Build-A-Bear Workshop, Inc. Reports Increased Revenues and Pre-Tax Income in Fiscal 2021 First Quarter Exceeding Both 2020 and 2019 First Quarter Results and Raises Annual Guidance

Rhea-AI Summary

Build-A-Bear Workshop, Inc. (NYSE: BBW) reported strong fiscal Q1 2021 results, highlighting a 96.7% increase in total revenues, reaching $91.7 million, compared to the same period in 2020. Pre-tax income improved to $13.2 million, recovering from a loss of $18.7 million a year prior. The company's gross profit margin hit a record 52.8%, and net income was $10.4 million or $0.66 per diluted share. Despite some store closures due to COVID-19, sales in brick-and-mortar and e-commerce remained robust, leading to an optimistic profit guidance for the year.

Positive

• Total revenues increased by 96.7% to $91.7 million compared to Q1 2020.
• Pre-tax income reached $13.2 million, a $31.9 million improvement year-over-year.
• Record gross profit margin of 52.8%, up from 17.3% in the previous year.
• Net income of $10.4 million or $0.66 per diluted share, recovering from a net loss of $21.2 million in Q1 2020.
• Strong sales growth in both physical and digital channels despite COVID-19 impact.

Negative

• Sales trends may moderate as the fiscal year progresses.
• Ongoing impact from pandemic restrictions affected European store operations.
• Increase in SG&A expenses attributed to store labor costs post-reopening.

Build-A-Bear Workshop, Inc. (NYSE: BBW) today reported results for its fiscal 2021 first quarter, the 13-week period ended May 1, 2021.

Sharon Price John, Build-A-Bear Workshop President and Chief Executive Officer, commented, “We delivered one of the strongest first quarters in our Company’s nearly 25-year history including a 96.7% increase in total revenues compared to the fiscal 2020 first quarter and an 8.7% increase versus the fiscal 2019 period. We grew pre-tax income to $13.2 million, an improvement of $31.9 million compared to the loss in the prior year’s quarter and $10.8 million compared to the 2019 period. We saw sales growth in both our brick-and-mortar stores and digital channels even with our locations in Europe temporarily closed for the majority of the period due to local COVID restrictions. We believe the improvement in sales was driven by the strength of the emotional connection that has kept Build-A-Bear a desired and relevant brand, strong merchandise mix and improved digital marketing programs along with the benefit of the stimulus package and pent-up consumer demand.

“I’m proud of our organization’s ability to remain agile and successfully pivot to aggressively evolve our digital capabilities, including a drive to enhance our e-commerce experience, increase omnichannel integration, maintain a flexible real estate portfolio with high lease optionality and diversify revenue streams to leverage our powerful brand, putting us in a positive position with favorable momentum. As a testament to the strength of the brand, we recently surpassed over 200 million furry friends sold since the company was established in 1997,” Ms. John continued.

“As we look forward, we believe the initiatives and investments that were put in place prior to the pandemic, and in many cases accelerated during the pandemic, are delivering improved results, which we expect to continue. While trends may moderate as the year progresses, thus far, sales in the current second quarter have remained strong, providing us the confidence to increase our profit guidance for this fiscal year. With a solid balance sheet and intense focus on our strategic priorities, we expect fiscal 2021 to represent a year of significant accomplishments and progress toward our objective to generate long term sustained profitable growth,” concluded Ms. John.

First Quarter 2021 Results (13 weeks ended May 1, 2021 compared to the 13 weeks ended May 2, 2020):

• Total revenues were $91.7 million, a 96.7% increase compared to $46.6 million in the fiscal 2020 first quarter and an 8.7% increase from $84.4 million in the fiscal 2019 first quarter;
  • Net retail sales were $89.2 million, a 95.4% increase compared to $45.6 million in the fiscal 2020 first quarter and a 10.1% increase compared to $81.0 million in the fiscal 2019 first quarter;
  • Consolidated e-commerce demand (orders generated online to be fulfilled from either the Company’s warehouse or its stores) rose 87% compared to the fiscal 2020 first quarter and 194% compared to fiscal 2019 first quarter;
  • Commercial and international franchise revenues were $2.5 million compared to $1.0 million in the fiscal 2020 first quarter and $3.3 million in the fiscal 2019 first quarter;
• Gross profit margin was 52.8%, the highest rate for a first quarter in the Company’s history, compared to 17.3% in the fiscal 2020 first quarter and 45.3% in the fiscal 2019 first quarter. The gross profit margin expanded by 3,550 basis-points compared to 2020 and 750 basis-points versus 2019 despite continuing impact from the pandemic and temporary stores closures due to local restrictions. The 2021 results reflected leverage on fixed occupancy expense and expansion in merchandise margin;
• Selling, general and administrative (“SG&A”) expenses were $35.2 million, or 38.4% of total revenues, compared to $26.7 million, or 57.3% of total revenues in the fiscal 2020 first quarter. The increase in SG&A expenses, as compared to the fiscal 2020 first quarter, was driven by the inclusion of store labor costs given the re-opening of substantially all of the Company’s North American store base;
• GAAP pre-tax income was $13.2 million compared to pre-tax loss of $18.7 million in the fiscal 2020 first quarter, an improvement of $31.9 million, and pre-tax income of $2.4 million in the fiscal 2019 first quarter, an improvement of $10.8 million;
• Adjusted pre-tax income was $12.3 million compared to adjusted pre-tax loss of $12.4 million in the fiscal 2020 first quarter;
• Income tax expense was $2.8 million with an effective tax rate of 21.3% compared to $2.5 million with an effective rate of (13.6%) in the fiscal 2020 first quarter. The tax rate in the fiscal 2020 first quarter included a $3.3 million non-cash income tax charge, or $0.22 per share, related to a valuation allowance against net deferred tax assets;
• Net income was $10.4 million, or $0.66 per diluted share, compared to net loss of $21.2 million, or ($1.42) per share, in the fiscal 2020 first quarter; and
• Adjusted net income was $9.5 million, or $0.60 per diluted share, compared to adjusted net loss of $12.4 million, or ($0.83) per share in the fiscal 2020 first quarter.

Store Activity:

• As of May 1, 2021, the Company had 355 corporately-managed stores. The Company noted that its locations in the United Kingdom and Ireland began the quarter closed due to COVID-related government mandates with the majority reopening on April 12, 2021. The Company maintains a high level of lease optionality with over 70% of its corporately-managed stores having a lease event within the next three years.
• Separately, 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 due to COVID for a portion of the 2021 first quarter.

Balance Sheet:

At the end of the fiscal 2021 first quarter, the Company had cash and cash equivalents totaling $45.9 million compared to $21.9 million at the end of the fiscal 2020 first quarter. The Company’s strong business performance and profitability in the fiscal 2021 first quarter helped drive the increase partially offset by the timing of inventory receipts, deferred rent payments for 2020 obligations and planned capital expenditures. Inventory at quarter end was $43.8 million, a $9.5 million decline from the fiscal 2020 first quarter. The Company expects its cash balance to fluctuate throughout the year as it builds its inventory levels and makes deferred rent payments. The Company is actively prioritizing opportunities to accelerate investments with the goal of continuing to drive profitable growth for the enhancement of shareholder value.

In the fiscal 2021 first quarter, capital expenditures totaled $0.5 million compared to $2.8 million in the fiscal 2020 first quarter.

Outlook:

While the Company had anticipated the reopening of its European stores and an increase in demand in North America as vaccines were more fully rolled out when it provided a

FAQ

What were Build-A-Bear's total revenues for Q1 2021?

Build-A-Bear reported total revenues of $91.7 million for Q1 2021, a 96.7% increase compared to the same quarter in 2020.

How did Build-A-Bear perform in terms of net income in Q1 2021?

The company reported net income of $10.4 million, or $0.66 per diluted share, compared to a net loss of $21.2 million in Q1 2020.

What is Build-A-Bear's profit guidance for the fiscal year 2021?

Build-A-Bear has increased its profit guidance for fiscal 2021, citing strong sales trends and a solid balance sheet.

What improvements did Build-A-Bear see in its gross profit margin?

Build-A-Bear achieved a record gross profit margin of 52.8% in Q1 2021, significantly higher than 17.3% in Q1 2020.

How has COVID-19 affected Build-A-Bear's store operations?

Some Build-A-Bear locations in Europe were closed due to COVID-19 restrictions for most of Q1 2021, impacting operations.