Build-A-Bear Workshop(US:BBW)2023-09-07 13:15Store Operations and Expansion - As of July 29, 2023, Build-A-Bear operated 351 corporately-operated stores globally, an increase from 346 stores as of July 30, 2022, with 47% in an updated Discovery format[88]. - The company plans to increase the number of stores in North America while reducing locations in Europe, expecting a net increase in total locations by the end of fiscal 2023 compared to fiscal 2022[85]. - Build-A-Bear's direct-to-consumer segment includes corporately-operated retail stores and e-commerce sites, contributing to sustained growth in consumer loyalty and engagement[80]. - The company has 76 partner-operated locations through a third-party retail model, which allows for capital-light expansion in the hospitality industry[90]. - Build-A-Bear aims to leverage its brand strength and multi-generational appeal to expand its total addressable market beyond children, targeting teens and adults[79]. - Build-A-Bear's expansion strategy includes non-traditional retail locations, with approximately 35% of total retail locations now in such settings[85]. - The company anticipates signing additional master franchise agreements in the future, which will support further market expansion[92]. Financial Performance - Consolidated revenues increased by 8.5% to $103.5 million for the thirteen weeks ended July 29, 2023, compared to $95.9 million for the same period in 2022[95]. - Net retail sales rose by $7.6 million, or 7.9%, driven by increased transactions in North American stores and growth in commercial and international franchising segments[95]. - Retail gross margin dollars increased by $8.3 million to $55.8 million, with a gross margin rate improvement of 440 basis points compared to the prior year[98]. - SG&A expenses were $48.3 million, or 44.2% of consolidated revenue, up from $42.3 million, or 42.0%, in the prior year, primarily due to higher wages and planned talent additions[100]. - Commercial revenue increased to $5.0 million for the thirteen weeks ended July 29, 2023, compared to $4.1 million in the same period last year, reflecting higher sales volume from commercial accounts[97]. - International franchising revenue rose to $0.8 million for the thirteen weeks ended July 29, 2023, compared to $0.7 million in the prior year, driven by increased sales from franchisees[97]. - For the twenty-six weeks ended July 29, 2023, net retail sales were $215.6 million, a 3.3% increase from $208.8 million in the same period last year[102]. - EBITDA for the thirteen weeks ended July 29, 2023 increased by $2.8 million to $13.5 million from $10.7 million for the same period in 2022, representing a 26.2% increase[110]. - For the twenty-six weeks ended July 29, 2023, EBITDA rose by $3.8 million to $35.9 million compared to $32.1 million for the same period in 2022, a 11.8% increase[110]. Cash Flow and Investments - Cash provided by operating activities increased by $25.1 million to $31.8 million for the twenty-six weeks ended July 29, 2023, compared to $6.7 million for the same period in 2022[115]. - Cash used in investing activities increased by $2.1 million to $6.1 million for the twenty-six weeks ended July 29, 2023, primarily due to increased capital expenditures[116]. - Cash used in financing activities increased by $13.7 million to $35.3 million for the twenty-six weeks ended July 29, 2023, driven by a special cash dividend payment of $22.1 million[116]. - The company expects to spend approximately $15 to $20 million on capital expenditures in fiscal 2023[122]. - As of July 29, 2023, the company had a consolidated cash balance of $32.6 million, with 85% domiciled in the U.S.[114]. - The company utilized $8.1 million in cash to repurchase 394,321 shares during the twenty-six weeks ended July 29, 2023[123]. Operational Challenges and Strategies - The company is focused on digital transformation, enhancing omni-channel capabilities to drive marketing and personalized experiences for consumers[83]. - Build-A-Bear plans to continue investing in innovative developments and strategic partnerships to support long-term profitable growth and shareholder value[86]. - The company is committed to maintaining a strong balance sheet while managing inflationary pressures and supply chain challenges[86]. - The company anticipates ongoing inflationary pressures, particularly through wage increases, but expects a reduction in freight costs compared to the prior year[124]. - The effective tax rate for the thirteen weeks ended July 29, 2023, was 20.4%, compared to 23.5% for the same period in 2022[101]. - EBITDA is used as a key operational efficiency metric, although it is not a GAAP measure, and is important for the company's incentive compensation structure[109].