Build-A-Bear Workshop, Inc. (NYSE: BBW) today reported results
for the second quarter and 26 weeks ended August 3, 2019. In the
fiscal 2019 second quarter:
- Total revenues were $79.2 million compared to $83.2 million in
the fiscal 2018 second quarter;
- Retail gross margin expanded to 44.1%, a 160-basis point
improvement compared to the fiscal 2018 second quarter;
- Selling, general and administrative expenses (“SG&A”) were
$35.7 million, or 45.1% of total revenues, a $2.2 million
improvement compared to the fiscal 2018 second quarter; and
- Pre-tax loss improved by $1.8 million to $0.7 million and
included the impact of unfavorable currency fluctuations compared
to the fiscal 2018 second quarter.
Sharon Price John, Build-A-Bear Workshop President and Chief
Executive Officer, commented, “In the quarter, gross margin
expansion and disciplined management of expenses contributed to an
improvement in operating results compared to the prior year even
with the anticipated decline in retail revenue given the comparison
to last year’s ground-breaking Pay Your Age promotional activity.
Notably, we delivered the seventh consecutive quarter of
double-digit e-commerce growth as we continue to more effectively
take advantage of trends in the digital economy. We also made
progress on the execution of our stated strategy as we continued to
build the necessary infrastructure to aggressively leverage the
awareness and power of our brand into incremental profitable
revenue streams with growth in our Commercial segment inclusive of
outbound licensing fees and wholesale. This leverage is further
evidenced by the recently signed agreements across a number of
entertainment fronts including the completion of a new
multi-dimensional relationship with Sony Pictures Worldwide
Acquisitions, all of which are intended to support efforts related
to the development of a new branded production entity called
Build-A-Bear Entertainment.
“We remain focused on the execution of our key priorities
including diversifying our business model to broaden consumer
accessibility to our brand. As the dynamics of traditional
mall-based retailing continue to change, we have maintained high
levels of lease optionality while expanding into places that allow
us to reach new consumers with added locations in Walmart and key
tourist venues. We also expect to benefit from an enhanced
celebration of National Teddy Bear Day in September, a favorable
backdrop for family-centric films including the highly anticipated
release of Disney’s Frozen II and expanded gifting programs for the
holiday season. Overall, we remain confident that the ongoing
implementation of our strategy will result in long-term profitable
growth and enhanced value for our stakeholders,” concluded Ms.
John.
Additional Second Quarter 2019 Highlights (13 weeks ended
August 3, 2019 compared to the 13 weeks ended August 4,
2018):
- Total revenues were $79.2 million compared to $83.2 million in
the fiscal 2018 second quarter; consolidated net retail sales were
$75.2 million compared to $81.0 million in the fiscal 2018 second
quarter;
- Pre-tax loss was $0.7 million, an improvement of $1.8 million,
compared to a pre-tax loss of $2.5 million in the fiscal 2018
second quarter;
- Income tax expense was $0.5 million, compared to an income tax
benefit of $0.7 million in the fiscal 2018 second quarter. The
income tax expense was impacted by the mix of earnings and the
effect of tax valuation allowances in various foreign tax
jurisdictions; and
- Net loss was $1.2 million, or $0.08 per share, compared to a
net loss of $1.8 million, or $0.12 per share, in the fiscal 2018
second quarter.
First Six Months Highlights (26 weeks ended August 3, 2019
compared to the 26 weeks ended August 4, 2018):
- Total revenues were $163.6 million compared to $166.4 million
in the first six months of fiscal 2018; consolidated net retail
sales were $156.3 million compared to $162.5 million in the first
six months of fiscal 2018;
- Pre-tax income was $1.7 million, an improvement of $3.6
million, compared to a $1.9 million pre-tax loss in the first six
months of fiscal 2018;
- Income tax expense was $1.7 million, compared to an income tax
benefit of $0.5 million in the first six months of fiscal 2018. The
income tax expense was impacted by the mix of earnings and the
effect of tax valuation allowances in various foreign tax
jurisdictions; and
- Net loss was $28,000, or $0.00 per share, compared to a net
loss of $1.4 million, or $0.10 per share, in the first six months
of fiscal 2018.
Store Activity:
In the second quarter of fiscal 2019, the Company closed 6
stores, had no openings and remodeled or reformatted 3 stores into
a Discovery format, ending the quarter with 38% of its store base
in an updated Discovery design. The Company maintained a high level
of lease optionality with nearly 70% of corporately-managed stores
having a lease option within the next three years. As of August 3,
2019, the Company operated 360 corporately-managed locations,
including 304 in North America and 56 outside of North America. The
Company’s international franchisees ended the quarter with 95
stores in 12 countries.
Balance Sheet:
As of August 3, 2019, cash and cash equivalents totaled $15.0
million. Based on the financial results for the 2019 second fiscal
quarter, the Company will not be in compliance with the minimum
EBITDA covenant under its revolving credit facility. The Company
ended the quarter with no borrowings under its revolving credit
facility and its peak borrowing requirements are not expected to
exceed $5 million during fiscal 2019. Moreover, the Company has
reached an agreement in principle with its lender for a waiver of
the covenant and an amendment of the revolving credit agreement
terms.
Total inventory at quarter-end was $62.1 million compared to
$47.8 million at the end of the fiscal 2018 second quarter. The
comparatively lower 2018 inventory level was primarily impacted by
the sales from the unprecedented Pay Your Age events that occurred
late in the 2018 second quarter, therefore, the Company noted that
the recast fiscal 2017 second quarter presents a more normalized
comparison. Recast fiscal 2017 second quarter inventory was $59.4
million, a delta of $2.7 million compared to fiscal 2019 second
quarter. Additionally, the fiscal 2019 second quarter inventory
increase was due to higher in-transit inventory to support new
product introductions including its collection supporting Disney’s
Frozen II movie and acceleration of some receipts of China-sourced
goods due to anticipated potential tariff increases. In the second
quarter of fiscal 2019, capital expenditures totaled $2.5 million
and depreciation and amortization were $3.3 million.
As a reminder, for comparison purposes, on February 3, 2019, the
Company recorded lease liabilities of $176.2 million upon adoption
of the new lease accounting standard, also referred to as ASC Topic
842, based on the present value of remaining lease payments. A
corresponding right-to-use asset of $151.5 million was recorded on
the balance sheet upon adoption which was net of accrued and
prepaid rent, deferred lease incentives and impairment charges.
2019 Expectations (52 weeks ending February 1, 2020 compared
to the 52 weeks ended February 2, 2019):
On a GAAP basis, the Company now expects:
- Total revenue for the year to increase in the low
single-digits;
- Pre-tax income to be slightly positive;
- Capital expenditures to be in the range of $12 to $14
million;
- Depreciation and amortization in the range of $15 to $16
million;
- Operating cash flow less capital expenditures to be positive
for the year; and
- To finish the year with $20 to $25 million in cash and cash
equivalents.
The Company notes that the above guidance assumes that there are
no changes in the rate or effective date that have been announced
for the potential tariffs on China goods later this year.
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, 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 website for one year. A telephone replay will be
available beginning at approximately noon ET today until midnight
ET on September 5, 2019. The telephone replay is available by
calling (844) 512-2921. The access code is 13693396.
About Build-A-Bear
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
more than 450 stores worldwide where Guests can create customizable
furry friends, including corporately-managed stores in the United
States, Canada, China, Denmark, Ireland, Puerto Rico, and the
United Kingdom, and franchise stores in Africa, Asia, Australia,
Europe, Mexico and the Middle East. Build-A-Bear Workshop, Inc.
(NYSE: BBW) posted total revenue of $336.6 million in fiscal 2018.
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
(including our ability to amend our credit facility on a timely
basis on terms acceptable to us or at all), 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 18, 2019 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 Balance Sheets (dollars in
thousands, except per share data)
August 3,
February 2,
August 4,
2019
2019
2018
ASSETS Current assets: Cash and cash equivalents
$
14,965
$
17,894
$
20,398
Inventories
62,081
58,356
47,833
Receivables
8,714
10,588
8,693
Prepaid expenses and other current assets
6,889
12,960
13,686
Total current assets
92,649
99,798
90,610
Operating lease right-of-use asset
137,680
-
-
Property and equipment, net
64,191
66,368
76,157
Deferred tax assets
1,949
3,099
4,847
Other intangible assets, net
1,067
731
1,013
Other assets, net
1,658
2,050
2,182
Total Assets
$
299,194
$
172,046
$
174,809
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable
$
16,734
$
22,551
$
15,046
Accrued expenses
8,622
10,047
12,482
Operating lease liability short term
30,697
-
-
Gift cards and customer deposits
16,981
21,643
14,502
Deferred revenue and other
2,056
1,936
2,154
Total current liabilities
75,090
56,177
44,184
Operating lease liability long term
132,613
-
Deferred rent
11
18,440
18,342
Deferred franchise revenue
1,399
1,625
1,100
Other liabilities
1,576
1,490
1,854
Stockholders' equity: Common stock, par value $0.01
per share
152
150
150
Additional paid-in capital
70,295
69,088
67,383
Accumulated other comprehensive loss
(11,579
)
(12,018
)
(12,015
)
Retained earnings
29,637
37,094
53,811
Total stockholders' equity
88,505
94,314
109,329
Total Liabilities and Stockholders' Equity
$
299,194
$
172,046
$
174,809
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income
(dollars in thousands, except share and per share data)
13 Weeks
13 Weeks
Ended
Ended
August 3,
% of Total
August 4,
% of Total
2019
Revenues (1)
2018
Revenues (1)
Revenues: Net retail sales
$
75,214
95.0
$
81,037
97.4
Commercial revenue
3,193
4.0
1,055
1.3
International franchising
807
1.0
1,086
1.3
Total revenues
79,214
100.0
83,178
100.0
Cost of merchandise sold: Cost of
merchandise sold - retail (1)
42,016
55.9
46,601
57.5
Cost of merchandise sold - commercial (1)
1,211
37.9
591
56.0
Cost of merchandise sold - international franchising (1)
1,016
125.9
587
54.1
Total cost of merchandise sold
44,243
55.9
47,779
57.4
Consolidated gross profit
34,971
44.1
35,399
42.6
Selling, general and
administrative expense
35,720
45.1
37,928
45.6
Interest expense (income), net
(7
)
(0.0
)
16
0.0
Income (loss) before income taxes
(742
)
(0.9
)
(2,545
)
(3.1
)
Income tax expense (benefit)
482
0.6
(745
)
(0.9
)
Net income (loss)
$
(1,224
)
(1.5
)
$
(1,800
)
(2.2
)
Income (loss) per common share:
Basic
$
(0.08
)
$
(0.12
)
Diluted
$
(0.08
)
$
(0.12
)
Shares used in computing common per share amounts:
Basic
14,726,678
14,618,582
Diluted
14,726,678
14,618,582
(1)
Selected statement of income 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
Income (dollars in thousands, except share and per share data)
26 Weeks
26 Weeks
Ended
Ended
August 3,
% of Total
August 4,
% of Total
2019
Revenues (1)
2018
Revenues (1)
Revenues: Net retail sales
$
156,263
95.5
$
162,462
97.7
Commercial revenue
5,947
3.6
2,074
1.2
International franchising
1,366
0.8
1,826
1.1
Total revenues
163,576
100.0
166,362
100.0
Costs and expenses: Cost of merchandise
sold - retail (1)
86,437
55.3
91,986
56.6
Cost of merchandise sold - commercial (1)
2,475
41.6
1,070
51.6
Cost of merchandise sold - international franchising (1)
1,455
106.5
919
50.3
Total cost of merchandise sold
90,367
55.2
93,975
56.5
Consolidated gross profit
73,209
72,387
43.5
Selling, general and
administrative expense
71,527
43.7
74,265
44.6
Interest expense (income), net
14
0.0
21
0.0
Income (loss) before income taxes
1,668
1.0
(1,899
)
(1.1
)
Income tax expense (benefit)
1,696
1.0
(453
)
(0.2
)
Net income (loss)
$
(28
)
(0.0
)
$
(1,446
)
(0.9
)
Income (loss) per common share:
Basic
$
(0.00
)
$
(0.10
)
Diluted
$
(0.00
)
$
(0.10
)
Shares used in computing common per share amounts:
Basic
14,669,626
14,600,578
Diluted
14,669,626
14,600,578
(1)
Selected statement of income 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 Selected Financial and Store Data
(dollars in thousands)
13 Weeks
13 Weeks
26 Weeks
26 Weeks
Ended
Ended
Ended
Ended
August 4,
August 4,
August 4,
August 4,
2019
2018
2019
2018
Other financial
data: Retail gross margin
($) (1)
$
33,198
$
34,436
$
69,826
$
70,476
Retail gross margin (%) (1)
44.1
%
42.5
%
44.7
%
43.4
%
Capital expenditures (2)
$
2,539
$
4,081
$
4,944
$
7,111
Depreciation and amortization
$
3,286
$
4,023
$
6,798
$
8,138
Store data (3):
Number of corporately-managed
retail locations at end of period
North America
304
301
Europe
55
57
Asia
1
1
Total corporately-managed retail locations
360
359
Number of franchised
stores at end of period
95
90
Corporately-managed store
square footage at end of period (4)
North America
713,789
720,264
Europe
79,922
79,236
Asia
1,750
1,750
Total square footage
795,461
801,250
(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.
(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 is
estimated selling square footage.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190829005206/en/
Investors: Voin Todorovic Build-A-Bear Workshop 314.423.8000
x5221
Media: Public Relations PR@buildabear.com
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