Core Insights - Build-A-Bear Workshop is hosting its first-ever "Stuff You Love Cub Condo Event" on July 16, allowing guests to customize a Cub Condo box with various items and receive a 20% discount on the total purchase [1][2][3] Event Details - The event is exclusive to Bonus Club members and takes place at participating locations in the U.S. and Canada [1][2] - Guests can fill their Cub Condo with a Make-Your-Own furry friend, clothing, and accessories [1][2] - Parents or guardians over age 18 must enroll in the Build-A-Bear Bonus Club or provide a valid email and name to participate [2][3] Membership Benefits - Bonus Club members gain access to exclusive deals, earn points for future purchases, receive birthday treats, and get early notifications about new releases [2][3] - Members not near a physical store can enjoy free shipping on online purchases [2] Operational Insights - The event encourages adults and guardians to enroll online to expedite the checkout process [3] - A minimum purchase of one Make-Your-Own furry friend is required to accompany any additional items in the Cub Condo [3] - There is a limit of 10 stuffed Cub Condos per person, and the offer cannot be combined with other promotions [3] Company Overview - Build-A-Bear Workshop is a global brand focused on creating memorable experiences through customizable furry friends [4][5] - The company operates over 500 interactive locations and offers e-commerce options, including a "Bear-Builder" and other digital experiences [4][5] - For fiscal 2023, Build-A-Bear reported total revenues of $486.1 million [5]

Core Insights - Build-A-Bear Workshop has opened a new location in the historic Wrigley Building on Chicago's Magnificent Mile, marking a significant expansion in a key retail destination [1][2]. Company Expansion - The new Workshop at 410 Michigan Avenue represents a strategic move for Build-A-Bear as it enhances its presence in a globally recognized retail area [2]. - The location is designed to provide a unique experience for guests, allowing them to create personalized furry friends in a setting that combines historical significance with modern retail [2]. Grand Opening Celebration - A Grand Opening event is scheduled for July 13, featuring promotions such as free Lil Cub teddy bears for the first 50 guests, a ribbon-cutting ceremony, and themed activities [3]. - The event aims to attract visitors and create excitement around the new Workshop, reinforcing the brand's commitment to memorable experiences [3]. Unique Offerings - The Workshop will feature the signature Build-A-Bear Make-Your-Own experience, including the Heart Ceremony, and will offer Chicago-themed merchandise alongside the brand's core products [4]. - This location will cater to a diverse audience, including kids, teens, and adults, by providing a variety of furry friends and accessories [4]. Brand Overview - Build-A-Bear Workshop is a multi-generational global brand focused on creating memorable experiences through personalized products, with over 500 interactive locations worldwide [5]. - The company reported total revenues of $486.1 million for fiscal 2023, highlighting its strong market presence and consumer engagement [5].

Core Viewpoint - Build-A-Bear Workshop's recent quarterly results were disappointing compared to the previous year, leading to a significant stock price drop, which may present a buying opportunity given the company's strong fundamentals and growth prospects [4][6][14] Company Overview - Build-A-Bear Workshop, established in 1997 and headquartered in St. Louis, Missouri, combines retail and entertainment in the plush toy market, allowing customers to create personalized stuffed animals [5] - The company has expanded its offerings to attract a broader audience, including teens and adults, leveraging its brand's pop-culture appeal [5] Financial Results - In Q1 of fiscal 2024, revenues decreased by 4.4% and diluted earnings per share fell by 16.23% compared to the same quarter last year, attributed to non-recurring expenses [6] - Despite the decline, management maintains a full-year guidance projecting another record-breaking year, supported by a pristine balance sheet with a current ratio of 1.57 and minimal long-term liabilities [6][14] - The company has accelerated its international expansion, opening 37 new net stores in 2023, compared to only 9 in 2022 and a decrease in 2021 [6] Growth Strategy - Management expects mid-single-digit revenue growth, primarily driven by new partner-operated locations, which offer higher gross margins and lower capital expenditures compared to corporately-managed stores [7] - The company has initiated a quarterly dividend plan, reflecting confidence in its financial stability and future profitability [8] Share Buybacks - Between April 2021 and April 2024, Build-A-Bear reduced its outstanding shares by approximately 12.5%, with aggressive buybacks continuing into 2024 [9] - The ongoing buyback strategy is expected to positively impact earnings per share, especially given the current low P/E ratio [9] Brand Strength - The company is focused on enhancing brand loyalty and awareness through various initiatives, including a new campaign and collaborations for animated films [10] - A recent store opening in a high-traffic tourist area in Paris is expected to further strengthen brand visibility [10] Valuation - Current estimates suggest a fair stock price of $38.50 per share, based on conservative assumptions regarding growth and profitability [11][12] - The company's strong financial position and expected return on equity of around 10% indicate potential for significant shareholder returns [11][12]

Retail Expansion - Build-A-Bear Workshop opened a net of 37 retail experience locations in fiscal 2023 and expects to open at least 50 new locations in fiscal 2024, with over 35% of total stores now in non-traditional settings [80]. - As of May 4, 2024, Build-A-Bear had 357 corporately-managed stores globally, with 51% in an updated Discovery format [86]. - The company had 97 stores in operation at the end of the first quarter of 2024, up from 70 at the same time last year [87]. - The company anticipates signing additional master franchise agreements in the future, with 5 master franchise agreements currently covering 8 countries [88]. Financial Performance - Total revenues decreased by 4.4%, primarily due to a 6.9% decrease in North America, partially offset by a 14.1% increase in Europe [92]. - Net retail sales for the thirteen weeks ended May 4, 2024, were $107.9 million, a decrease of $4.2 million, or 3.8%, compared to the prior year [93]. - Retail gross margin dollars decreased by $2.7 million to $58.5 million, with a retail gross margin rate decrease of 40 basis points compared to the prior year [96]. - SG&A expenses increased to $47.6 million, or 41.5% of consolidated revenue, compared to $45.6 million, or 38.0% of consolidated revenue, in the prior year [97]. - EBITDA decreased by $4.1 million, or 18.3%, to $18.3 million from $22.4 million for the same period last year [100]. - Cash provided by operating activities decreased by $8.4 million to $10.4 million for the thirteen weeks ended May 4, 2024, compared to $18.8 million for the same period last year [105]. - International franchising revenue was $0.9 million, down from $1.3 million, primarily due to the timing of product shipments [96]. Shareholder Returns - The company returned $42 million to shareholders through special dividends and share repurchases, with a new quarterly cash dividend of $0.20 per share announced in March 2024 [82]. - The company utilized $9.2 million in cash to repurchase 343,406 shares during the thirteen weeks ended May 4, 2024, compared to $3.1 million for 132,385 shares in the same period of 2023 [115]. Cash Flow and Investments - Cash used in investing activities decreased by $0.6 million for the thirteen weeks ended May 4, 2024, compared to the same period in 2023, primarily due to lower capital expenditures on IT projects [108]. - Cash used in financing activities decreased by $11.1 million for the thirteen weeks ended May 4, 2024, mainly due to a special cash dividend of $22.1 million paid in the first quarter of 2023, compared to $2.9 million in the first quarter of 2024 [108]. - Capital spending for the thirteen weeks ended May 4, 2024, totaled $2.4 million, with an expected total of $18 to $20 million on capital expenditures for fiscal 2024 [114]. - As of May 4, 2024, the company had approximately $24.7 million available for borrowing under a secured revolving loan agreement with PNC Bank [110]. - The company had no outstanding borrowings as of May 4, 2024 [110]. Market and Operational Challenges - E-commerce sales have tripled since 2018, with 2023 sales reflecting a significant increase despite some softness during the year [81]. - The company’s cash flows have improved significantly, allowing for increased support of key initiatives while managing inflationary pressures and supply chain challenges [82]. - Build-A-Bear's digital transformation includes marketing and loyalty programs, contributing to the expansion of its total addressable market beyond children [81]. - The ongoing strategy focuses on expanding the brand through innovative experiences, including Build-A-Bear vending machines [80]. - The company emphasizes the importance of consumer engagement through personalized experiences and digital initiatives to capture a broader audience [79]. - Build-A-Bear's reliance on a few global supply chain vendors poses risks that could impact product availability and pricing [70]. - Inflationary pressures are expected to continue throughout fiscal 2024, particularly through wage increases, impacting business operations [116]. - The company is monitoring the impact of inflation on operations and may need to adjust prices to mitigate cost increases [116].

Core Viewpoint - Build-A-Bear Workshop, Inc. (BBW) has experienced a decline in financial performance, missing both revenue and earnings estimates in the latest quarterly results, leading to a significant drop in stock price [5][30]. Revenue Performance - BBW reported a 4.4% year-over-year decline in revenues, totaling $114.7 million, with net retail sales down 3.8% and consolidated e-commerce demand falling 11.3% [6][30]. - Commercial and international franchise revenues combined decreased by 13.7% compared to the same period last year, contributing only $6.9 million to total revenues [6][30]. Store Count and Demand - Despite an increase in store count and total square footage, BBW did not see a corresponding rise in revenues, indicating weakening demand for its products [8][10]. - The number of corporately-managed retail locations increased to 317 in North America and 357 in Europe, with a total of 77 franchised stores and 97 third-party retail locations [9]. Financial Metrics - Diluted EPS fell to $0.82 from $0.98, marking a decline of over 16%, primarily due to increased selling, general, and administrative (SG&A) expenses [14][30]. - SG&A expenses rose due to higher wages, inflationary pressures, and unfavorable expense timing, leading to lower operating income [14]. Management Outlook - Management remains optimistic, projecting revenue growth for the full year at a low- to mid-single-digit rate and plans to add at least 50 new locations [13][30]. Shareholder Returns - BBW has focused on returning value to shareholders through share buybacks, spending over $9 million on buybacks compared to $2.9 million on dividends, which is covered by cash flow from operations [18]. Valuation Perspective - BBW's stock is trading at a significant discount compared to the consumer discretionary sector median, but this may not indicate undervaluation when compared to its historical metrics [21][30]. - The company is not expected to outperform the broader market in the coming months due to deteriorating financial performance and an unstable macroeconomic environment [29][30].

Group 1: Promotions and Events - Build-A-Bear is offering a free Lil Cub teddy bear to the first 11 guests at participating locations on June 11, with additional Lil Cubs available for purchase at $11 each [1] - The company is celebrating International Day of Play with activities that promote creativity and fun for families and children in their workshops [3] Group 2: Philanthropic Efforts - Build-A-Bear Workshop has donated 11,000 reading buddy teddy bears to support childhood literacy and provide comfort to children and classrooms in need [2] - The Build-A-Bear Foundation focuses on children's literacy programs and has donated over $22 million and 1.5 million furry friends to charitable causes since 1997 [5] Group 3: Company Overview - Build-A-Bear is a global brand with over 500 interactive locations, emphasizing personal expression through creating custom teddy bears [4] - The company reported total revenues of $486.1 million for fiscal 2023, showcasing its strong market presence [4]

Financial Data and Key Metrics Changes - Total revenues for Q1 2024 were $114.7 million, a decrease of 4.4% year-over-year [8][20] - Pre-tax income was over $15 million, resulting in a pre-tax margin of 13.1% [8][20] - Earnings per share decreased by 16.3% to $0.82, reflecting the decline in pre-tax income [22] Business Line Data and Key Metrics Changes - Net retail sales decreased by 3.8%, with a significant 11.3% decline in web demand contributing to the overall revenue decline [20] - Commercial revenue, primarily from wholesale sales and international franchises, was down 13.7% due to timing of product shipments [21] Market Data and Key Metrics Changes - The company experienced solid repeat customer growth, but new customer acquisition, particularly online, faced challenges [20] - Web traffic was challenging during the quarter, with lower conversion rates impacting overall sales [36] Company Strategy and Development Direction - The company is focused on a three-pronged strategy: global expansion of experience locations, digital transformation, and leveraging brand awareness for growth [9][12][15] - Plans to open at least 50 net new experience locations through partner-operated, franchise, and corporately-operated models [10][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that Q1 results were slightly more challenging than anticipated but reiterated guidance based on expected execution of strategic plans [6][16] - The company expects total revenue to grow on a mid-single-digit basis for the full year, with growth weighted towards the back half of the year [23] Other Important Information - The company returned over $12 million to shareholders in Q1 through share repurchases and dividends [8][18] - The gross margin improved to 54.2%, an increase of 10 basis points year-over-year [21] Q&A Session Summary Question: Focus on Store Expansion - Management emphasized a focus on partner-operated expansion due to its asset-light model, which allows for less capital-intensive growth [28][29] Question: Web Demand Challenges - Management acknowledged ongoing web traffic challenges but noted strong conversion related to Valentine's Day products [36][39] Question: Expense Timing in Q1 - Elevated SG&A expenses in Q1 were attributed to marketing supplies and payroll timing, with expectations for normalization in future quarters [40][41] Question: International Market Strategy - The company aims to increase penetration in existing markets while also exploring new international opportunities [45] Question: Collaboration with Movie Releases - Management confirmed ongoing collaborations with theaters to drive traffic from movie releases to Build-A-Bear stores [48][49] Question: Confidence in Full-Year Guidance - Management expressed confidence in maintaining full-year guidance due to expected store expansions and easier comparisons in the latter half of the year [52]

Company Performance - Build-A-Bear reported quarterly earnings of $0.82 per share, missing the Zacks Consensus Estimate of $1.02 per share, and down from $0.98 per share a year ago, representing an earnings surprise of -19.61% [1] - The company posted revenues of $114.73 million for the quarter, missing the Zacks Consensus Estimate by 3.35%, and down from $120.05 million year-over-year [1] - Over the last four quarters, Build-A-Bear has surpassed consensus EPS estimates three times but has topped consensus revenue estimates only once [1] Stock Performance - Build-A-Bear shares have increased approximately 39.2% since the beginning of the year, significantly outperforming the S&P 500's gain of 10.4% [2] - The current consensus EPS estimate for the upcoming quarter is $0.60 on revenues of $112 million, while the estimate for the current fiscal year is $3.57 on revenues of $492.5 million [4] Industry Outlook - The Retail - Miscellaneous industry, to which Build-A-Bear belongs, is currently ranked in the top 35% of over 250 Zacks industries, indicating a favorable outlook [5] - Bath & Body Works, another company in the same industry, is expected to report quarterly earnings of $0.33 per share, with revenues anticipated to be $1.37 billion, down 2.1% from the year-ago quarter [6]

Financial Performance - First quarter revenues were $114.7 million, a decrease of 4.4% compared to the same period last year[1] - Net retail sales were $107.9 million, down 3.8%, while consolidated e-commerce demand decreased by 11.3%[2] - Pre-tax income was $15.0 million, representing 13.1% of total revenues, a decrease of 300 basis points from the previous year[2] - Diluted earnings per share (EPS) was $0.82, a decline of 16.3% compared to the prior year[2] - EBITDA for the 13 weeks ended May 4, 2024, was $18,261,000, compared to $22,357,000 for the same period in 2023, reflecting a decrease of 18.5%[22] - Retail gross margin for the 13 weeks ended May 4, 2024, was $58,453,000, representing a margin percentage of 54.2%, down from 54.6% in the same period last year[21] Shareholder Returns - The company returned $12.1 million to shareholders in the first quarter through share repurchases and dividends[1] Guidance and Future Plans - The company plans to open at least 50 new experience locations globally in fiscal 2024[7] - The company reaffirms its fiscal 2024 guidance, expecting total revenue growth on a low-to-mid-single-digit percentage basis[7] Cash and Assets - Cash and cash equivalents at the end of the first quarter totaled $38.2 million, an increase of 16.5% year-over-year[5] - Total current assets decreased to $123,850,000 from $127,772,000 in the previous quarter, a decline of 1.4%[19] - Total assets decreased to $265,276,000 from $272,325,000 in the previous quarter, a decline of 2.3%[19] Liabilities and Equity - Total liabilities decreased to $136,935,000 from $141,342,000 in the previous quarter, a reduction of 3.1%[19] - The total stockholders' equity decreased slightly to $128,341,000 from $129,662,000, a decline of 1%[19] Inventory and Locations - Inventory at quarter end was $64.0 million, reflecting a decline of 3.7% compared to the previous year[5] - The number of corporately-managed retail locations increased to 357, up from 349 year-over-year, indicating a growth of 2.3%[21] - The number of franchised stores increased to 77, up from 63 year-over-year, representing a growth of 22.2%[21] Capital Expenditures - Capital expenditures for fiscal 2024 are expected to be in the range of $18 million to $20 million[7] - Capital expenditures for the 13 weeks ended May 4, 2024, were $2,430,000, down from $3,065,000 in the same period last year, a decrease of 20.7%[21]

Core Viewpoint - Build-A-Bear Workshop (BBW) stock has increased over 30% year-to-date, outperforming major stock indexes due to consistent revenue and profit growth, stock buybacks, special dividends, and record gross and operating margins [3] - The company is projected to have a share value of approximately $41.34, indicating a potential upside of 43% from the current price of $30.00 [3] Company Overview - BBW is a retailer specializing in customizable stuffed animals, offering a unique customer experience with options for clothing, sounds, and scents [4] - The average transaction price in 2023 was $50.59, reflecting a 43% increase since 2013, which is higher than the typical inflation rate [4] - The company operates 369 corporately managed stores, 92 third-party stores, and 74 international stores, along with two e-commerce sites [4] Growth Opportunities - BBW has two primary growth avenues: the commercial segment and e-commerce sales [6] - The commercial segment, which includes wholesale activities and licensing, has seen sales grow from 2.08% in FY 2022 to around 3% in FY 2023, with a 61% growth in FY 2023 [6][8] - Third-party retail partnerships have resulted in 22 new store openings in FY 2024, with no closures, indicating strong potential for this segment [8][9] - E-commerce sales have tripled since 2018, driven by exclusive online offers and loyalty programs [9][10] Financial Performance - BBW has demonstrated robust financials with more than double the free cash flow over the past three years and increasing EBITDA and EBIT margins [12] - The company maintains low capital expenditures at 3.3% of revenue, contributing to its strong balance sheet and liquidity [12] Investment Thesis - The investment thesis is based on three principles: robust financials, a solid product with premium pricing, and significant growth potential [11] - The unique customization offerings allow BBW to charge premium prices, enhancing profit margins [12] - The company is expected to continue growing its high-margin segments, providing more cash flow for reinvestment or shareholder returns [13] Valuation - The estimated share price of $41.34 is based on a 10-year discounted cash flow analysis, projecting a CAGR of 4.5% driven by new store openings and revenue growth [14] - The valuation methods include an exit multiple of 5.7x EV/EBITDA and a growth perpetuity method, yielding implied share prices of $40.69 and $41.99 respectively [15]