- 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
Build-A-Bear Workshop, Inc. (NYSE:BBW) today reported results
for the 2015 third quarter and thirty-nine weeks ended October 3,
2015.
Third Quarter Fiscal 2015 Highlights (13 weeks ended October
3, 2015, compared to the 13 weeks ended September 27,
2014):
- Consolidated comparable store sales
increased 2.1% and included a 0.2% increase in North America and an
8.9% increase in Europe. Third quarter 2015 comparable store sales
are compared to the thirteen-week period ended October 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.)
Sharon Price John, Build-A-Bear Workshop’s Chief Executive
Officer commented: “In the quarter, we had comparable store sales
increases across geographies marking our fifth consecutive quarter
of consolidated comparable store sales growth. For the first nine
months of 2015, we have delivered $8.0 million in pre-tax profit,
the highest level since 2007. This puts us in a solid position as
we enter the fourth quarter, which is typically our largest and
most profitable period of the year.
“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 October 3, 2015, compared to the 13 weeks ended September 27,
2014):
- 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
October 3, 2015, compared to the 39 weeks ended September 27,
2014):
- 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 in Europe. Comparable store sales for the first nine
months of 2015 are compared to the thirty-nine week period ended
October 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 North America and 60 in Europe. This reflects four
store closures and six store openings in the quarter, including
five true outlet concept locations and one new format specialty
store. The Company also remodeled six stores in its new specialty
retail format. The Company’s international franchisees ended the
2015 third quarter with 67 stores in 11 countries.
Balance Sheet
The Company ended the 2015 third quarter with cash and cash
equivalents totaling $37.1 million and no borrowings under its
revolving credit facility. Total inventory at quarter end was $55.6
million, compared to $45.7 million in the fiscal 2014 third
quarter. This $9.9 million increase was driven by a stronger
inventory position on key product stories and the timing of
purchases to support fourth quarter product launches, as well as
additional store openings during the Holiday season. This follows
an $11.0 million decrease at the end of last year’s third quarter
with inventory declining 1.9% on a two-year basis.
In 2015, the Company continues to expect capital expenditures to
be between $20 million and $25 million to support the remodeling
and opening of stores, as well as investment in infrastructure.
Depreciation and amortization is expected to be between $16 million
and $17 million.
Share Repurchase Activity
During the third quarter the Company repurchased approximately
106,000 shares of its common stock for an aggregate amount of $1.9
million, leaving approximately $8.9 million available under the
current share repurchase program.
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 Build-A-Bear Workshop location was opened on
Li & Fung’s Shanghai campus in the Explorium, a retail
laboratory and exhibition operated by the Fung Group, a Hong
Kong-based multinational with international brands and retail
operations across China.
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 YouTube.
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 Costco Wholesale Corporation is offering
Build-A-Bear branded, pre-packaged gift sets during the holiday
season. In addition, the Company announced an agreement with Spin
Master, Inc. to distribute a complementary toy line that is
expected to launch in the fall of 2016.
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 $8.0
million for the first nine months of fiscal 2015, an increase of
$4.6 million over the prior year.
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
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 October 29,
2015, until 12 a.m. ET on November 5, 2015. The telephone replay is
available by calling 877-870-5176. The access code is 13622377.
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, Ireland and Denmark, 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
seventh year in a row in 2015. Build-A-Bear Workshop (NYSE: BBW)
posted total revenue of $392.4 million in fiscal 2014. For more
information, call 888.560.BEAR (2327) or visit the Investor
Relations section of its 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
January 3, 2015, as filed with the SEC, and the following:
- 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.
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Investors:Build-A-Bear WorkshopVoin Todorovic 314.423.8000
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