1.3
million marking the first time since 2008 that our Company has been
profitable at the halfway point of the year.”
Ms. John continued, “While early, we have a positive sales trend
in the third quarter and we are well-positioned for the back half
of the year with a powerful lineup of hot licenses, proprietary
concepts and holiday offerings. I am confident that the disciplined
execution of our stated strategies will continue to drive
sustainable profitability.”
Additional Second Quarter Highlights (13 weeks ended June 28,
2014):
- Total revenues were $76.2 million while
operating 10 fewer stores at quarter’s end compared to $81.9
million in the 2013 second quarter, a decrease of 8.1%, excluding
the impact of foreign exchange;
- Selling, general and administrative
expense (“SG&A”) was $34.0 million, or 44.6% of total revenues.
This compares to $36.9 million, or 45.1% of total revenues,
including $0.9 million in management transition and store closing
expenses in the fiscal 2013 second quarter. Excluding these costs,
SG&A was 44.0% of total revenues in the 2013 second
quarter.
First Six Months 2014 Highlights (26 weeks ended June 28,
2014):
- Total revenues were $174.2 million
compared to $186.2 million in the first six months of 2013, a
decrease of 8.6%, excluding the impact of foreign exchange;
- Consolidated net retail sales were
$172.2 million, compared to $183.3 million in the first six months
of fiscal 2013, a decrease of 7.4%, excluding the impact of foreign
exchange;
- Consolidated comparable store sales
decreased 3.4% and included a 2.8% decrease in North America and a
5.5% decrease in Europe;
- Retail gross margin expanded 220 basis
points to 41.6% from 39.4% in the first six months of 2013;
- SG&A was $71.8 million, or 41.2% of
total revenues, including $0.4 million in management transition and
store closing expenses. This compares to $80.6 million, or 43.3% of
total revenues, including $3.2 million in management transition and
store closing expenses in the first half of fiscal 2013. Excluding
these costs in both periods, SG&A was 41.0% of total revenues
in the first six months of 2014, an improvement of 60 basis points
from the prior year;
- Pre-tax income was $1.3 million, an
improvement from a pre-tax loss of $6.0 million in the first six
months of 2013;
- Net income was $0.7 million or $0.04
per diluted share, an improvement from a net loss of $6.2 million,
or $0.38 per share in the first six months of fiscal 2013; and
- Adjusted net income was $1.1 million or
$0.06 per diluted share, an improvement from an adjusted net loss
of $3.1 million, or $0.19 per share in the first six months of
fiscal 2013. (See Reconciliation of Net Income (Loss) to Adjusted
Net Income (Loss).)
Store Activity
During the quarter, the Company closed four stores and opened
one to end the period with 313 company-owned stores, including 254
in North America and 59 in Europe. (See Company-Owned Store
Activity Schedule.) The Company’s international franchisees ended
the 2014 second quarter with 75 stores in 15 countries.
Balance Sheet
The Company ended the 2014 second quarter with cash and cash
equivalents totaling $41.8 million and no borrowings under its
revolving credit facility. Total inventory at quarter end was $43.5
million. Inventory per square foot decreased 6.7% as compared to
the end of the second quarter of the prior year.
In 2014, the Company continues to expect capital expenditures to
be between $12 million and $15 million and depreciation and
amortization is expected to be approximately $18 million.
2014 Key Strategic Objectives:
The Company reported progress on its stated strategies:
- Optimize real estate to improve
store productivity. Year-to-date in fiscal 2014, the Company has
closed 11 stores transferring 16% of sales to remaining stores,
consistent with past closures. The Company continues to expect to
close approximately 15 stores in the fiscal year, primarily in
North America. The Company will selectively upgrade stores in
conjunction with lease renewals while reducing the cost of capital
that is needed for the improvements. In addition, the Company
expects to open six to eight pop-up stores ahead of the holiday
season.
- Refine the consumer value
equation by continuing to reposition its marketing programs. In
the quarter, the Company expanded its integrated brand building
marketing initiatives as it broadened its annual Huggable Heroes
program which recognizes charitably-minded kids by partnering with
the USO and their “Every Moment Counts” campaign. The elevated
marketing resulted in strong consumer demand for its superhero
merchandise collection and delivered over 80 million media
impressions.
- Rationalize expense structure to
leverage its SG&A expenses and enhance product margins with
end-to-end improvements in its supply chain and ongoing value
engineering of product designs. For the first half, retail gross
margin increased to 41.6%, a 220 basis point improvement from the
prior year and adjusted SG&A as a percent of total revenues was
41.0%, a 60 basis point improvement from the prior year.
- Build on core competencies and
leverage brand equity into new revenue streams. The Company
expects to make continual improvements to its high touch retail
service model and customizable product offerings. It expects to lay
the ground work to further leverage the strength of the
Build-A-Bear brand as it begins to develop new product categories
to generate incremental profit and revenue streams.
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 12 p.m. ET on July 24,
2014, until 12 a.m. ET on August 7, 2014. The telephone replay is
available by calling (858) 384-5517. The access code is
13586042.
About Build-A-Bear Workshop, Inc.:
Founded in St. Louis in 1997, Build-A-Bear Workshop, Inc. is the
only global company that offers an interactive make-your-own
stuffed animal retail-entertainment experience. There are
approximately 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, and Mexico. The Company was
named to the FORTUNE 100 Best Companies to Work For® list for the
sixth year in a row in 2014. Build-A-Bear Workshop (NYSE: BBW)
posted total revenue of $379.1 million in fiscal 2013. For more
information, call 888.560.BEAR (2327) or visit the Investor
Relations section of its award-winning Web site at
buildabear.com®.
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
December 28, 2013, 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 its products, which represent relatively
discretionary spending;
•
customer traffic may decrease in the shopping malls where the
Company’s stores are located, and which it depends on to attract
guests to its stores;
•
the Company may be unable to generate interest in and demand for
its interactive retail experience, or to identify and respond to
consumer preferences in a timely fashion;
•
the marketing and on-line initiatives may not be effective in
generating sufficient levels of brand awareness and guest traffic;
•
the Company may be unable to generate comparable store sales
growth;
•
the Company is subject to a number of risks related to disruptions,
failures or security breaches of its information technology
infrastructure and may we improperly obtain, or fail to protect,
its data or violate privacy or security laws or expectations;
•
the Company may be unable to effectively operate or manage the
overall portfolio of its company-owned stores;
•
the Company may be unable to renew or replace its store leases, or
enter into leases for new stores on favorable terms or in favorable
locations, or may violate the terms of its current leases;
•
the Company may not be able to operate its company-owned stores in
the United Kingdom and Ireland profitably;
•
the availability and costs of its products could be adversely
affected by risks associated with international manufacturing and
trade, including foreign currency fluctuation;
•
its products could become subject to recalls or product liability
claims that could adversely impact its financial performance and
harm its reputation among consumers;
•
the Company may lose key personnel, be unable to hire qualified
additional personnel, or experience turnover of its management
team;
•
the Company is susceptible to disruption in its inventory flow due
to its reliance on a few vendors;
•
the Company may be unable to effectively manage its international
franchises or laws relating to those franchises may change;
•
the Company may fail to renew, register or otherwise protect its
trademarks or other intellectual property or may be sued by third
parties for infringement or, misappropriation of their proprietary
rights;
•
the Company is subject to risks associated with technology and
digital operations;
•
the Company may suffer negative publicity or be sued due to
violations of labor laws or unethical practices by manufacturers of
its merchandise;
•
the Company may be unable to operate its company-owned distribution
center efficiently or its third-party distribution center providers
may perform poorly;
•
high petroleum products prices could increase the Company’s
inventory transportation costs and adversely affect its
profitability;
•
the Company’s market share could be adversely affected by a
significant, or increased, number of competitors;
•
the Company may suffer negative publicity or negative sales if the
non-proprietary toy products it sells in its stores do not meet its
quality or sales expectations;
•
poor global economic conditions could have a material adverse
effect on the Company’s liquidity and capital resources;
•
fluctuations in the Company’s quarterly results of operations could
cause the price of its common stock to substantially decline; and
•
the Company may be unable to repurchase shares of its common stock
at the times or in the amounts it currently anticipates or the
results of the share repurchase program may not be as beneficial as
it currently anticipates.
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 28, % of Total June
29, % of Total 2014 Revenues (1)
2013 Revenues (1) Revenues: Net retail sales $
75,351 98.8 $ 80,395 98.2 Franchise fees 487 0.6 757 0.9 Commercial
revenue 410 0.5 750 0.9
Total revenues 76,248 100.0 81,902
100.0 Costs and expenses: Cost of merchandise sold
46,099 60.8 51,169 63.1 Selling, general and administrative 34,044
44.6 36,901 45.1 Interest expense (income), net 64
0.1 (55 ) (0.1 ) Total costs and expenses
80,207 105.2 88,015 107.5 Loss
before income taxes (3,959 ) (5.2 ) (6,113 ) (7.5 ) Income tax
expense 343 0.4 105 0.1
Net loss $ (4,302 ) (5.6 ) $ (6,218 ) (7.6 ) Loss per common
share: Basic $ (0.25 ) $ (0.38 ) Diluted $ (0.25 ) $ (0.38 ) Shares
used in computing common per share amounts: Basic 17,024,598
16,460,474 Diluted 17,024,598 16,460,474
(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
28, % of Total June 29, % of Total
2014 Revenues (1) 2013 Revenues
(1) Revenues: Net retail sales $ 172,191 98.9 $ 183,326 98.5
Franchise fees 1,156 0.7 1,618 0.9 Commercial revenue 842
0.5 1,223 0.7 Total revenues 174,189
100.0 186,167 100.0 Costs and expenses: Cost
of merchandise sold 100,997 58.4 111,640 60.5 Selling, general and
administrative 71,844 41.2 80,636 43.3 Interest expense (income),
net 2 0.0 (106 ) (0.1 ) Total costs and expenses
172,843 99.2 192,170 103.2 Income
(loss) before income taxes 1,346 0.8 (6,003 ) (3.2 ) Income tax
expense 624 0.4 202 0.1 Net income
(loss) $ 722 0.4 $ (6,205 ) (3.3 ) Earnings (loss) per
common share: Basic $ 0.04 $ (0.38 ) Diluted $ 0.04 $ (0.38 )
Shares used in computing common per share amounts: Basic 16,863,160
16,345,882 Diluted 17,097,263 16,345,882
(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 28,
December 28, June 29, 2014 2013
2013 ASSETS Current assets: Cash and cash equivalents
$ 41,762 $ 44,665 $ 28,061 Inventories 43,463 50,248 48,134
Receivables 9,307 14,542 6,866 Prepaid expenses and other current
assets 11,469 11,547 13,115 Deferred tax assets 118
81 382 Total current assets 106,119
121,083 96,558 Property and equipment, net 63,185 70,163
68,273 Other intangible assets, net 397 518 611 Other assets, net
3,630 3,847 3,227 Total
Assets $ 173,331 $ 195,611 $ 168,669
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 25,447 $ 34,977 $ 33,897 Accrued
expenses 11,961 16,380 8,547 Gift cards and customer deposits
27,547 33,786 24,744 Deferred revenue 4,243 4,687 4,892 Deferred
tax liability 856 900 -
Total current liabilities 70,054 90,730
72,080 Deferred franchise revenue 1,064 905
1,057 Deferred rent 14,073 19,357 18,099 Other liabilities 602 229
652 Stockholders' equity: Common stock, par value
$0.01 per share 176 174 173 Additional paid-in capital 70,730
69,094 67,225 Accumulated other comprehensive loss (6,515 ) (7,303
) (8,949 ) Retained earnings 23,147 22,425
18,332 Total stockholders' equity
87,538 84,390 76,781 Total
Liabilities and Stockholders' Equity $ 173,331 $ 195,611
$ 168,669
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 28, June 29, June 28,
June 29, 2014 2013 2014 2013
Other financial data: Retail gross margin ($) (1) $
29,413 $ 29,563 $ 71,553 $ 72,252 Retail gross margin (%) (1) 39.0
% 36.8 % 41.6 % 39.4 % E-commerce sales $ 2,233 $ 2,289 $ 5,304 $
5,628 Capital expenditures, net (2) $ 2,066 $ 5,209 $ 3,171 $ 9,016
Depreciation and amortization $ 4,469 $ 4,761 $ 8,977 $ 9,677
Store data (3): Number of company-owned
stores at end of period North America - Traditional 244 257 North
America - Non-traditional 10 6 Total
North America 254 263 Europe - Traditional 57 58 Europe -
Non-traditional 2 2 Total Europe
59 60 Total stores 313
323 Number of franchised stores at end of period 75
90 Company-owned store square footage at end of period North
America - Traditional 689,026 728,639 North America -
Non-traditional 19,519 9,759 Total
North America 708,545 738,398 Europe - Traditional (4) 82,863
84,405 Europe - Non-traditional (4) 1,926
1,926 Total Europe 84,789 86,331
Total square footage 793,334 824,729
Comparable store sales change (5) North America (4.0 )% 8.6
% (2.8 )% 9.7 % Europe (8.1 )% 1.7 % (5.5 )%
5.9 % Consolidated (4.9 )% 7.3 % (3.4 )% 9.0 % (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 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 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 Income (Loss) to Adjusted Net Income
(Loss) (dollars in thousands, except per share data)
13 Weeks 13 Weeks 26
Weeks 26 Weeks Ended Ended Ended
Ended June 28, June 29, June 28,
June 29, 2014 2013 2014 2013 Net
income (loss) $ (4,302 ) $ (6,218 ) $ 722 $ (6,205 )
Management transition costs(1) 213 506 454 2,251 Store closing
costs (2) (240 ) 340 (65 ) 904 Adjusted
net income (loss) $ (4,329 ) $ (5,372 ) $ 1,111 $ (3,050 )
13 Weeks 13 Weeks 26 Weeks 26
Weeks Ended Ended Ended Ended
June 28, June 29, June 28, June 29,
2014 2013 2014 2013 Net income (loss)
per share $ (0.25 ) $ (0.38 ) $ 0.04 $ (0.38 ) Management
transition costs(1) 0.01 0.03 0.02 0.14 Store closing costs (2)
(0.01 ) 0.02 (0.00 ) 0.05 Adjusted net
income (loss) per share $ (0.25 ) $ (0.33 ) $ 0.06 $ (0.19 )
(1) 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. (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.
BUILD-A-BEAR WORKSHOP, INC. AND
SUBSIDIARIES Company-Owned Store Activity
2014 Twenty-six
Weeks Fifty-three Weeks - Projected December 28,
June 28, December 28, January 3, 2013
Opened Closed 2014 2013 Opened
Closed 2015 North America Traditional 252
1
(9 ) 244 252 5 (13 ) 244 Non-traditional 11 - (1 ) 10 11 6 (1 ) 16
263
1
(10 ) 254 263 11 (14 ) 260 Europe Traditional 58 - (1 ) 57
58 - (1 ) 57 Non-traditional 2 - - 2 2 1 - 3 60 - (1
) 59 60 1 (1 ) 60 Total 323 1 (11 ) 313 323 12 (15 ) 320
2013 Twenty-six Weeks Fifty-two Weeks
December 29, June 29, December 29, December
28, 2012 Opened Closed 2013
2012 Opened Closed 2013 North America
Traditional 283 - (26 ) 257 283 3 (34 ) 252 Non-traditional 8 - (2
) 6 8 5 (2 ) 11 291 - (28 ) 263 291 8 (36 ) 263 Europe
Traditional 58 - - 58 58 1 (1 ) 58 Non-traditional 2 - - 2 2
- - 2 60 - - 60 60 1 (1 ) 60 Total 351 - (28 ) 323
351 9 (37 ) 323
Build-A-Bear WorkshopInvestors:Tina Klocke, 314-423-8000
x5210orMedia:Tanya Coventry-Strader, 314-423-8000 x5293
Build A Bear Workshop (NYSE:BBW)
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