Build-A-Bear Workshop Reports Second Quarter and First Half Fiscal 2024 Results and Reaffirms Annual Guidance

Rhea-AI Summary

Build-A-Bear Workshop (NYSE: BBW) reported strong Q2 fiscal 2024 results, with revenues up 2.4% to $111.8 million and diluted EPS increasing 12.3% to $0.64. The company reaffirmed its fiscal 2024 guidance, expecting growth in total revenues and pre-tax income. Key highlights include:

- Pre-tax income rose 10.2% to $11.5 million
- EBITDA increased 10.7% to $15.0 million
- Net new unit growth of 17 global experience locations
- $23.9 million returned to shareholders through share repurchases and dividends in H1

Despite challenges in web demand, Build-A-Bear's omni-channel strategy and global expansion continue to drive profitability. The company maintains a strong balance sheet with no borrowings under its credit facility.

Positive

• Q2 revenues increased 2.4% to $111.8 million
• Diluted EPS rose 12.3% to $0.64
• Pre-tax income grew 10.2% to $11.5 million
• EBITDA increased 10.7% to $15.0 million
• Net new unit growth of 17 global experience locations
• $23.9 million returned to shareholders in H1 fiscal 2024
• Commercial and international franchise revenues increased 44.8%
• Gross margin expanded by 50 basis points

Negative

• Consolidated e-commerce demand decreased 28.2% in Q2
• First half total revenues decreased 1.2% to $226.5 million
• First half pre-tax income margin decreased 130 basis points to 11.7%
• First half diluted EPS declined 6.8% to $1.46
• First half EBITDA decreased 7.4% to $33.3 million

Financial Analyst

Build-A-Bear Workshop's Q2 fiscal 2024 results show positive momentum. Revenue increased by 2.4% to $111.8 million, while pre-tax income rose 10.2% to $11.5 million. The 12.3% increase in EPS to $0.64 is particularly noteworthy. The company's ability to grow revenues and expand margins in a challenging retail environment is commendable.

The reaffirmation of annual guidance, including expectations for revenue and pre-tax income growth, suggests management's confidence in the business model. The planned expansion of at least 50 new experience locations globally indicates a strong growth strategy. However, investors should monitor the 28.2% decrease in e-commerce demand, as this could be a potential concern if the trend continues.

The company's capital return policy is robust, with $23.9 million returned to shareholders through share repurchases and dividends in the first half. This demonstrates a commitment to shareholder value and confidence in future cash flows.

Retail Industry Expert

Build-A-Bear's Q2 results highlight the resilience of experiential retail in a post-pandemic landscape. The company's success in driving foot traffic to physical locations, evidenced by the in-line net retail sales despite e-commerce challenges, underscores the enduring appeal of its interactive shopping experience.

The 44.8% increase in commercial and international franchise revenues is a standout performance, indicating strong brand appeal and successful partnerships. This diversification of revenue streams could provide a buffer against potential volatility in the core retail business.

The company's focus on omni-channel integration and global expansion through various store models (corporate, partner-operated and franchise) is a smart strategy to capture market share and reduce risk. However, the decline in e-commerce demand warrants attention and may require strategic adjustments to align with changing consumer behaviors in the digital space.

Market Research Analyst

Build-A-Bear's Q2 results reflect a shifting consumer landscape. The company's ability to grow overall revenues despite a significant drop in e-commerce demand suggests a successful pivot back to in-store experiences. This aligns with broader retail trends showing a resurgence in physical shopping post-pandemic.

The expansion of gross margins, particularly in Commercial and Retail segments, indicates effective pricing strategies and operational efficiencies. The improvement in SG&A expenses as a percentage of revenue demonstrates good cost management, which is important in the current inflationary environment.

The company's inventory management appears solid, with only a 1% increase year-over-year, suggesting a well-controlled supply chain. This is particularly important given the recent challenges in global logistics and supply chains faced by many retailers.

Looking ahead, Build-A-Bear's focus on experiential retail and global expansion could position it well to capitalize on the growing trend of consumers seeking unique, interactive shopping experiences.

ST. LOUIS--(BUSINESS WIRE)-- Build-A-Bear Workshop, Inc. (NYSE: BBW) today announced results for the second quarter of fiscal year 2024 ended August 3, 2024.

• Second quarter revenues were $111.8 million, an increase of 2.4%, pre-tax income was $11.5 million, an increase of 10.2%, and diluted earnings per share was $0.64, an increase of 12.3%
• The Company reiterates its fiscal 2024 guidance with expectations for growth in total revenues and pre-tax income, as well as net new unit growth of at least 50 experience locations globally
• Through first half fiscal 2024, the Company returned $23.9 million to shareholders through share repurchases and quarterly dividends

“With increasing momentum for our experience locations starting in the second quarter, and continuing into August, and with strong improvement in web demand on a third quarter-to-date basis, we remain confident in our annual guidance,” commented Sharon Price John, President and Chief Executive Officer of Build-A-Bear Workshop. “As the year progresses, we intend to stay focused on leveraging the power of the Build-A-Bear brand while driving profitable growth, and believe our omni-channel integration initiatives, combined with new global experience locations across our corporately-operated, partner-operated, and franchise store models, will continue to provide key opportunities to deliver on our stated objectives."

Voin Todorovic, Chief Financial Officer of Build-A-Bear Workshop added, “The Company grew total revenues, even with what we believe to be transitory web demand challenges, resulting in the most profitable second quarter in our history, and demonstrating the sustainability of our transformed business model. In conjunction with Build-A-Bear’s strong cash flow generation, and our confidence in the company's continued financial performance, year to date we have repurchased more than 5% of the shares outstanding at the start of fiscal 2024."

Second Quarter Fiscal 2024 Results

(13 weeks ended August 3, 2024, compared to the 13 weeks ended July 29, 2023)

• Total revenues were $111.8 million and increased 2.4%

• Net retail sales were $103.5 million and in-line with last year
• Consolidated e-commerce demand (online orders fulfilled from either the Company’s warehouse or its stores) decreased 28.2%
• Commercial and international franchise revenues were a combined $8.3 million and increased 44.8%

• Pre-tax income was $11.5 million, or 10.3% of total revenues, an increase of 70 basis points, driven primarily by a 50-basis-point increase in gross margin from an expansion in Commercial and Retail gross margins, and a 20-basis point improvement in Selling, General and Administrative (“SG&A”) expense, mainly from expense timing and leverage of corporate costs.

• Diluted earnings per share (“EPS”) was $0.64, an increase of 12.3%, reflecting higher pretax income and a reduction in share count, partially offset by a higher tax rate.

• Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was $15.0 million, an increase of 10.7%, and represented 13.4% of total revenues.

First Half Fiscal 2024 Results

(26 weeks ended August 3, 2024, compared to the 26 weeks ended July 29, 2023)

• Total revenues were $226.5 million and decreased 1.2%

• Net retail sales were $211.3 million and decreased 2.0%
• Consolidated e-commerce demand (online orders fulfilled from either the Company’s warehouse or its stores) decreased 19.6%
• Commercial and international franchise revenues were a combined $15.2 million and increased 10.9%

• Pre-tax income was $26.6 million, or 11.7% of total revenues, a decrease of 130 basis points, driven by a 170-basis point increase in SG&A expense, mainly from marketing, higher wage rates, and general inflationary pressures, partially offset by a 40-basis-point benefit between gross margin expansion, primarily from an increase in Commercial gross margin, and an increase in interest income.

• Diluted EPS was $1.46, a decline of 6.8%, reflecting lower pretax income and a higher tax rate, offset by a reduction in share count.

• EBITDA was $33.3 million, a decrease of 7.4%, and represented 14.6% of total revenues.

Store Activity

For the quarter, the Company had net new unit growth of 17 global experience locations, comprised of four corporately-managed locations, ten partner-operated locations, and three franchise locations. At the end of the second quarter, Build-A-Bear had 548 global locations through a combination of its corporately-managed, partner-operated, and franchise models. Globally, this reflects 361 corporately-managed stores, 107 partner-operated stores, and 80 franchise stores.

Balance Sheet

At second quarter end, cash and cash equivalents totaled $25.2 million, a decrease of $7.4 million, or 22.7%, compared to $32.6 million at second quarter-end last year. The Company finished the quarter with no borrowings under its revolving credit facility.

For the second quarter and first half of fiscal 2024, capital expenditures totaled $3.3 million and $5.7 million, respectively.

Inventory at quarter end was $67.0 million, reflecting an increase of $0.7 million, or 1.0% compared to $66.3 million at second quarter-end last year, in line with our expectations. The Company remains comfortable with the level and composition of its inventory.

Return of Capital to Shareholders

For the second quarter, the Company utilized $9.1 million in cash to repurchase 341,621 shares of its common stock and paid a $2.7 million quarterly cash dividend to shareholders. For the first half of fiscal 2024, the Company utilized $18.2 million in cash to repurchase 685,027 shares of its common stock and paid $5.6 million in quarterly cash dividends to shareholders.

Since second quarter-end through August 28, the Company utilized $1.7 million in cash to repurchase an additional 63,667 shares of its common stock, with $6.2 million remaining under the Board authorized $50.0 million stock repurchase program adopted on August 31, 2022.

2024 Outlook

The Company reaffirms its fiscal 2024 outlook with expectations of delivering growth in total revenues and pre-tax income compared to our 53-week fiscal 2023:

• Total revenue growth on a low-to-mid-single-digit percentage basis
• Pre-tax income growth on a low-single-digit percentage basis

For comparative purposes, the company notes that the additional week in fiscal 2023 was approximately $7 million in total revenues with an estimated 35% flow-through to EBITDA.

For fiscal 2024, as compared to the 2023 non-GAAP 52-week year, the Company expects:

• Total revenue growth on a mid-single-digit percentage basis
• Pre-tax income growth on a mid-single-digit percentage basis

In addition, for fiscal 2024, the Company reaffirms its expectations as follows:

• Net new unit growth of at least 50 experience locations, through a combination of corporately-managed, partner-operated, and franchised business models
• Capital expenditures in the range of $18 million to $20 million
• Depreciation and amortization in the range of $15 million to $16 million
• Tax rate to approximate 26%, excluding discrete items

The Company’s guidance considers a variety of factors including anticipated ongoing inflationary pressures and increased freight costs. Additionally, the Company’s outlook assumes no further material changes in the macroeconomic or 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 p.m. ET on Thursday, August 29, 2024, until 11:59 p.m. ET on September 5, 2024. The telephone replay is available by calling (412) 317-6671 (toll/international) or (844) 512-2921 (toll free). The access code is 13747870.

About Build-A-Bear

Since its beginning in 1997, Build-A-Bear has evolved to become a beloved multi-generational brand focused on its mission to “add a little more heart to life” where guests of all ages make their own “furry friends” in celebration and commemoration of life moments. Guests create their own stuffed animals by participating in the stuffing, dressing, accessorizing, and naming of their own teddy bears and other plush toys based on the Company’s own intellectual property and in conjunction with a variety of best-in-class licenses. The hands-on and interactive nature of our more than 500 company-owned, partner-operated and franchise experience locations around the world, combined with Build-A-Bear’s pop-culture appeal, often fosters a lasting and emotional brand connection with consumers, and has enabled the Company to expand beyond its retail stores to include e-commerce sales on www.buildabear.com and non-plush branded consumer categories via out-bound licensing agreements with leading manufacturers, as well as the creation of engaging content via Build-A-Bear Entertainment (a subsidiary of Build-A-Bear Workshop, Inc.). The brand’s newest communications campaign, "The Stuff You Love," commemorates more than a quarter-century of creating cherished memories worldwide. Build-A-Bear Workshop, Inc. (NYSE: BBW) posted consolidated total revenues of $486.1 million for fiscal 2023. 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 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 18, 2024 and other periodic reports filed with the SEC which are incorporated herein.

All 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 3,			% of Total				July 29,			% of Total
					2024			Revenues (1)				2023			Revenues (1)
Revenues:
Net retail sales				$	103,455			92.5			$	103,465			94.7
Commercial revenue					7,294			6.5				4,978			4.6
International franchising					1,049			1.0				782			0.7
Total revenues					111,798			100.0				109,225			100.0
Cost of merchandise sold:
Cost of merchandise sold - retail (1)					47,607			46.0				47,710			46.1
Cost of merchandise sold - commercial (1)					3,008			41.2				2,425			48.7
Cost of merchandise sold - international franchising (1)					614			58.5				454			58.1
Total cost of merchandise sold					51,229			45.8				50,589			46.3
Consolidated gross profit					60,569			54.2				58,636			53.7
Selling, general and administrative expense					49,212			44.0				48,324			44.2
Interest (income) expense, net					(188	)		(0.2	)			(167	)		(0.2	)
Income before income taxes					11,545			10.3				10,479			9.6
Income tax expense					2,767			2.5				2,141			2.0
Net income				$	8,778			7.9			$	8,338			7.6
Income per common share:
Basic				$	0.64						$	0.58
Diluted				$	0.64						$	0.57
Shares used in computing common per share amounts:
Basic					13,665,958							14,419,365
Diluted					13,685,801							14,500,971
(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)
					26 Weeks							26 Weeks
					Ended							Ended
					August 3,			% of Total				July 29,			% of Total
					2024			Revenues (1)				2023			Revenues (1)
Revenues:
Net retail sales				$	211,323			93.2			$	215,561			94.0
Commercial revenue					13,278			5.9				11,665			5.1
International franchising					1,927			0.9				2,049			0.9
Total revenues					226,528			100.0				229,275			100.0
Costs and expenses:
Cost of merchandise sold - retail (1)					97,022			45.9				98,614			45.7
Cost of merchandise sold - commercial (1)					5,541			41.7				5,783			49.6
Cost of merchandise sold - international franchising (1)					1,231			63.9				1,339			65.3
Total cost of merchandise sold					103,794			45.8				105,736			46.1
Consolidated gross profit					122,734			54.2				123,539			53.9
Selling, general and administrative expense					96,774			42.7				93,950			41.0
Interest expense (income), net					(614	)		(0.3	)			(243	)		(0.1	)
Income before income taxes					26,574			11.7				29,832			13.0
Income tax expense					6,337			2.8				6,886			3.0
Net income				$	20,237			8.9			$	22,946			10.0
Income per common share:
Basic				$	1.47						$	1.59
Diluted				$	1.46						$	1.57
Shares used in computing common per share amounts:
Basic					13,795,958							14,438,611
Diluted					13,845,309							14,630,089
(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)
		August 3,				February 3,				July 29,
			2024				2024				2023
ASSETS
Current assets:
Cash, cash equivalents and restricted cash		$	25,163			$	44,327			$	32,642
Inventories, net			66,977				63,499				66,329
Receivables, net			12,075				8,569				13,120
Prepaid expenses and other current assets			13,258				11,377				11,898
Total current assets			117,473				127,772				123,989
Operating lease right-of-use asset			94,158				73,443				70,915
Property and equipment, net			53,303				55,262				50,435
Deferred tax assets			8,694				8,682				6,828
Other assets, net			5,831				7,166				6,246
Total Assets		$	279,459			$	272,325			$	258,413
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	17,542			$	16,170			$	15,598
Accrued expenses			13,343				19,954				28,347
Operating lease liability short term			30,110				25,961				27,194
Gift cards and customer deposits			15,828				18,134				18,305
Deferred revenue and other			3,490				3,514				4,444
Total current liabilities			80,313				83,733				93,888
Operating lease liability long term			71,993				57,609				55,368
Other long-term liabilities			1,362				1,321				1,291
Stockholders' equity:
Common stock, par value $0.01 per share			136				142				145
Additional paid-in capital			62,831				66,330				66,773
Accumulated other comprehensive loss			(11,913	)			(12,082	)			(12,017	)
Retained earnings			74,737				75,272				52,965
Total stockholders' equity			125,791				129,662				107,866
Total Liabilities and Stockholders' Equity		$	279,459			$	272,325			$	258,413

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 3,				July 29,				August 3,				July 29,
					2024				2023				2024				2023
Other financial data:
			Retail gross margin ($) (1)	$	55,848			$	55,755			$	114,301			$	116,947
			Retail gross margin (%) (1)		54.0	%			53.9	%			54.1	%			54.3	%
			Capital expenditures (2)	$	3,270			$	3,073			$	5,700			$	6,138
			Depreciation and amortization	$	3,636			$	3,229			$	7,294			$	6,309
Store data (3):
			Number of corporately-managed retail locations at end of period
			North America										321				314
			Europe										40				37
			Total corporately-managed retail locations										361				351
			Number of franchised stores at end of period										80				64
			Number of third-party retail locations at end of period										107				76
			Corporately-managed store square footage at end of period (4)
			North America										730,408				726,857
			Europe										55,535				52,763
			Total square footage										785,943				779,620
(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 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				26 Weeks				26 Weeks
							Ended				Ended				Ended				Ended
							August 3,				July 29,				August 3,				July 29,
								2024				2023				2024				2023
Income before income taxes (pre-tax)							$	11,545			$	10,479			$	26,574			$	29,832
Interest (income) expense, net								(188	)			(167	)			(614	)			(243	)
Depreciation and amortization expense								3,636				3,229				7,294				6,309
Earnings before interest, taxes, depreciation and amortization (EBITDA)							$	14,993			$	13,541			$	33,254			$	35,898

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240828889264/en/

Investor Relations Contact

Gary Schnierow, Vice President, Investor Relations & Corporate Finance

garys@buildabear.com

Media Relations Contact

pr@buildabear.com

Source: Build-A-Bear Workshop, Inc.

FAQ

What were Build-A-Bear Workshop's (BBW) Q2 2024 earnings results?

Build-A-Bear Workshop reported Q2 2024 revenues of $111.8 million, up 2.4% year-over-year, and diluted earnings per share of $0.64, a 12.3% increase from the previous year.

How many new stores did Build-A-Bear Workshop (BBW) open in Q2 2024?

Build-A-Bear Workshop had a net new unit growth of 17 global experience locations in Q2 2024, including four corporately-managed, ten partner-operated, and three franchise locations.

What is Build-A-Bear Workshop's (BBW) outlook for fiscal 2024?

Build-A-Bear Workshop reaffirmed its fiscal 2024 guidance, expecting low-to-mid-single-digit percentage growth in total revenues and low-single-digit percentage growth in pre-tax income compared to fiscal 2023.

How much did Build-A-Bear Workshop (BBW) return to shareholders in the first half of fiscal 2024?

Build-A-Bear Workshop returned $23.9 million to shareholders through share repurchases and quarterly dividends in the first half of fiscal 2024.

What was Build-A-Bear Workshop's (BBW) e-commerce performance in Q2 2024?

Build-A-Bear Workshop's consolidated e-commerce demand decreased by 28.2% in Q2 2024 compared to the same period last year.