Build-A-Bear Workshop(BBW) - 2025 Q1 - Quarterly Report

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].