Build-A-Bear Workshop, Inc. Reports Consolidated Comparable Sales and Profit in Line with Guidance with First Quarter Fiscal 2017 Results

  • First quarter consolidated comparable sales decline 8.1%, in line
    with guidance, reflecting holiday shifts and following a 2.2% increase
    in the fiscal 2016 first quarter
  • First quarter results include GAAP pre-tax income of $4.6 million
    and net income per diluted share of $0.17
  • Consolidated comparable sales increase mid-single digits for the
    nine-week period from February 19 to April 22, 2017, which accounts
    for the Easter shift

ST. LOUIS–(BUSINESS WIRE)–Build-A-Bear Workshop, Inc. (NYSE:BBW) today reported results for the
first quarter of fiscal 2017, the 13 weeks ended April 1, 2017. The
Company noted sales performance was impacted by the shift in timing of
both Valentine’s Day and Easter as well as associated school breaks in
the quarter.

First Quarter 2017 Highlights (13 weeks ended April 1, 2017, compared
to the 13 weeks ended April 2, 2016):

  • Consolidated comparable sales declined 8.1% following a 2.2% increase
    in the fiscal 2016 first quarter. The fiscal 2017 first quarter
    included a 9.0% decrease in North America, following a 3.0% increase
    in the fiscal 2016 first quarter and a 3.3% decrease in Europe,
    following a decrease of 1.8% in the fiscal 2016 first quarter.
    Consolidated comparable e-commerce sales decreased 5.6%, following a
    1.0% increase in the fiscal 2016 first quarter;
  • Pre-tax income was $4.6 million, including $0.2 million in
    adjustments, compared to pre-tax income of $5.3 million, including
    $0.3 million in adjustments, in the fiscal 2016 first quarter. (See
    Reconciliation of Net Income to Adjusted Net Income);
  • Income tax expense was $1.8 million with an effective tax rate of
    39.8%, compared to income tax expense of $1.8 million with an
    effective tax rate of 33.3% in the fiscal 2016 first quarter;
  • Net income was $2.8 million, or $0.17 per diluted share, compared to
    net income of $3.5 million, or $0.22 per diluted share, in the fiscal
    2016 first quarter; and
  • Adjusted net income was $2.7 million, or $0.17 per diluted share,
    compared to adjusted net income of $3.0 million, or $0.19 per diluted
    share, in the fiscal 2016 first quarter. (See Reconciliation of Net
    Income to Adjusted Net Income.)

Sharon Price John, Build-A-Bear Workshop President and Chief Executive
Officer, commented, “In the first quarter, sales and profit levels were
in line with previously stated expectations and we made progress in
evolving our strategies and building on the foundation that has been
laid over the past few years to fuel future growth. As expected, sales
were negatively impacted by shifts in both Valentine’s Day and Easter as
well as the associated school break periods.

“As adjustments were made to our marketing and media programs following
a disappointing fourth quarter, we saw an improvement in overall traffic
and sales trends. I am encouraged by the start of the second quarter and
believe we are well prepared to capitalize on an exciting lineup of
proprietary and licensed properties supported by a robust movie schedule
while continuing to evolve and diversify our retail portfolio with a
goal of enhancing shareholder value throughout fiscal 2017,” concluded
Ms. John.

Additional Fiscal First Quarter 2017 Details (13 weeks ended April 1,
2017, compared to the 13 weeks ended April 2, 2016):

  • Total revenues were $90.6 million compared to $95.0 million in the
    fiscal 2016 first quarter. The decline in total revenues reflects a
    decrease in consolidated comparable sales and unfavorable currency
    exchange rates partially offset by increases in sales from new retail
    locations and commercial revenue from the Company’s strategic
    wholesale and licensing initiatives;
  • Consolidated net retail sales were $88.6 million compared to $94.1
    million in the fiscal 2016 first quarter;
  • Retail gross margin declined 130 basis points to 47.1% compared to
    48.4% in the fiscal 2016 first quarter, primarily driven by the
    deleveraging of fixed occupancy expenses; and
  • Selling, general and administrative expense decreased $2.0 million to
    $37.6 million, or 41.5% of total revenues, compared to 41.8% of total
    revenues in the fiscal 2016 first quarter.

Impact of Foreign Currency:

The significant movement in the British pound sterling relative to the
U.S. dollar as a result of the United Kingdom’s referendum vote in June
2016 continues to negatively affect the Company’s revenues and pre-tax
income with most of the impact resulting from higher retail cost of
merchandise sold as most inventory is purchased in U.S. dollars. In the
2017 fiscal first quarter, the Company estimates this impact on revenues
and pre-tax income to be approximately $2.0 million and $0.3 million,
respectively. This is inclusive of the transactional impact of changes
in foreign exchange rates on the remeasurement of the Company’s balance
sheets included in the Reconciliation of Net Income to Adjusted Net

Store Activity:

During the first quarter, the Company opened 1 new store, closed 11
locations and completed 4 store remodels. As of April 1, 2017, the
Company operated 336 company-owned stores, including 61 in its new
Discovery format, with 275 locations in North America, 60 in Europe and
1 in China. The Company’s international franchisees ended the period
with 87 stores in 11 countries.

Balance Sheet:

The Company ended the fiscal 2017 first quarter with cash and cash
equivalents totaling $35.6 million and no borrowings under its revolving
credit facility. Total inventory at quarter-end was $53.3 million
compared to $54.0 million in the prior year, a decrease of 1.2%. In the
fiscal 2017 first quarter, capital expenditures were $2.3 million, and
depreciation and amortization was $3.9 million.

Review of Strategic Alternatives:

In May 2016, the Company announced that its Board of Directors had
authorized an exploration of a full range of strategic alternatives. No
timetable has been set for the Company’s review process. The Company
does not expect to comment further or update the market with any
additional information on the process unless and until the Board of
Directors deems disclosure appropriate or necessary. There is no
assurance that this exploration will result in any strategic
alternatives being announced or executed.

2017 Key Strategic Initiatives:

CHANNEL Evolution

The Company continues to evolve its aged store fleet into new Discovery
format stores, finishing the first quarter with 61 locations. Overall,
these locations continue to perform ahead of heritage locations. The
Company remains on track to have approximately 20 additional locations
remodeled into this format in 2017 as it leverages natural lease events.
Importantly, ongoing value engineering efforts have resulted in a
significant reduction in capital requirements needed to open or remodel
a store.

The Company continues to make progress to bring Build-A-Bear to places
families go for entertainment, including tourist locations, seasonal
event settings such as the successful relationship with Gaylord Hotels,
pop-up shops at AMC Theatres and a rapidly expanding wholesale
relationship with Carnival Cruise Line. Separately, the Company’s new
retail model referred to as “concourse shops” requires less capital, has
shorter-term leases and, at approximately 200 square feet, offers a
solution for a wide range of settings. The Company expects to have 20 to
25 concourse shops open by the end of the fiscal year.

In addition, the Company is on track to upgrade its web platform ahead
of the fourth quarter holiday season. The reinvention of the website
platform and e-commerce systems is expected to enable Guests to
experience Build-A-Bear online in new ways.

International franchisees ended the first quarter with 87 locations in
11 countries, including 7 Discovery stores, which delivered positive
results. The Company continues to expect existing franchisees to open
approximately 10 stores and to expand into additional countries in
fiscal 2017.

PRODUCT Expansion

The Company is focused on meeting the needs of its core consumer base,
boys and girls ages 3 to 12, while systematically building secondary
consumer segments, including the teen-plus affinity and gift-giver
consumers. Accordingly, the Company plans to balance its offering of
core products with a comprehensive program of key licensed properties
including products with tie-ins to major movie releases throughout 2017
while continuing to develop and expand offerings of its successful owned
intellectual property stories, such as its Promise Pets, Honey Girls and
the holiday-specific Merry Mission collections.

The Company also plans to continue to build outbound licensing programs
by leveraging the power of the Build-A-Bear brand, as well as other
owned intellectual properties. New license agreements have been added in
categories ranging from non-plush toys to slippers and electronics, with
updates and launches planned throughout 2017.

BRAND and EXPERIENCE Amplification

In addition to creating sharable, emotional content that more
authentically communicates the heart of the brand, the Company is making
adjustments to marketing programs that create synergy across channels.
To that end, in the first quarter, the company shifted its media to
better reach moms and kids while leveraging the competitive advantage of
its entertainment retail experience by adding in-store events such as
story readings, movie release celebrations and appearances by its iconic
mascots. The Company plans to continue to develop entertainment content,
including mobile apps, music videos and other opportunities that
increase engagement, and are designed to improve efficiency, drive
traffic and lead to profitable sales growth.


The Company is focused on improving profitability by driving revenue
growth through the execution of its stated strategies, as well as
disciplined expense management and ongoing efforts in process and
systems upgrades. In response to business shifts that occurred at the
end of 2016, adjustments have already been implemented in core
operations, including marketing and media strategies, in order to regain
a positive sales position.

As Build-A-Bear enters its 20th year in business and continues to evolve
into a multi-generational, multi-dimensional branded company, the plans
and actions that have been implemented since the start of the turnaround
in 2013 are expected to provide the foundation to execute the Company’s
strategies and achieve its goal of sustained profitable growth.

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 website,
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 website for one year. A telephone replay will be
available beginning at approximately noon ET today until midnight ET on
April 27, 2017. The telephone replay is available by calling
(844)-512-2921. The access code is 13659727.

About Build-A-Bear

Celebrating 20 years of business in 2017, Build-A-Bear is a global brand
kids love and parents trust that seeks to add a little more heart to
life. Build-A-Bear Workshop has approximately 400 stores worldwide where
guests can create customizable furry friends, including company-owned
stores in the United States, Canada, Denmark, Ireland, Puerto Rico, the
United Kingdom and China, and franchise stores in Africa, Asia,
Australia, Europe, Mexico and the Middle East. The company was named to
the FORTUNE 100 Best Companies to Work For® list for the
eighth year in a row in 2016. Build-A-Bear Workshop, Inc. (NYSE:BBW)
posted a total revenue of $364.2 million in fiscal 2016. For more
information, visit the Investor Relations section of

Forward-Looking Statements

This press release contains certain statements that are, or may be
considered to be, “forward-looking statements” for the purpose of
federal securities laws, including, but not limited to, statements that
reflect our current views with respect to future events and financial
performance. We generally identify these statements by words or phrases
such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “intend,” “predict,” “future,” “potential” or
“continue,” the negative or any derivative of these terms and other
comparable terminology. All of the information concerning the potential
outcome of exploring strategic alternatives, our future liquidity,
future revenues, margins and other future financial performance and
results, achievement of operating of financial plans or forecasts for
future periods, sources and availability of credit and liquidity, future
cash flows and cash needs, success and results of strategic initiatives
and other future financial performance or financial position, as well as
our assumptions underlying such information, constitute forward-looking

These statements are based only on our current expectations and
projections about future events. Because these forward-looking
statements involve risks and uncertainties, there are important factors
that could cause our actual results, level of activity, performance or
achievements to differ materially from the results, level of activity,
performance or achievements expressed or implied by these
forward-looking statements, including those factors discussed under the
caption entitled “Risks Related to Our Business” and “Forward-Looking
Statements” in our Annual Report on Form 10-K filed with the Securities
and Exchange Commission (“SEC”) on March 16, 2017 and other periodic
reports filed with the SEC which are incorporated herein.

All of our forward-looking statements are as of the date of this Press
Release only. In each case, actual results may differ materially from
such forward-looking information. We can give no assurance that such
expectations or forward-looking statements will prove to be correct. An
occurrence of or any material adverse change in one or more of the risk
factors or other risks and uncertainties referred to in this Press
Release or included in our other public disclosures or our other
periodic reports or other documents or filings filed with or furnished
to the SEC could materially and adversely affect our continuing
operations and our future financial results, cash flows, available
credit, prospects and liquidity. Except as required by law, the Company
does not undertake to publicly update or revise its forward-looking
statements, whether as a result of new information, future events or

All other brand names, product names, or trademarks belong to their
respective holders.

Unaudited Condensed Consolidated Income Statements
(dollars in thousands, except share and per share data)
13 Weeks 13 Weeks
Ended Ended
April 1, % of Total April 2, % of Total
2017 Revenues (1) 2016 Revenues (1)
Net retail sales $ 88,586 97.7 $ 94,056 99.0
Commercial revenue 1,607 1.8 481 0.5
Franchise fees 439 0.5 439 0.5
Total revenues 90,632 100.0 94,976 100.0
Costs and expenses:
Cost of merchandise sold – retail (1) 46,868 52.9 48,557 51.6
Cost of merchandise sold – commercial (1) 891 55.4 249 51.8
Selling, general and administrative 37,649 41.5 39,681 41.8
Store preopening 639 0.7 1,244 1.3
Interest (income) expense, net (10) (0.0) (27) (0.0)
Total costs and expenses 86,037 94.9 89,704 94.4
Income before income taxes 4,595 5.1 5,272 5.6
Income tax expense 1,830 2.0 1,754 1.8
Net income $ 2,765 3.1 $ 3,518 3.7
Income per common share:
Basic $ 0.17 $ 0.22
Diluted $ 0.17 $ 0.22
Shares used in computing common per share amounts:
Basic 15,539,939 15,410,699
Diluted 15,709,591 15,592,347


  Selected income statement 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
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
April 1, December 31, April 2,
  2017     2016     2016  
Current assets:
Cash and cash equivalents $ 35,627 $ 32,483 $ 30,778
Inventories 53,315 51,885 53,982
Receivables 6,395 12,939 10,440
Prepaid expenses and other current assets   12,300     12,737     15,070  
Total current assets 107,637 110,044 110,270
Property and equipment, net 73,246 74,924 68,886
Deferred tax assets 9,543 8,256 10,863
Other intangible assets, net 1,588 1,721 1,557
Other assets, net   2,384     4,650     4,439  
Total Assets $ 194,398   $ 199,595   $ 196,015  
Current liabilities:
Accounts payable $ 24,064 $ 27,861 $ 27,812
Accrued expenses 14,140 15,897 17,960
Gift cards and customer deposits 31,841 37,070 31,617
Deferred revenue 1,838 2,029 2,485
Other current liabilities   69          
Total current liabilities   71,952     82,857     79,874  
Deferred rent 16,460 15,438 13,167
Deferred franchise revenue 528 565 681
Other liabilities 1,879 1,623 1,213
Stockholders’ equity:
Common stock, par value $0.01 per share 160 159 158
Additional paid-in capital 68,902 68,001 65,713
Accumulated other comprehensive loss (12,505 ) (12,727 ) (10,614 )
Retained earnings   47,022     43,679     45,823  
Total stockholders’ equity   103,579     99,112     101,080  
Total Liabilities and Stockholders’ Equity $ 194,398   $ 199,595   $ 196,015  
Unaudited Selected Financial and Store Data
(dollars in thousands)
13 Weeks 13 Weeks
Ended Ended
April 1, April 2,
2017 2016
Other financial data:
Retail gross margin ($) (1) $ 41,718 $ 45,499
Retail gross margin (%) (1) 47.1% 48.4%
Capital expenditures (2) $ 2,290 $ 6,185
Depreciation and amortization $ 3,926 $ 3,811
Store data (3):
Number of company-owned retail locations at end of period
North America 275 264
Europe 60 57
China 1
Total company-owned retail locations 336 321
Number of franchised stores at end of period 87 76
Company-owned store square footage at end of period (4)
North America 731,227 716,751
Europe 85,177 82,436
China 1,750
Total square footage 818,154 799,187
Consolidated comparable sales change (5)
North America (9.0)% 3.0%
Europe (3.3)% (1.8)%
Consolidated (8.1)% 2.2%
Stores (8.2)% 2.2%
E-commerce (5.6)% 1.0%
Consolidated (8.1)% 2.2%
(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 e-commerce. North American stores are located in the United
States, Canada and Puerto Rico. In Europe, stores are located in the
United Kingdom, Ireland and Denmark.
(4) Square footage for stores located in North America is leased square
footage. Square footage for stores located in Europe and China is
estimated selling square footage.
(5) Comparable 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.
* 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.
Reconciliation of Net Income to Adjusted Net Income
(dollars in thousands, except per share data)
13 Weeks 13 Weeks
Ended Ended
April 1, April 2,
  2017     2016  
Net income $ 2,765 $ 3,518
Foreign exchange (gains)/losses (2) (7) (293 ) (580 )
Duty dispute (3) (7) 56
China start-up costs (4) (7) 322
Income tax charges (5) 182
Income tax impact (6) 18 (231 )
Adjusted net income $ 2,728   $ 3,029  
13 Weeks 13 Weeks
Ended Ended
April 1, April 2,
  2017     2016  
Net income per diluted share $ 0.17 $ 0.22
Foreign exchange (gains)/losses (2) (0.02 ) (0.04 )
Duty dispute (3) 0.01
China start-up costs (4) 0.02
Income tax charges (5) 0.01
Income tax impact (6) 0.00 (0.01 )
Adjusted net income per diluted share $ 0.17   $ 0.19  
(1)   When originally presented, the 2016 results were not adjusted, as
they were not considered material at the time. The adjustments for
2016 are now included to be consistent with what the Company
included as adjustments for the full year of 2016 and with what it
expects to include for the remainder of 2017.
(2) Represents the consolidated impact of foreign exchange rates on the
re-measurement of balance sheet items not denominated in functional
currency recorded under the provisions of U.S. GAAP and
transactional gains and losses. This does not include any impact on
margin associated with the translation of revenues or the foreign
subsidiaries’ purchase of inventory in U.S. dollars.
(3) Non-cash charges related to an ongoing dispute with the customs
authority in the United Kingdom related to duty on imports dating
back to 2009, recorded under the provisions of U.S. GAAP. The
Company continues to vigorously pursue the claim.
(4) Represents the costs associated with opening the first company-owned
location in China, including start-up costs and store preopening.
(5) Includes certain discrete items, including the impact of the
adoption of a new accounting standards in Q1 2017.
(6) Represents the aggregate impact of the pre-tax adjustments,
excluding income tax valuation allowance on income tax expense for
the respective periods.
(7) These pre-tax adjustments totaled $0.2 million and $0.3 million for
the 13 weeks ended April 1, 2017 and April 2, 2016, respectively.


Build-A-Bear Workshop
Voin Todorovic, 314-423-8000
Build-A-Bear Workshop
Beth Kerley