Release Date: May 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Build-A-Bear Workshop Inc (BBW, Financial) maintained a higher level of profitability compared to any pre-COVID first quarter since its IPO in 2004.
- The company returned over $12 million to shareholders in the first quarter through share repurchases and quarterly dividends.
- Build-A-Bear Workshop Inc (BBW) opened five new partner-operated locations in the first quarter, expanding its global footprint.
- The company is on track to open at least 50 net new experience locations this year through various business models.
- Build-A-Bear Workshop Inc (BBW) has launched successful new products, including licensed items like Pokemon and TikTok trend animals, contributing to product expansion.
Negative Points
- First quarter revenue decreased by 4.4% year-over-year, totaling $114.7 million.
- Web demand declined by 11.3%, significantly contributing to the overall revenue decrease.
- SG&A expenses increased to 41.5% of total revenues, up from 38% in the previous year, driven by higher wages and inflationary pressures.
- The company experienced a negative impact of about $2 million due to a calendar shift affecting the timing of expenses.
- There were challenges in new customer acquisition, particularly online, impacting overall sales performance.
Q & A Highlights
Build-A-Bear Workshop Inc (BBW) Q1 2024 Earnings Call Highlights
Q: Congrats on a lot of the positives here. When you look at your own store expansion, what are your focus on in terms of those stores? I know that you're doing [50] in total but when you look at outside of the commercial and the franchisee, what is kind of focus for your own stores here at 2024 and beyond?
A: When you say our own stores. Eric, just for clarification, you're talking about corporately operated versus partner operated?
Q: Yes.
A: Yeah, we do have some expansion plans for corporately operated. But as we noted on the call, and as we've said in many of our previous calls, we're focused more on our patent partner operated expansion because as an asset-light model. As you know, that's an example of that is our Great Wolf Lodge location, a really great one where and they those partners purchased the fixtures and we train their employees to be Bear builders and to have a seamless to it from a consumer perspective operation that looks and feels just like a Build-A-Bear, but then we sell it on a wholesale level. The product to them are Build-A-Bear product and then they benefit from our marketing, et cetera. So those are those are very good financials. I think, it's a very good financial model for us in that it does take less capital for us to expand the Build-A-Bear footprint. And the important piece of that besides the obvious expansion of a brand and the potential for sale is that store experience is such a critical part of our ecosystem. That's how we build this power of the brand that we keep referring to It. Is yet to come in and tissue, and Stefan will go to the heart ceremony and then you're a fan for a long time, in some cases for life fits that memory is so indelible for consumers.
Q: Actually, let's expand a little bit on that. In terms of the non corporate locations, the franchisees and the international expansion, I know there's an initial ramp where they get the product and the inventory historically, how quickly do those stores start to contribute start to really start to grow and roll out as you head into new areas like Italy, Colombia, I'm sure there are other international territories that you're looking at right now?
A: Yes, we are looking at other international territories, we we've had a mantra inside the company for many years that a fuzzy hug is understood in every language and kids seem to understand Build-A-Bear and as well as adults interestingly, but we do believe there is extended opportunity, this is interesting, though, your question and that these are partners. So we have to work hand in hand. That's not those aren't unilateral decisions. Some of these are shop-in-shops with other relationships, so GOC proceeds, that relationship is actually in conjunction with our relationship with family. So some of those stores or shop-in-shops inside of family toy stores as an example. So when there's a pre-existing infrastructure, we can roll a lot faster. The example in Colombia is actually with a relationship with many other countries inside of South America, we have a chiller franchise. But beyond that, this is just a stake in the ground in an entire continent, and that was just the first store. So that's not just the Columbia relationship. So specifically, it's a sadly at an it depends answer, but there are requirements and with from a partnership perspective, for the relationship, when we look at those contracts of what the expectations are, but a lot of it is in their hands is it is their capital.
Q: Wondering if you could speak to the what demand challenges and whether you expect that could persist? And also just kind of follow up on those some point, I think you mentioned at a high level on that trends that you saw with total transactions versus average transaction size, if you could cover that again.
A: Sure. So definitely our web traffic has been challenging during the quarter. And you know, some of those trends continue to persist in so far in the quarter to date basis. But again, even within the quarter. Some of those challenges that we saw from the web traffic perspective, especially in February, we saw very strong conversion related to our Valentine's Day product, and we saw a growth in dollars per transaction for the rest of the quarter are still we have challenging traffic, even though we improved our dollar per transaction on a smaller level, our conversion was lower and not enough to offset some of the challenges from the traffic perspective. We continue to work on different initiatives to improve our traffic opportunities and drive more visits to the website. But again, we may have some choppiness throughout the year as we continue to focus on this particularly challenging piece of our business at this point. As we think about some of the dollars per transaction that we are seeing and the traffic across the Board, [RDPT] was slightly lower than last year. Some of that you know could be related to the overall economic environment. There may be also some trade-offs. As you know, we continue to see very strong DPT in our locations, but there may be some shifting, but people are more focused on the entry price points and some lower price product compared to what was done in the past. Again, speaking from the overall economic situation, but we feel good about the engagement we are seeing with our guests and the overall things that we have in the line for the rest of the year.
Q: I guess as a follow-up, if you could just touch on what drove that elevated or unfavorable expense timing in Q1 and maybe how we should expect expenses to trend in the coming quarters? Would be expect kind of return to normalcy?
A: Yes. So timing of SG&A expenses, as we called out in Q1, is a little bit more elevated as we had some incremental expenses related to signing in marketing supplies related to the start of the new campaign, the stuff you love. We also had some timing of certain payroll expenses Q1 to Q2. And as I mentioned in the call, we expect SG&A on a full year basis to be at or below last year rates. So we feel good about the overall SG&A on a full-year basis. Just there is noise created with the calendar shift and couple of these things that I highlighted that's creating timing between quarters.
Q: Congratulations on the international expansion in the markets. I guess my question is over the course of the year, should we expect that the new international markets that are being penetrated will largely focus on building density in fewer markets or the goals to really increase on a geographic level more broadly?
A: Well, the short answer is both. And you know, our goal is really to increase penetration in the existing markets. And just as a reminder, our first store in Italy open late September of last year. So just to
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
