- Closes the quarter with $25.3 million in cash and cash
equivalents, an increase of $10.3 million or 69%, compared to the
fiscal 2019 second quarter end
- Reduces selling, general and administrative expenses by
$14.2 million, or 40%, compared to the fiscal 2019 second
quarter
- Accelerates e-commerce sales with a 299% increase compared
to the fiscal 2019 second quarter
- Recently announced the completion of a new five-year credit
facility including a revolving line of credit for up to $25
million
Build-A-Bear Workshop, Inc. (NYSE: BBW) today reported results
for the second quarter and 26 weeks ended August 1, 2020. The
Company noted that the global COVID-19 pandemic had a significant
negative impact on its operating performance during the second
quarter as stores were forced to remain closed for a portion of the
period while business shifted sharply to e-commerce.
Second Quarter Fiscal 2020 Results: (13 weeks ended
August 1, 2020 compared to the 13 weeks ended August 3, 2019):
- Total Revenues were $40.4 million compared to $79.2
million in the fiscal 2019 second quarter, reflecting 60% fewer
operating days, driven by the significant impact of temporary store
closures due to the COVID pandemic partially offset by a 299%
increase in e-commerce sales;
- Loss per share totaled $0.93, including $2.1 million in
estimated non-cash asset impairment charges compared to a loss per
share of $0.08 in the fiscal 2019 second quarter;
- Adjusted loss per share totaled $0.82, compared to an
adjusted loss per share of $0.02 in the fiscal 2019 second quarter
(see Reconciliation of GAAP to Non-GAAP Results); and
- Maintained solid balance sheet with no borrowings on its
credit facility with cash and cash equivalents of $25.3
million, an increase of $10.3 million compared to end of the fiscal
2019 second quarter.
Operational Highlights for the Second Quarter of fiscal
2020:
- Retail merchandise margin improved by 210 basis points
compared to the fiscal 2019 second quarter driven by lower
promotional activity and favorable merchandise mix;
- In the second quarter and continuing through the end of August,
reflecting its strong lease flexibility, the Company has
successfully completed renegotiations of approximately 95% of
its store leases resulting in a combination of rent reductions,
deferments and abatements;
- Total inventory at quarter-end was $55.5 million, an 11%
decrease compared to the end of the fiscal 2019 second quarter;
and
- Selling, general and administrative expenses reduced by
$14.2 million from the second quarter of fiscal 2019 reflecting
expense saving initiatives as well as the benefit of a corporate
reorganization.
Following Quarter End:
- In August, the Company saw a sequential improvement in sales
trends in its operating stores and recaptured over 80% of sales in
its brick and mortar locations which was an improvement from 70% in
its second quarter compared to the same periods in fiscal 2019,
while its e-commerce demand continued to grow at triple-digit
rates;
- The Company entered into a new five-year asset-based credit
facility including a revolving line of credit for up to $25
million.
Sharon Price John, Build-A-Bear Workshop President and Chief
Executive Officer, commented, “Our second quarter results show the
impact of store closures in response to the COVID-19 pandemic and
the significant shift to e-commerce which increased nearly 300% for
the period. We put actions in place to drive sales while reducing
inventory and leveraging the high optionality that we had in place
with leases to renegotiate terms on approximately 95% of our store
locations to date. In addition, strict expense management, revised
marketing activities and a corporate reorganization contributed to
$14.2 million in cost savings, or a 40% reduction, as compared to
the prior year’s second quarter.”
“Entering the third quarter, we have reopened approximately 90%
of our corporately-managed store locations with a reimagined
bear-building experience that reflects recommended safety protocols
designed to continue to keep both our associates and our guests as
safe as possible. We have seen sales trends steadily improve in
store locations while e-commerce has continued to be strong. To
support the increase in digital sales, we have enhanced our
omni-channel capabilities with rapid expansion of “buy online, ship
from store” which also allows us to take advantage of geographic
proximity and available store labor to meet the higher demand. We
have initiatives in place to further accelerate our digital
transformation which has been a key pillar of our strategy to
capitalize on the power of our Build-A-Bear brand and diversify our
revenue streams. Finally, with an ongoing focus on financial
liquidity, we recently entered a new agreement for an asset-based
credit facility giving us increased flexibility to manage through
these unusual circumstances resulting from the COVID-19 impact
while we simultaneously continue to execute our strategic plans
designed to drive long term profitable growth for the benefit of
our stakeholders,” concluded Ms. John.
Additional Second Quarter 2020 Results (13 weeks ended August
1, 2020 compared to the 13 weeks ended August 3, 2019):
- Retail gross margin was 23.1% of retail sales. The retail gross
margin rate, excluding estimated non-cash store impairment charges,
declined 2,099 basis points, including 1,862 basis points related
to fixed occupancy costs that were recorded through the end of the
second quarter despite store closures beginning on March 18, 2020
and 429 basis points related to warehouse and distribution costs,
both partially offset by an expansion in merchandise margin;
- Pre-tax loss was $14.0 million compared to pre-tax loss of $0.7
million in the fiscal 2019 second quarter. Fiscal 2020 second
quarter pre-tax loss included $2.1 million, or $0.14 per share,
related to estimated asset impairment charges;
- Income tax benefit was $74,000 compared to income tax expense
of $482,000 in the fiscal 2019 second quarter; and
- Net loss was $13.9 million, or a loss of $0.93 per share,
compared to net loss of $1.2 million, or a loss of $0.08 per share,
in the fiscal 2019 second quarter.
Store Activity:
As of August 1, 2020, 359 stores were operating representing
approximately 90% of the Company’s corporately-managed locations
including 307 in North America and 52 outside of North America. The
majority of locations associated with the Company’s third-party
retail model with relationships that include Carnival Cruise Lines,
Great Wolf Lodge Resorts, Landry’s and Beaches Family Resorts as
well as international franchise locations, were either closed or
operated under restrictions for a portion or all of the
quarter.
Balance Sheet:
At quarter end, cash and cash equivalents were $25.3 million, an
increase of $10.3 million compared to the end of the fiscal 2019
second quarter driven by disciplined expense and working capital
management as well as the temporary suspension of rent payments
while the Company renegotiated the terms of its store leases. Total
inventory at quarter-end was $55.5 million a decline of $6.6
million, or 11%, compared to $62.1 million at the end of the fiscal
2019 second quarter. The Company noted that it is comfortable with
the quality and composition of its inventory at quarter-end.
In the fiscal 2020 second quarter, capital expenditures totaled
$0.5 million compared to $2.5 million in the fiscal 2019 second
quarter. Depreciation and amortization was $3.3 million compared to
$3.3 million in the fiscal 2019 second quarter.
Preliminary Second Quarter 2020 Results
The Company’s fiscal second quarter 2020 financial results and
disclosures in this press release reflect the Company’s current
views, including with respect to estimated charges for impairment
of long-lived and right-of-use assets. Final financial results and
other disclosures will be reported in the Company’s Quarterly
Report on Form 10-Q to be filed with the Securities and Exchange
Commission and may differ from the results and disclosures in this
press release due to, among other things, the completion of closing
and review procedures, change in management’s views including of
estimates, and the occurrence of subsequent events. The Company
urges you to read the Form 10-Q when it becomes available.
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 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. These non-GAAP
financial measures are defined and reconciled to the most
comparable GAAP measure later in this document.
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 8, 2020. The telephone replay is available by
calling (844) 512-2921. The access code is 13706737.
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
over 500 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, third party retail locations and franchise stores
in Africa, Asia, Australia, Europe, Mexico, the Middle East and
South America. Build-A-Bear Workshop, Inc. (NYSE: BBW) posted total
revenue of $338.5 million in fiscal 2019. 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 16, 2020 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
August 1,
% of Total
August 3,
% of Total
2020 (2)
Revenues (1)
2019
Revenues (1) Revenues: Net retail sales
$
39,339
97.5
$
75,214
94.9
Commercial revenue
865
2.1
3,193
4.0
International franchising
149
0.4
807
1.0
Total revenues
40,353
100.0
79,214
99.9
Cost of merchandise sold: Cost of merchandise sold - retail
(1)
30,233
76.9
42,016
55.9
Store asset impairment (2)
2,063
5.2
—
0.0
Cost of merchandise sold - commercial (1)
387
44.7
1,211
37.9
Cost of merchandise sold - international franchising (1)
130
87.2
1,016
125.9
Total cost of merchandise sold
32,813
81.3
44,243
55.9
Consolidated gross profit
7,540
18.7
34,971
44.1
Selling, general and administrative expense
21,516
53.3
35,720
45.1
Interest (income) expense, net
7
0.0
(7
)
(0.0
)
(Loss) income before income taxes
(13,983
)
(34.7
)
(742
)
(0.9
)
Income tax expense
(74
)
(0.2
)
482
0.6
Net (loss) income $
(13,909
)
(34.5
)
$
(1,224
)
(1.5
)
(Loss) Income per common share: Basic $
(0.93
)
$
(0.08
)
Diluted $
(0.93
)
$
(0.08
)
Shares used in computing common per share amounts: Basic
14,999,786
14,726,678
Diluted
14,999,786
14,726,678
(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.
(2)
Includes estimated charges for long-lived and right-of-use asset
impairment for the three months ended August 1, 2020. See
Preliminary Second Quarter 2020 Results section within this
release.
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)
26 Weeks
26 Weeks
Ended
Ended
August 1, % of Total
August 3,
% of Total
2020 (2)
Revenues (1)
2019
Revenues (1) Revenues: Net retail sales
$
84,986
97.7
$
156,263
95.5
Commercial revenue
1,198
1.4
5,947
3.6
International franchising
793
0.9
1,366
0.8
Total revenues
86,977
100.0
163,576
99.9
Costs and expenses: Cost of merchandise sold - retail (1)
63,585
74.8
86,437
55.3
Store asset impairment (2)
6,882
8.1
—
—
Cost of merchandise sold - commercial (1)
527
44.0
2,475
41.6
Cost of merchandise sold - international franchising (1)
385
48.5
1,455
106.5
Total cost of merchandise sold
71,379
82.1
90,367
55.2
Consolidated gross profit
15,598
17.9
73,209
44.8
Selling, general and administrative expense
48,241
55.5
71,527
43.7
Interest expense, net
4
0.0
14
0.0
Income (loss) before income taxes
(32,647
)
(37.5
)
1,668
1.0
Income tax expense (benefit)
2,466
2.8
1,696
1.0
Net income (loss)
$
(35,113
)
(40.4
)
$
(28
)
(0.0
)
Income (loss) per common share: Basic
$
(2.35
)
$
(0.00
)
Diluted
$
(2.35
)
$
(0.00
)
Shares used in computing common per share amounts: Basic
14,936,541
14,669,626
Diluted
14,936,541
14,669,626
(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.
(2)
Due to the charges primarily in the 26 weeks ended August 1, 2020,
a separate line item was disclosed and expressed as a percentage of
net retail sales.
BUILD-A-BEAR WORKSHOP, INC. AND
SUBSIDIARIES Unaudited Condensed Consolidated Balance
Sheets (dollars in thousands, except per share data)
August 1, February 1, August 3,
2020 (1)
2020
2019
ASSETS Current assets: Cash and cash
equivalents
$
25,274
$
26,726
$
14,965
Inventories, net
55,509
53,381
62,081
Receivables, net
6,314
11,526
8,714
Prepaid expenses and other current assets
5,400
7,117
6,889
Total current assets
92,497
98,750
92,649
Operating lease right-of-use asset
114,709
126,144
137,680
Property and equipment, net
58,085
65,855
64,191
Deferred tax assets
-
3,411
1,949
Other intangible assets, net
-
-
1,067
Other assets, net
2,972
3,202
1,658
Total Assets
$
268,263
$
297,362
$
299,194
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable
$
23,267
$
15,680
$
16,734
Accrued expenses
15,911
16,536
8,622
Operating lease liability short term
39,917
30,912
30,697
Gift cards and customer deposits
17,988
20,231
16,981
Deferred revenue and other
2,659
2,605
2,056
Total current liabilities
99,742
85,964
75,090
Operating lease liability long term
111,640
119,625
132,613
Deferred franchise revenue
916
1,325
1,399
Other liabilities
1,430
1,717
1,587
Stockholders' equity: Common stock, par
value $0.01 per share
156
152
152
Additional paid-in capital
71,906
70,733
70,295
Accumulated other comprehensive loss
(12,339
)
(12,079
)
(11,579
)
Retained (deficit)/earnings
(5,188
)
29,925
29,637
Total stockholders' equity
54,535
88,731
88,505
Total Liabilities and Stockholders' Equity
$
268,263
$
297,362
$
299,194
(1)
Includes estimated charges for long-lived and right-of-use asset
impairment for the three months ended August 1, 2020. See
Preliminary Second Quarter 2020 Results section within this
release.
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 1,
August 3,
August 1,
August 3,
2020 (2)
2019
2020 (2)
2019
Other financial data: Retail gross
margin ($) (1)
$
9,106
$
33,198
$
21,401
$
69,826
Retail gross margin (%) (1)
23.1
%
44.1
%
25.2
%
44.7
%
Capital expenditures (2)
$
529
$
2,539
$
3,378
$
7,111
Depreciation and amortization
$
3,254
$
3,286
$
6,711
$
8,138
Store data (3): Number of corporately-managed retail
locations at end of period North America
307
304
Europe
51
55
Asia
1
1
Total corporately-managed retail locations
359
360
Number of franchised stores at end of period
78
95
Corporately-managed store square footage at end of period (4)
North America
712,350
713,789
Europe
76,173
79,922
Asia
1,750
1,750
Total square footage
790,273
795,461
(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, 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. Seasonal locations 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 Results (dollars in
thousands, except per share data)
13 Weeks 13
Weeks 26 Weeks 26 Weeks Ended Ended
Ended Ended August 1, August 3,
August 1, August 3,
2020
2019
2020
2019
(Loss) income before income taxes (pre-tax)
$
(13,983
)
$
(742
)
$
(32,647
)
$
1,668
(Loss) income before income taxes adjustments: COVID-19 activity
(1)
100
-
120
-
Impairment and other charges (2) (3)
2,163
8,311
(456
)
Foreign exchange losses (gains) (4)
(581
)
1,143
265
1,117
Adjusted (loss) income before income taxes (adjusted pre-tax)
(12,301
)
401
(23,951
)
2,329
Income tax (expense) benefit
74
(482
)
2,466
1,696
Tax adjustments:
Income tax impact: adjustments (5)
-
(240
)
-
(139
)
Income tax impact: CARES Act (6)
-
-
(773
)
-
Valuation allowance (7)
-
-
3,272
-
Adjusted income tax (expense) benefit
74
(722
)
4,965
1,557
Net (loss) income
(13,909
)
(1,224
)
(35,113
)
(28
)
Adjustments
1,682
903
11,196
522
Adjusted net (loss) income
$
(12,227
)
$
(321
)
$
(23,917
)
$
494
Net (loss) income per diluted share (EPS)
$
(0.93
)
$
(0.08
)
$
(2.35
)
$
(0.00
)
Adjusted net (loss) income per diluted share (adjusted EPS)
$
(0.82
)
$
(0.02
)
$
(1.60
)
$
0.03
(1)
Represents COVID-19 related expenses at our stores, warehouse, and
headquarters.
(2)
Represents non-cash adjustments including estimated asset
impairment charges related to store fixed assets and right-of-use
operating lease assets and bad debt expense in the 13 weeks ending
August 1, 2020 and August 3, 2019.
(3)
See Preliminary Second Quarter 2020 Results section within this
release.
(4)
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.
(5)
Represents the aggregate tax impact of the pre-tax adjustments. As
a result of the Company's full, global valuation allowance as of
May 2, 2020, the Company cannot realize an income tax benefit on
these adjustments for first quarter of fiscal 2020.
(6)
Represents the impact of the technical correction related to
qualified leasehold improvements resulting from the CARES Act
occuring in the first quarter of fiscal 2020.
(7)
Represents the valuation allowance recorded on its net deferred tax
assets in North America in the first quarter of fiscal 2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200901005444/en/
Investors: Voin Todorovic Build-A-Bear Workshop 314.423.8000
x5221
Media: Public Relations PR@buildabear.com
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