For Third Quarter Fiscal 2016:
- GAAP pre-tax income increases 104%
to $2.8 million compared to the fiscal 2016 third quarter, in line
with guidance
- Consolidated comparable sales
decrease 2.2% following a 2.2% increase in the fiscal 2015 third
quarter, while stores remodeled in the new Discovery format perform
above heritage stores by double digits
- Diluted net income per share
increases to $0.11 compared to $0.06 in the fiscal 2015 third
quarter
Build-A-Bear Workshop, Inc. (NYSE:BBW) today reported results
for the 2016 fiscal third quarter and 39 weeks ended October 1,
2016. Fiscal 2016 third quarter results reflect the ongoing
execution of the Company’s stated strategy to deliver sustained
profitability highlighted by the 104% increase in GAAP pre-tax
income versus the prior year.
Sharon Price John, Build-A-Bear Workshop President and Chief
Executive Officer, commented, “In the quarter, we delivered a
significant increase in pre-tax income landing within our guidance
as we continued to move our key strategies forward, including the
repositioning and diversification of our real estate portfolio.
While sales were soft early in the quarter when we anniversaried a
key movie product launch, we finished with positive momentum that
has carried into the start of our fourth quarter, which is
typically our largest and most profitable of the year.
“We believe we are well-positioned for the quarter as our
product assortment is balanced across licensed and proprietary
products that target each of our key consumer segments while our
Discovery format stores continue to deliver positive results
compared to our heritage stores. Given that, we expect to deliver
pre-tax income expansion of 15% to 25% in fiscal 2016, which
excludes the impact of foreign exchange for the year given that we
are unable to predict future fluctuations,” concluded Ms. John.
Third Quarter Fiscal 2016 Highlights (13 weeks ended October
1, 2016, compared to the 13 weeks ended October 3, 2015):
- Total revenues were $83.7 million
compared to $85.6 million in the fiscal 2015 third quarter;
- Consolidated net retail sales were
$81.9 million compared to $84.3 million in the fiscal 2015 third
quarter;
- Consolidated comparable sales (stores
and e-commerce) decreased 2.2% following a 2.2% increase in the
fiscal 2015 third quarter. The fiscal 2016 third quarter included a
1.6% decrease in North America, following a 0.1% increase in the
fiscal 2015 third quarter and a 4.8% decrease in Europe, following
an increase of 9.8% in the fiscal 2015 third quarter. Consolidated
comparable e-commerce sales increased 25.2%, following a 4.1%
increase in the fiscal 2015 third quarter;
- Sales from stores remodeled in the
Company’s Discovery format in North America increased an average of
9.0%;
- Retail gross margin was 43.3%, a
decline of 200 basis points compared to the fiscal 2015 third
quarter, reflecting a 120 basis-point decline in merchandise margin
primarily driven by the unfavorable impact of currency on net
retail sales. In addition, retail gross margin was impacted by
deleverage of fixed occupancy costs given lower sales;
- Selling, general and administrative
expenses (“SG&A”) were $33.4 million, or 39.9% of total
revenues, compared to $36.8 million, or 43.0% of total revenues in
the fiscal 2015 third quarter. The $3.4 million decrease in
SG&A was primarily due to a planned decrease in marketing
expenses versus the prior year third quarter, as well as a decrease
in corporate expenses that included a favorable impact from
currency, partially offset by expenses associated with the
exploration of strategic alternatives;
- Total business expansion expenses were
$0.9 million, including store preopening expenses of $0.6 million
related to the opening of new and remodeled Discovery format
locations. This compared to $1.2 million in business expansion
expenses in the fiscal 2015 third quarter;
- Pre-tax income was $2.8 million, which
included $0.9 million in business expansion expenses, compared to
$1.4 million, which included $1.2 million in business expansion
expenses in the fiscal 2015 third quarter. Overall, the negative
impact of currency on pre-tax income was approximately $0.5 million
in the fiscal 2016 third quarter;
- Tax expense was $1.0 million with a tax
rate of 34.2% compared to $0.3 million with a tax rate of 22.0% in
the fiscal 2015 third quarter, which benefited from the partial
release of a valuation allowance; and
- Net income was $1.8 million, or $0.11
per diluted share, compared to net income of $1.1 million, or $0.06
per diluted share, in the fiscal 2015 third quarter.
First Nine Months Fiscal 2016 Highlights (39 weeks ended
October 1, 2016, compared to the 39 weeks ended October 3,
2015):
- Total revenues were $253.9 million
compared to $260.0 million in the first nine months of fiscal
2015;
- Consolidated net retail sales were
$249.9 million, compared to $256.2 million in the first nine months
of fiscal 2015;
- Consolidated comparable sales (stores
and e-commerce) decreased 2.6% following a 4.2% increase in the
first nine months of fiscal 2015. The first nine months of fiscal
2016 included a 2.0% decrease in North America, following a 1.9%
increase in the first nine months of fiscal 2015 and a 5.5%
decrease in Europe, following an increase of 13.9% in the first
nine months of fiscal 2015. Consolidated comparable e-commerce
sales increased 11.9%, following a 7.9% increase in the first nine
months of fiscal 2015;
- Sales from stores remodeled in the
Company’s Discovery format in North America increased an average of
7.1%;
- Retail gross margin decreased 40 basis
points to 44.9% from 45.3% in the first nine months of fiscal 2015
as increased merchandise margin was more than offset by the
unfavorable impact of currency;
- SG&A was $110.1 million, or 43.4%
of total revenues compared to $109.7 million, or 42.2% of total
revenues, in the first nine months of fiscal 2015;
- Total business expansion expenses were
$4.5 million, including store preopening expenses of $3.0 million,
related to the opening of new and remodeled Discovery format
stores. This compared to $1.5 million in business expansion
expenses in the first nine months of fiscal 2015;
- Pre-tax income was $1.8 million, which
included $4.5 million in business expansion expenses, compared to
pre-tax income of $8.0 million, which included $1.5 million in
business expansion expenses, in the first nine months of fiscal
2015;
- Tax expense was $0.8 million with a tax
rate of 42.0% compared to $0.7 million with a tax rate of 9.0% in
the first nine months of fiscal 2015, which benefited from the
partial release of a valuation allowance; and
- Net income was $1.1 million, or $0.07
per diluted share, compared to net income of $7.3 million, or $0.42
per diluted share, in the first nine months of fiscal 2015.
Store Activity
During the third quarter, the Company had 11 store openings, 2
closures and completed 2 store remodels. As of October 1, 2016, the
Company operated 330 company-owned stores, including 43 in its
Discovery format, with 271 locations in North America, 58 in Europe
and 1 in China. The Company’s international franchisees ended the
period with 80 stores, as compared to 74 stores at the end of the
fiscal 2015 third quarter.
Balance Sheet
The Company ended the fiscal 2016 third quarter with cash and
cash equivalents totaling $11.8 million and no borrowings under its
revolving credit facility. Total inventory at quarter-end was $59.4
million compared to $55.6 million in the prior year, an increase of
6.8%. In the fiscal 2016 third quarter, capital expenditures were
$6.3 million, and depreciation and amortization expenses were $4.0
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. The Company retained Guggenheim Securities, LLC as
its financial advisor and Bryan Cave LLP as its legal counsel to
assist with the strategic review.
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 its
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.
Fiscal 2016 Outlook
For fiscal 2016, the Company has adjusted certain expectations
in consideration of the continuing fluctuations of foreign
exchange. The Company’s current expectations are as follows:
- Total revenue to increase in the low
single-digit range compared to the prior year;
- Fourth quarter consolidated comparable
sales to increase in the low- to mid-single digit range resulting
in consolidated comparable sales in the range of negative
low-single-digit to positive low-single-digit for the 2016 fiscal
year;
- Pre-tax income to grow 5% to 15%
compared to the prior year GAAP results, which reflects current
foreign exchange rates. Excluding the impact of foreign exchange,
pre-tax income is expected to grow 15% to 25%;
- A tax rate of approximately 35%;
- Capital expenditures of approximately
$30 million and depreciation and amortization of approximately $16
million; and
- To end the year with an estimated 345
stores, including approximately 55 in a Discovery format.
2016 Key Strategic Initiatives
To increase shareholder value, the Company expects to continue
to execute its “MORE” strategic plan with key initiatives in four
areas outlined below:
Expanding into More Places
The Company is focused on expanding its owned and operated
locations in 2016. At the end of the third quarter, the Company had
330 stores compared to 317 in the prior year. The Company also
plans to continue to upgrade an aged fleet to its Discovery format.
Through a combination of remodels and new openings, as of October
1, 2016, the Company operated 43 Discovery locations, the sales of
which outpaced heritage stores at a double-digit rate for the
quarter. Of note, the first franchised Discovery store opened in
Australia with similar positive results. The Company also recently
opened two of three new Discovery concourse shops planned for
fiscal 2016, which allows it to take its concept to mid-tier
markets and non-traditional locations in a cost effective
manner.
Developing More Products
The Company plans to continue to develop and expand its offering
of intellectual property concepts designed to appeal to key
consumer segments. To that end, the Company continued to drive
sales of its intellectual properties, including Promise Pets, Honey
Girls and Horses & Hearts Riding Club, delivering higher than
average dollars and units per transaction. In addition, to advance
the Company’s expanding outbound licensing programs, Spin Master
Corp. began its national advertising campaign for a new branded toy
line that features the Build-A-Bear Workshop Stuffing Station.
Attracting More People
The Company expects to leverage its relationships with key
licensors to reach more people through a compelling offering of
affinity, collectible, entertainment, sports and fashion
properties. The Company launched its new Trolls collection in
advance of DreamWorks Animation’s film, Trolls, and is updating its
Star Wars products in advance of the next film release expected in
December. The Company also expects to build on its nine consecutive
quarters of consolidated e-commerce growth with a focus on
expanding its consumer base with the teen-plus segment and gift
givers. This strategy is supported with web exclusive product
offerings such as the Pokémon merchandise which includes Pikachu
and Eevee collector bundles.
Driving More Profitability
The Company expects to increase its 2016 GAAP pre-tax income by
5% to 15% compared to the prior year GAAP results, which reflects
current foreign exchange rates. Excluding the impact of foreign
exchange, pre-tax income is expected to grow 15% to 25% by the
disciplined execution of its stated strategies, including those
initiatives detailed above as well as its on-going efforts in
process improvement and organizational efficiency, system upgrades,
value engineering and strategic pricing to enhance merchandise
margins.
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 noon ET today until
midnight ET on November 3, 2016. The telephone replay is available
by calling 858.384.5517. The access code is 13647254.
About Build-A-Bear
Founded in St. Louis in 1997, Build-A-Bear, a global brand kids
love and parents trust, 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 $377.7 million
in fiscal 2015. For more information, visit the Investor Relations
section of buildabear.com.
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 information.
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 17, 2016 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 otherwise.
All other brand names, product names, or trademarks belong to
their respective holders.
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 1, % of
Total October 3, % of Total 2016
Revenues (1) 2015 Revenues (1)
Revenues: Net retail sales $ 81,870 97.8 $ 84,303 98.5 Commercial
revenue 1,322 1.6 795 0.9 Franchise fees 556 0.7 525 0.6 Total
revenues 83,748 100.0 85,623 100.0 Costs and expenses: Cost of
merchandise sold - retail (1) 46,461 56.7 46,117 54.7 Cost of
merchandise sold - commercial (1) 535 40.5 551 69.3 Selling,
general and administrative 33,404 39.9 36,826 43.0 Store preopening
571 0.7 817 1.0 Interest expense (income), net (19) (0.0) (56)
(0.1) Total costs and expenses 80,952 96.7 84,255 98.4 Income
before income taxes 2,796 3.3 1,368 1.6 Income tax expense 955 1.1
301 0.4 Net income $ 1,841 2.2 $ 1,067 1.2 Income per common
share: Basic $ 0.12 $ 0.06 Diluted $ 0.11 $ 0.06 Shares used in
computing common per share amounts: Basic 15,518,115 16,670,358
Diluted 15,691,004 16,890,722 (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
1, % of Total October 3, % of Total
2016 Revenues (1) 2015 Revenues
(1) Revenues: Net retail sales $ 249,854 98.4 $ 256,246 98.5
Commercial revenue 2,601 1.0 2,159 0.8 Franchise fees 1,407 0.6
1,624 0.6 Total revenues 253,862 100.0 260,029 100.0 Costs and
expenses: Cost of merchandise sold - retail (1) 137,778 55.1
140,288 54.7 Cost of merchandise sold - commercial (1) 1,213 46.6
1,093 50.6 Selling, general and administrative 110,135 43.4 109,736
42.2 Store preopening 2,969 1.2 1,079 0.4 Interest expense
(income), net (58) (0.0) (148) (0.1) Total costs and expenses
252,037 99.3 252,048 96.9 Income before income taxes 1,825 0.7
7,981 3.1 Income tax expense 767 0.3 721 0.3 Net income $ 1,058 0.4
$ 7,260 2.8 Income per common share: Basic $ 0.07 $ 0.42
Diluted $ 0.07 $ 0.42 Shares used in computing common per share
amounts: Basic 15,471,759 16,834,968 Diluted 15,650,143 17,071,591
(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 1, January 2, October 3,
2016 2016 2015 ASSETS Current assets:
Cash and cash equivalents $ 11,780 $ 45,196 $ 37,146 Inventories
59,398 53,877 55,591 Receivables 8,787 13,346 8,053 Prepaid
expenses and other current assets 13,752
16,312 16,651 Total current assets 93,717
128,731 117,441 Property and equipment, net 71,984 67,741
60,090 Deferred tax assets 10,737 10,864 2,734 Other intangible
assets, net 1,653 1,738 1,211 Other assets, net 4,806
4,260 1,828 Total Assets $ 182,897
$ 213,334 $ 183,304
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 26,242 $ 42,551 $ 29,927 Accrued expenses 11,918
19,286 14,197 Gift cards and customer deposits 27,094 35,391 28,048
Deferred revenue 2,030 2,633
2,635 Total current liabilities 67,284
99,861 74,807 Deferred rent 15,278
12,156 12,327 Deferred franchise revenue 603 728 782 Other
liabilities 1,008 1,175 1,111 Stockholders' equity:
Common stock, par value $0.01 per share 159 158 169 Additional
paid-in capital 67,197 66,009 69,880 Accumulated other
comprehensive loss (11,994 ) (9,971 ) (9,272 ) Retained earnings
43,362 43,218 33,500
Total stockholders' equity 98,724 99,414
94,277 Total Liabilities and Stockholders'
Equity $ 182,897 $ 213,334 $ 183,304
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 1, October 3, October 1, October
3, 2016 2015 2016 2015
Other financial data: Retail gross margin ($) (1) $ 35,409 $
38,186 $ 112,076 $ 115,958 Retail gross margin (%) (1) 43.3 % 45.3
% 44.9 % 45.3 % E-commerce sales $ 3,356 $ 2,801 $ 9,242 $ 8,461
Capital expenditures (2) $ 6,331 $ 6,785 $ 18,213 $ 12,864
Depreciation and amortization $ 3,954 $ 4,029 $ 11,573 $ 12,262
Store data (3): Number of company-owned
retail locations at end of period North America 271 257 Europe 58
60 Asia 1 — Total company-owned retail locations 330
317 Number of franchised stores at end of
period 80 74 Company-owned store square
footage at end of period (4) North America 730,283 700,685 Europe
85,416 85,925 Asia 1,750 — Total square footage
817,449 786,610 Consolidated comparable sales
change
(5) North America (1.6 )% 0.1 % (2.0 )% 1.9 % Europe
(4.8 )% 9.8 % (5.5 )% 13.9 % Consolidated (2.2 )% 2.2 % (2.6 )% 4.2
% Stores (3.2 )% 2.1 % (3.1 )% 4.0 % E-commerce 25.2 % 4.1 %
11.9 % 7.9 % Consolidated (2.2 )% 2.2 % (2.6 )% 4.2 % (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. In Asia, the store is located in China. (4) Square
footage for stores located in North America is leased square
footage. Square footage for stores located in Europe and Asia 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161027005449/en/
Build-A-Bear WorkshopInvestors:Voin Todorovic, 314-423-8000
x5221orMedia:Beth Kerleybethk@buildabear.com
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