Build-A-Bear Workshop, Inc. (NYSE: BBW) today announced results
for the third fiscal quarter and nine months ended October 28,
2023.
- Total revenues, pre-tax income, and diluted earnings per share
(“EPS”) increased 2.9%, 4.7%, and 3.9%, respectively
- Nine months total revenues, pre-tax income, and diluted EPS
increased 4.3%, 12.5%, and 18.0%, respectively
- The Company revises its fiscal 2023 guidance from 5% to 7%
revenue growth and 10% to 15% pre-tax income growth to 3% to 5%
revenue growth and 5% to 10% pre-tax income growth
- Through the nine months of fiscal 2023, the Company returned
$37 million to shareholders through dividends and share
repurchases
“The first nine months of strong performance brings us one step
closer to our third consecutive year of record results, even as we
experienced some unexpected softness in the business that began the
final two weeks of October. As we look forward to the important
holiday sales period, we believe our results are a reflection of
the evolution of our business model and the broadening appeal of
the Build-A-Bear brand, which includes the continued expansion of
our addressable market highlighted by our teen-focused Axolotl
being nominated for Plush Toy of the Year at this year’s New York
Toy Fair and our recently introduced innovative make-your-own
interactive bear, the Bearlieve Bear, which comes to life through
touch or the sound of your voice,” commented Sharon Price John,
President and Chief Executive Officer of Build-A-Bear Workshop.
“The Bearlieve Bear is a cornerstone of our holiday product line,
driven by Build-A-Bear’s first-ever animated theatrical film
release, "Glisten and the Merry Mission," based on our multi-year
best-selling seasonal line, which will begin streaming in multiple
countries starting December first,” concluded Ms. John.
Voin Todorovic, Chief Financial Officer of Build-A-Bear Workshop
added, “As we adjust to navigate the macroeconomic headwinds
reflected in our revised guidance, we believe we are still well
positioned to deliver record revenue and profitability for our
third consecutive year. Our year-to-date results further
demonstrate the company’s ability to profitably grow the
Build-A-Bear brand.”
Third Quarter Fiscal 2023 Results
(13 weeks ended October 28, 2023, compared to the 13 weeks ended
October 29, 2022)
- Total revenues were $107.6 million and increased 2.9%
- Net retail sales were $100.4 million and increased 1.2%
- Consolidated e-commerce demand (online orders fulfilled from
either the Company’s warehouse or its stores) increased 7.1%
- Commercial and international franchise revenues were a combined
$7.2 million and increased 36.2%
- Pre-tax income grew 4.7% to $10.3 million, or 9.6% of total
revenues, an improvement of 10 basis points, driven by a 70-basis
point increase in gross margin, primarily due to improvement from
lower freight expense, plus expansion in our Commercial and
Franchise segments. This was partially offset by an increase in
Selling, General and Administrative (“SG&A”) expense from
higher store-level wages due to inflation, the addition of talent,
marketing, and other investments to support future growth.
- Diluted EPS was $0.53, a 3.9% year-over-year increase driven by
pre-tax margin expansion and a reduction in share count, offset by
an increase in tax rate.
- Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) grew 3.0% to $13.3 million, or 12.4% of total
revenues.
Nine-Month Fiscal 2023 Results
(39 weeks ended October 28, 2023, compared to the 39 weeks ended
October 29, 2022)
- Total revenues were $336.8 million and increased 4.3%
- Net retail sales were $316.0 million and increased 2.6%
- Consolidated e-commerce demand decreased 2.2%
- Commercial and international franchise revenues were a combined
$20.9 million and increased 40.7%
- Pre-tax income grew 12.5% to $40.2 million, or 11.9% of total
revenues, an expansion of 80 basis points, driven by a 210-basis
point increase in gross margin, primarily due to improvement from
lower freight expense and leverage of warehouse costs, plus
expansion in our Commercial and Franchise segments. This was
partially offset by an increase in SG&A from higher wages due
to inflation, the addition of talent, marketing, and other
investments to support future growth.
- Diluted EPS was $2.10, an 18.0% year-over-year increase driven
by pre-tax margin expansion, plus a reduction in share count,
offset by an increase in tax rate.
- EBITDA grew 9.2% to $49.2 million, or 14.6% of total
revenues.
Store Activity
The Company added a total of 14 corporately-managed and
partner-operated locations in the quarter. As of the fiscal third
quarter end, Build-A-Bear had 511 global locations through a
combination of its corporately-managed, partner-operated, and
international franchise models. This reflects 356
corporately-managed stores with five store openings in the quarter,
85 partner-operated stores with nine store openings, and 70
international franchise stores with six store openings. Through the
end of the third quarter, the company has added a total of 21
corporately-managed and partner-operated locations.
Balance Sheet
As of October 28, 2023, cash and cash equivalents totaled $24.8
million compared to $12.0 million as of October 29, 2022. The
Company finished the quarter with no borrowings under its revolving
credit facility.
Since the end of the second quarter, the Company utilized $5.7
million in cash to repurchase 217,206 shares of its common stock.
Fiscal year-to-date, through November 29, 2023, the Company has
returned $39.0 million to shareholders, reflecting dividend
payments of $22.1 million and share repurchases of $16.9 million,
and has $29.6 million available under the current $50.0 million
stock repurchase program adopted on August 31, 2022.
For the third quarter and first nine months of fiscal 2023,
capital expenditures totaled $5.0 million and $11.1 million,
respectively.
Inventory at quarter end was $64.5 million, reflecting a decline
of $23.9 million, or 27.0% from October 29, 2022. The Company
remains comfortable with the level and composition of its
inventory.
2023 Outlook
The Company is revising its fiscal 2023 outlook with continued
expectations of delivering growth in total revenues and pre-tax
income, as compared to fiscal year 2022.
For fiscal 2023, the Company expects:
- Total revenues to increase in the range of 3% to 5%, with
growth in its three operating segments, as compared to the previous
range of 5% to 7% growth
- Pre-tax income growth of 5% to 10%, surpassing 2022’s record
high, as compared to the previous range of 10% to 15% growth
- To open approximately 30 experience locations, through a
combination of partner-operated and corporately-managed business
models, as compared to previous guidance to open 20 to 30
locations
- Capital expenditures in the range of $16 million to $18
million, as compared to the previous range of $15 million to $20
million
- Depreciation and amortization of approximately $13 million, as
compared to the previous range of $13 million to $14 million
- Tax rate to approximate 25%, excluding discrete items
While the Company notes that its fiscal 2023 is a 53-week year
compared to a 52-week year in fiscal 2022, it expects to deliver
growth in total revenues and pre-tax income versus the prior year
exclusive of the projected benefit of the 53rd week. For reference,
the additional week in fiscal 2023, which will be reflected in the
Company’s fourth quarter, is estimated to be $7 million in total
revenues with approximately 35% flow-through to EBITDA.
The Company’s guidance considers a variety of factors ranging
from anticipated ongoing inflationary pressures to the expected
benefit of reduced freight costs. Additionally, the Company noted
that its outlook assumes no further material changes in the
macroeconomic and geopolitical environment, or relevant foreign
currency exchange rates.
Note Regarding 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 adjusted to
exclude certain costs, 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. These
non-GAAP financial measures are defined and reconciled to the most
comparable GAAP measure later in this document.
Webcast and Conference Call Information
At 9:00 AM ET today, Build-A-Bear Workshop will host a
conference call with investors and financial analysts to discuss
its financial results. The conference call will be webcast on
Build-Bear’s Investor Relations website,
https://ir.buildabear.com.
The dial-in number for the live conference call is (877)
407-3982 or (201) 493-6780 for international callers. The access
code is Build-A-Bear. The call is expected to conclude by 10 AM
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 1:00 PM ET today until 11:59
PM ET on December 7, 2023. The telephone replay is available by
calling (412) 317-6671 (toll/international) or (844) 512-2921 (toll
free). The access code is 13742128.
About Build-A-Bear
Build-A-Bear is a multi-generational global brand focused on its
mission to “add a little more heart to life” appealing to a wide
array of consumer groups who enjoy the personal expression in
making their own “furry friends” to celebrate and commemorate life
moments. More than 500 interactive brick-and-mortar experience
locations operated through a variety of formats provide guests of
all ages a hands-on entertaining experience, which often fosters a
lasting and emotional brand connection. The Company also offers
engaging e-commerce/digital purchasing experiences on
www.buildabear.com including its online “Bear-Builder” as well as
the “Bear Builder 3D Workshop”. In addition, extending its brand
power beyond retail, Build-A-Bear Entertainment, a subsidiary of
Build-A-Bear Workshop, Inc., is dedicated to creating engaging
content for kids and adults that fulfills the Company’s mission,
while the Company also offers products at wholesale and in
non-plush consumer categories via licensing agreements with leading
manufacturers. Build-A-Bear Workshop, Inc. (NYSE: BBW) posted total
revenues of $467.9 million in fiscal 2022. 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 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 April 14, 2022 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 Statements of Operations (dollars in
thousands, except share and per share data)
13 Weeks 13 Weeks
Ended Ended
October 28 % of Total October 29 % of
Total
2023
Revenues (1)
2022
Revenues (1)
Revenues:
Net retail sales
$
100,411
93.4
$
99,229
95.0
Commercial revenue
6,021
5.6
4,125
3.9
International franchising
1,129
1.0
1,126
1.1
Total revenues
107,561
100.0
104,480
100.0
Cost of merchandise sold:
Cost of merchandise sold - retail
(1)
47,549
47.4
47,354
47.7
Cost of merchandise sold -
commercial (1)
2,675
44.4
1,929
46.8
Cost of merchandise sold -
international franchising (1)
702
62.2
867
77.0
Total cost of merchandise
sold
50,926
47.3
50,150
48.0
Consolidated gross profit
56,635
52.7
54,330
52.0
Selling, general and
administrative expense
46,568
43.3
44,436
42.5
Interest (income) expense,
net
(281
)
(0.3
)
6
0.0
Income before income taxes
10,348
9.6
9,888
9.5
Income tax expense
2,762
2.6
2,433
2.3
Net income
$
7,586
7.1
$
7,455
7.1
Income per common share:
Basic
$
0.53
$
0.51
Diluted
$
0.53
$
0.51
Shares used in computing common
per share amounts:
Basic
14,362,702
14,542,947
Diluted
14,438,795
14,760,586
(1)
Selected statement of operations
data expressed as a percentage of total revenues, except cost of
merchandise sold - retail, cost of merchandise sold - commercial
and cost of merchandise sold - international franchising that are
expressed as a percentage of net retail sales, commercial revenue
and international franchising, respectively. Percentages will
not total due to cost of merchandise sold being expressed as a
percentage of net retail sales, commercial revenue or international
franchising 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 28
% of Total
October 29
% of Total
2023
Revenues (1)
2022
Revenues (1)
Revenues: Net retail sales $
315,972
93.8
$
308,001
95.4
Commercial revenue
17,685
5.3
12,464
3.9
International franchising
3,179
0.9
2,362
0.7
Total revenues
336,836
100.0
322,827
100.0
Cost of merchandise sold: Cost of merchandise sold - retail (1)
146,163
46.3
149,341
48.5
Cost of merchandise sold - commercial (1)
8,458
47.8
5,824
46.7
Cost of merchandise sold - international franchising (1)
2,041
64.2
1,593
67.4
Total cost of merchandise sold
156,662
46.5
156,758
48.6
Consolidated gross profit
180,174
53.5
166,069
51.4
Selling, general and administrative expense
140,518
41.7
130,320
40.4
Interest (income) expense, net
(524
)
(0.2
)
27
0.0
Income before income taxes
40,180
11.9
35,722
11.1
Income tax expense
9,648
2.9
8,247
2.6
Net income $
30,532
9.1
$
27,475
8.5
Income per common share: Basic $
2.12
$
1.82
Diluted $
2.10
$
1.78
Shares used in computing common per share amounts: Basic
14,413,308
15,097,816
Diluted
14,563,974
15,412,130
(1)
Selected statement of operations
data expressed as a percentage of total revenues, except cost of
merchandise sold - retail, cost of merchandise sold - commercial
and cost of merchandise sold - international franchising that are
expressed as a percentage of net retail sales, commercial revenue
and international franchising, respectively. Percentages will
not total due to cost of merchandise sold being expressed as a
percentage of net retail sales, commercial revenue or international
franchising and immaterial rounding.
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES Unaudited
Condensed Consolidated Balance Sheets (dollars in thousands,
except per share data)
October 28
January 28,
October 29,
2023
2023
2022
ASSETS Current assets: Cash, cash equivalents and
restricted cash
$
24,800
$
42,198
$
12,023
Inventories, net
64,465
70,485
88,339
Receivables, net
13,908
15,374
15,894
Prepaid expenses and other current assets
13,592
19,374
10,379
Total current assets
116,765
147,431
126,635
Operating lease right-of-use asset
67,768
71,791
76,236
Property and equipment, net
51,914
50,759
46,264
Deferred tax assets
6,822
6,592
7,561
Other assets, net
7,274
4,221
3,105
Total Assets
$
250,543
$
280,794
$
259,801
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable
$
11,961
$
10,286
$
19,514
Accrued expenses
25,319
37,358
25,764
Operating lease liability short term
26,002
27,436
27,644
Gift cards and customer deposits
18,366
19,425
18,287
Deferred revenue and other
3,665
6,646
5,713
Total current liabilities
85,313
101,151
96,922
Operating lease liability long term
52,423
59,080
64,212
Other long-term liabilities
1,159
1,446
1,569
Stockholders' equity: Common stock, par value $0.01 per
share
145
148
147
Additional paid-in capital
66,640
69,868
68,422
Accumulated other comprehensive loss
(12,319
)
(12,274
)
(12,336
)
Retained earnings
57,182
61,375
40,865
Total stockholders' equity
111,648
119,117
97,098
Total Liabilities and Stockholders' Equity
$
250,543
$
280,794
$
259,801
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
28 October 29 October 28 October 29
2023
2022
2023
2022
Other financial data: Retail gross margin ($)
(1) $
52,862
$
51,875
$
169,809
$
158,660
Retail gross margin (%) (1)
52.6
%
52.3
%
53.7
%
51.5
%
Capital expenditures (2) $
4,986
$
2,685
$
11,124
$
6,752
Depreciation and amortization $
3,231
$
3,017
$
9,540
$
9,293
Store data (3): Number of corporately-managed retail
locations at end of period North America
318
312
Europe
38
35
Total corporately-managed retail locations
356
347
Number of franchised stores at end of period
70
66
Number of third-party retail locations at end of period
85
65
Corporately-managed store square footage at end of period
(4) North America
728,658
727,006
Europe
53,675
53,146
Total square footage
782,333
780,152
(1)
Retail gross margin represents net retail sales less cost of
merchandise sold - retail. Retail gross margin percentage
represents retail gross margin divided by net retail sales. Store
impairment is excluded from retail gross margin.
(2)
Capital expenditures represents cash paid for property, equipment,
and other assets.
(3)
Excludes e-commerce. North American stores are located in the
United States and Canada. In Europe, stores are located in
the United Kingdom and Ireland. Seasonal locations are not included
in store count.
(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. Seasonal locations not included in the
store count.
* Non-GAAP Financial Measures
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP figures (dollars in
thousands) 13 Weeks 13 Weeks 39
Weeks 39 Weeks Ended Ended Ended
Ended October 28 October 29 October 28
October 29
2023
2022
2023
2022
Income before income taxes (pre-tax)
$
10,348
$
9,888
$
40,180
$
35,722
Interest expense, net
(281
)
6
(524
)
27
Depreciation and amortization expense
3,231
3,017
9,540
9,293
Earnings before interest, taxes, depreciation and amortization
(EBITDA)
$
13,298
$
12,911
$
49,196
$
45,042
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231130130465/en/
Investor Relations Contact Gary Schnierow, Vice
President, Investor Relations & Corporate Finance
garys@buildabear.com
Media Relations Contact pr@buildabear.com
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