Q1 2020 Build-A-Bear Workshop Inc Earnings Call

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It is now my pleasure to introduce your host Allison Malkin of I see our thank you you may begin.

Good morning, Thank you for joining us with me today, our Sharron price, John CEO and Voin Todorovic <unk> CFO for today's call Sharon will begin with a discussion over first quarter 2020 performance as well as our positioning and actions and respond to the code at 19 pandemic. After Weibo reviewer Delphi.

Financials in more detail.

We will then open the call to take your question. We ask that you limit your questions to one question and one follow up this way we can get to everyone's questions. During that's one hour call.

Ill free to re queue. If you have further question members of the media who may be on our call today. She contact us. After this conference call with your question. Please note the call is being recorded and broadcast live via the Internet. The earnings release is available on the Investor Relations portion of our corporate website a replay.

<unk> of both our call and webcast will be available later today on the IR site.

The covert 19 pandemic convenient continues to have a significant impact on our operations cash flow and financial position. The I'm, sorry, I'm dynamic nature of carrying conditions and its ongoing impact could materially alter our outlook.

I will remind everyone that forward looking statements are inherently subject to risks and uncertainties actual results could differ materially. So currently anticipated due to a number of factors, including those set forth in a risk factor section in the Companys annual report on form 10-K, we undertake.

No obligation to revise any forward looking statement.

Now I would like to turn the call or because Sharon.

Good morning, Thanks for joining us today.

I would like to update you on the current status of our business and our plans for the coming month.

As you're well aware globally covert 19 has disrupted the way family friends and colleagues interact with each other including how they shop and what they do for entertainment.

This has significantly impacted not only our business, but the global economy overall.

However, we believe that build a bear is well positioned to better manage through this crisis and to emerge for for future growth. If we work to accelerate strategic changes that have been previously initiated.

In fact, it's we've consistently shared we've been executing a strategy to build on our brands strengthen diversify our retail channel expand digitally and add incremental profitable revenue stream.

Our goal has been to leverage the synergies between retail and intellectual property initiative to profitably grow the entire business.

We have been methodically upgrading system, adding talent and aggressively managing change within the organization given the backdrop of a rapidly evolving retail consumer and geopolitical environment.

That fluidity and flexibility has never been more relevant then in the circumstances that we currently face.

In addition to a sound strategy upgraded foundation and enhanced infrastructure on the onset of the pandemic. We ran a positive cash position when no borrowings on our credit facility.

We believe that our strategic repositioning that has been underway will be vital to dividing and ultimately driving in the new world normal. Our advantages include our powerful brand with high consumer awareness and affinity a passionate and engage consumer base with over 8 million accounts opt in for marketing communication Hi.

Yeah, Optionality on our retail store portfolio with over 70% of leases up for renewal in the next three years.

A rapidly growing E commerce segment that is leveraging the expanding digital economy, and reaching a broader demographic of affinity and adult gifting segment.

And the groundwork in place to further leverage our intellectual property through new revenue streams, including outbound licensing wholesale and entertainment.

As we discussed on our year end call in March in addition to a stronger cash position. We ended fiscal 19 with growth in total revenues and improved profitability.

We were building on the momentum of last year's fourth quarter. As we started fiscal 2020 with a positive sales trend and we had expected to deliver profit growth for the year.

As the severity of covert 19 became apparent we put plans in motion to comply with new international governmental recommendation regarding health and safety, which led to the temporary closure of all of our North American and European Corporately managed retail stores.

This in turn necessitated the furlough of over 90% of our workforce.

And a reduction in salaries for all other stuff.

We moved to work from home model for our remaining corporate associates and quickly instituted aggressive cash preservation and extensive Virgin policy.

Simultaneously, we shifted our focus and remain bring resources to support our ecommerce channel.

Since the store closures, we have seen triple digit ecommerce growth with high volume of key affinity products, including record setting demand. When we launched an initial offering other furry friend based on the child from the Disney plus series Amendable oriented.

We quickly modified process season enhanced capabilities to more efficiently respond to the digital the man, which I will discuss further in detail in a moment.

Well, we made meaningful progress in moving forward, we were not able to offset the complete closure of our store base.

Historically E Commerce has represented less than 10% of our revenues so even with aggressive growth in that channel, we will still need to reopen a significant number of stores to regain and regain traffic patterns to return to position of overall growth and profitability with the current business model and mix.

Our expectations for the balance of the year continue to evolve, it's we collect additional data and monitor government decisions and actions.

Let me update you on progress through our retail stores and retail portfolio. He digital initiative.

Cash generation and preservation.

First as it relates to our retail stores, which as noted our vital component of our revenue stream.

We have started to reopen retail stores on a staggered basis in select areas with the goal of delivering a modified version of our beloved retail experience recognizing the new guidelines that are now standard to essentially all public businesses.

In preparation for the Reopenings, we modified our in store experience to accommodate these new standards, including.

Limited occupancy based on store size to allow for social distancing protective face covering four store associates.

For markings directional signage and new processes to enter and interactive areas such as the stuff is stuffing station to limit personal contact.

Heightened sanitation processes throughout the store and associate training focused on the consistent delivery of these new requirements and safety practices.

Thus far with approximately 40 stores reopened the modifications have been well received on the based on the positive feedback from both our associates and I guess.

We have seen varying levels of business recovery compared to the prior year at stores that have reopen with tourist locations generally faring better than traditional mall sites.

Most recently a limited number select locations have also been impacted by protest and social unrest in certain areas.

Separately in the UK. The government has announced June 15, as a day for retailers to begin to reopen and we are planning accordingly.

At this time, we expect to continue to rollout store openings as restrictions east why we monitor the business rebounded consumer traffic patterns over the upcoming weeks.

As I previously mentioned, we began the year with high levels of lease optionality with over 70% of locations, having Elisa then in the next three years.

A strategic position, we took as we recognize the shifts that had been underway in consumer shopping patterns away from traditional malls into places where families increasingly spend time, including the digital space.

We've been working to leverage this position with our landlords to achieve more favorable inflexible times.

And the discussions and negotiations with landlords, we believe that build a bear is perceived to be evaluating it but it's also seem to be a part of the long term outlook and the new retail landscape.

Thus far we have maintained the lease optionality that has been so important to our strategy to diversify and evolve our real estate portfolio and we'll continue to aggressively manage this process.

There are many scenarios that we continue to review and modify which may include selective store closures. If terms are not able to reflect the impact of reduced traffic and changing all performance going forward.

Turning to our digital progress, including ecommerce the investments in platforms systems and talent that we systematically made in recent years enabled us to deliver a 10th consecutive quarter of double digit growth in online self.

After the temporary store closures the rate of increase grew to triple digit rates on a sustained basis.

With reliance on our ecommerce channel is our primary revenue source. During this crisis. We took several actions. These include reworking processes at our fulfillment center to incorporate recommendations of governmental unhealthy agencies.

While this initially negatively impacted our order processing time in terms it and as the teams adapted to the new requirements. We also made additional changes to improve our processing.

Such is tightening Ari with our heightened ecommerce that volume we quickly made modifications to our fulfillment approach to expand dedicated assembly lines utilizing simplified bundle offers specifically designed to service certain high demand items, which increased throughput and overall efficiency.

After recording the largest single ecommerce demand day in our history with initial quantities of the stuffed animal version of the child from the Disney plus series, the man Lorianne, which sold out within hours. We added new features to support high demand product launches.

These include of fire virtual waiting room, and a chat thought.

We have now had two additional sold out of instead of the child, notably the second event set another record demand day already eclipsing the level previously set in the first quarter.

We intend to use these enhancements to support additional business capabilities going forward, including ongoing releases of the child and other affinity products.

In addition, we expedited the infrastructure to be able to buy online ship from store in order to supplement ecommerce fulfillment, while leveraging labor that we would already have available in retail stores after they've reopened.

We continue to review all aspects of ecommerce with the goal of driving further growth on both a short and long term basis, and we expect as we expect demand to remain high even with the reopening of stores.

Separately as a tool for consumer engagement and platform for key digital marketing messages. We introduced a program called workshop Wednesdays as a resource your family's defined entertainment activities and fun product ideas.

This platform further positions build a bear in entertainment space suggest options for gift, giving and increases awareness of key products, while helping to stay connected to our value guess.

We garnered almost 100 million media oppressions, when we announced workshop Wednesdays, indicating the continued interest in our brand.

Importantly, the concept is one that we plan to transfer to our retail channel in the future to increase destination driven traffic when appropriate.

We also plan to continue key actions that were immediately institute did to address the initial crisis.

Including a sort of cash preservation tight inventory management revise marketing strategy and a reduced workforce.

As we look forward to the balance of the year, we're focused on accelerating our digital transformation inclusive of ecommerce content development CRM advancement and entertainment platform.

While we are actively executing a staggered store reopening plan, we believe that our future state will reflect the business transformation that it's been the underlying driver of our strategic plan.

In closing these are clearly unusual times that necessitate innovation and flexibility as well as a reevaluation of a wide array of previously held business model beliefs and corporate constructs.

Even with that standard I continue to believe that our stated strategy of evolving our company to better monetize the in eight value of our brand across more channel to more consumers remains directionally on course.

In fact shifting our business focus to the acceleration of our digital transformation will be key to our future as new consumer shopping patterns and preferences are expected to also accelerate and an even more rapid rate doing online space.

Build a bear has weathered storms before we have proven ourselves to be a resilient organization with an authentic emotional brand that continues to be meaningful to consumers.

And while I am truly moved by the devastating impact of this pandemic I still have great hope for the future and remain genuinely proud and grateful to not only lead but to be a part of a team that is proven time and again they are passionately believers in this company and that this brand and this brand.

By facing in emerging from a wide variety of challenges in recent years.

I'm also pleased that through the efforts of the build a bear foundation, we've been able to support organizations that had been providing assistance to those in needs. During this time.

Finally, even as life and business move forward in a very different world recent events clearly indicate that we are likely to face continued uncertainty on many fronts.

Our goal is to emerge in a position of growth.

Understanding the need to remain flexible while accelerating these key initiatives of our strategy, we mentioned to take us into the future whatever form that may take.

For our company, it's circles back to our mission statement of adding a little more heart to life.

And choosing to believes that people will still want to experience enjoy and special moment by creating their own furry friend for life and having the comfort of a Teddy bear hug, maybe now more than ever.

And now I'd like to turn the call over to Voin to review our financials in more detail.

Thanks, Sarah and good morning, everyone.

I would also like to start my thinking our team and their dedication to our company throughout this challenging period.

Not only have they dealt with the store closures are headquartered associates transition to a full work from home model and our warehouse employees, who have worked feverously to modify processes and fulfill our borders and record level.

The reopening of approximately 35 locations, we have begun to welcome back some store employees, who work for a lot.

I'm proud of how our team has managed thus far for this time.

As Sharon mentioned, the first quarter ended very differently than it began.

At the start of the it'll be expected to report profitability above 2019 ended at time of our last earnings call me better aligned with that goal.

That said, we the spread over the quarter on the virus, we made it difficult decision for temporarily clause all of our stores starting on March 18.

At the same time.

Implemented several initiatives to provide financial flexibility to manage through this crisis, while evolving our business to further capitalize on and expand our omni channel capabilities to meet the needs of our guests.

As it relates to containing cost and as previously announced during the first quarter, we took several actions.

Including Furloughing over 90% of our employees and reducing compensation by 20% world employees not than temporarily including got executive officers [noise].

We also eliminated the annual cash retailers for all non employee directors serving on the board of the first for the first quarter.

In addition, we delayed full payment of bonuses earned by executive officers for fiscal 2019, and 80% of such bonuses for associates as well is delayed the payment of our contribution to our formal one k. plan as we shared in 8-K filed with the FCC on March 27.

[noise] separately, we generated savings from a reduction in marketing expenses and the extension of payment terms among the among other areas.

As of the end of first quarter, we have not made any cash payments for April store right.

And the Bobby expense was appropriately recorded via <unk> active discussions with our landlords to obtain some combination of rent the basement and deferral on an immediate bases and more favorable and flexible terms going forward.

As shown in though that we maintain high lease option LT with over 70% of out of leases coming up for renewal in the next three years in.

Including approximately 520 locations with natural lease events before the end of this fiscal year.

Well the vast majority of these locations have historically been profitable.

We have the flexibility to accelerate store closings.

If store traffic and profitability do not meet our expectations going forward.

Over the past few weeks via reopened approximately 35 stores, but a governmental orders have been lifted or relax and we currently expect to have the majority of our locations open by the end of second quarter.

That's fair I noted most recently a handful of our stores like negatively impacted by local protests and social unrest.

We continue to run multiple scenarios and to maintain tight control of expenses.

The situation remains fluid and that's a rollout schedule may change.

As we opened stores, we are monitoring traffic patterns and sales recovery.

In may.

While relatively small number reopened stores recaptured approximately 65% over their sales from prior year.

This rate improves the vet order fulfillment from our buy online ship from store program is added on.

Notably in the past two weeks the sales performance has improved.

Although there is a wide variability with tourist locations meaningfully outperforming the average.

The investments to be for me to elevate and upgrade our website and ecommerce platform along with our partnership with Salesforce and technology upgrades have been critical as we navigate through this time.

Unlike many other retailers E commerce is a highly profitable channel for us as we benefit from low return rates and minimal discounts.

In fact EBITDA margin in this channel is better than the higher end of our store for vault EBITDA contribution margin.

Both store closures are rep demand has gained momentum posting growth it's triple digits rates.

Moving now to review of the preliminary first quarter results.

I want to note that our GAAP results include $6.3 million in noncash pretax expenses comprised mainly of estimated store asset impairments.

Foreign exchange losses, due to the fluctuation of the British pound to the U.S. dollar.

And we also recognize that the additional bad debt expense.

In addition, we recorded $3.3 million tax valuation allowance taken on our deferred tax asset, which also has no impact to cash flow.

Well my remarks will focus in our adjusted the results you can find our GAAP results and the reconciliation of GAAP results to adjusted results in our press release that the issued earlier this morning.

In total for the first quarter total revenues were $46.6 million compared with $84.4 million in the first quarter fiscal 2019.

Reflecting the temporary closure of our stores midway through the quarter.

Retail gross margin was significantly lower compared to prior year as it includes full occupancy costs for 13 weeks, while the only had sales from stores for approximately six weeks.

However, during the quarter merchandise margin was up compared to the prior year driven by low promotional activity on our website.

As you name it was $26.7 million down $9.1 million from the first quarter of 2019.

Driven by lower store and corporate payroll due to our corporate 19 mitigation efforts during the last six weeks of the quarter.

As Jim they include approximately $3 million in payroll expenses related to the pay made to furloughed employees across countries, which we expect will be partially offset by government reimbursement.

In addition, we recorded bad debt expense of $600000.

Adjusted pretax loss was $12.4 million. This compares to pretax income of $2.4 million in the prior year.

Turning to the balance sheet.

We ended the first quarter with cash and cash equivalents of $21.9 million with no borrowings on our credit facility.

This represents an increase of $1.6 million compared to the end of the first fiscal quarter in 2019.

We ended the first quarter with approximately $53 million of consolidated inventories down about 5% from the end of the 2019 first quarter.

We are comfortable with both the composition and level of our inventory.

We will continue to manage our inventory prudently as business conditions evolve and normalize and we currently expect inventory to be down at the end of the fiscal year compared to fiscal 2019 Europe.

We will continue to stay focused on the working capital to ensure that we have financial flexibility to navigate during this unprecedented type.

We believe beat our current cash position.

And the actions taken to reduce expenses with continued disciplined expense in cash management, we will have sufficient liquidity for the next 12 months.

Separately as we reported yesterday, we amended our credit facility with U.S. Bank, which will now expired on September thirtyth of this year.

Although we do not expect to draw on the credit line during that time.

We expect to secure additional financing during the second quarter, which could include a new credit facility government loan or monetization of our warehouse asset.

This decision will be based on the solution that will give us the most flexibility at the lowest cost.

As previously highlighted on our fourth quarter earnings call given the rapidly evolving nature of the pandemic. We do not believe it is prudent to provide guidance given that given the ongoing uncertainty.

In closing, we believe we have the financial flexibility and strategy to navigate during this challenging time, while continuing to make progress on our initiatives that evolve our business model to maximize the power of our brand and drive value for our stakeholders.

This concludes our prepared remarks, and we will now turn the call back over to the operator for questions operator.

Thank you we will now be conducting a question and answer session.

He would like to ask your question. Please press star one on your telephone keypad. He called summation no indicate your line is and the question Q.

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Oh participants using speaker equipment, it may be necessary to pick up your hands up before Christmas Dark keys, one moment, please while we pull for questions [laughter].

Thank you. Our first question comes from the line of Eric Beder with SCC Research. Please proceed with your question.

Good morning.

Good morning, Eric.

Hi, when you look at.

So the online business has been really strong higher margin when you look at it going forward I noticed that under 10%.

Do you think it needs to go longer term and how do you look as a potential for savings by doing.

Buy online ship from store in terms of allowing you to be more productive.

Yeah, Great question, Eric I'm hope you're doing well.

I'll start with a little bit of a set the stage and then on and we may have some additional comments on this of course. This year you know, we'll probably have our largest ecommerce year in our history and and it is likely to be a much larger percentage as a total <unk> as a total for center revenue, but that's you know obviously and then.

Unusual circumstance and a lower base so with that being said you know I just want to be cautious of how much. We overstate you know the future.

Sales econ sales as a percent of total business for this year, but what if theres a silver lining in this I think that you know as I noted in my remarks, it had a identified and shine the light on a much broader opportunity, even though we sort of innately knew that we had an E commerce.

We had some E commerce runway the is much greater than I believe that we had parted.

Anticipated.

And this has accelerated our advancement of a lot of things that it's been in a the queue for us to do from a digital transformation perspective.

And the in this odd way because the stores were closed we shifted all of our I T focus our you know our creative focus on driving those E commerce sales and unlock a lot of potential there a this we look forward and yes, the buy online ship from store could.

Be a key component of that when you we've talked about this before the creation of 200 300 tiny warehouses scattered all over the country and that's ultimately what our stores could become in it services. That's in many ways one from a labor perspective labor utilization perspective, even as traffic might go down a little bit we can.

We can shoot those orders out and have the have our bear builders work on fulfillment. Additionally, with the next phase of technology, we will be able to ship the product to the stores with the right approximation to the delivery say so it could even decrease our delivery dates and and stretch out certain giftgiving.

Time periods to you know, adding 234 more days on two time periods that we would otherwise have to cut off deliveries, which could be significant volume for us, particularly during Christmas.

So I'm going I mean, I think to cover it really well and you know we continued to make investments as we said that our partnership with Salesforce to really continue to make strong investments.

Continuous investments in this channel as there is a big opportunity. We do have have really strong margins in this particular channel as I mentioned earlier, we do have a business model of their our web business really that has a low.

Return rate as well as you know I'm not very promotional so we continue to derive some of those initiatives. Because we believe this is going to be the future as we continue to work with Salesforce.

Suite of services and different clouds that have been input implement it really to help drive some of these things its sharon's been talking about to really make the omni channel experience and that our guests.

Are going to be able to really show about online and in stores and some of those capabilities are still being in early stages and some of them are going to be coming on as we continue to open most of our fleet.

Great and just for a follow up you all the stores.

Work in this new world of spacing and.

Certain types of formats. Other pieces do all these stores still makes sense in terms of both the amount of snow on the source, but in terms of all I can make physically work in terms of providing a healthy experience for whereas on the grandfather going out to get a barrel per se.

You know also great question, Eric We started this process within days of the shutdown recognizing that the new world would be very different and that we have unlike a lot of retailers, which generally is a competitive advantage for us a very interactive engaging experience. So.

We started building and testing processes to assure that we were meeting CDC and governmental standards early on and of course, we went through the wide variety of format that we had to be able to do that and the key Eric is one of course in each location. There we will be following the recommendation.

In time sanitation and enhancing our that sanitation. So that you know who is going to happen no matter what the what the footprint in format is on secondly, all of the distancing processes that you talk about and of course, the use of masks, where it's where are our associates will always where math, but on there are expected to always awareness.

Yeah, and we will be following the individual woman if capacity guidelines for guests in those areas, our malls or whatever the oh the recommendations maybe but the key is Ah it's going to be on.

Men, managing and minimizing how many people go into a location. That's how you maintained the social distancing. So we've made it is build a bear friendly as possible. So are the math for our associates actually is a bear muscle, whose always smiling and it we have our social distancing signage is on very you know very friendly but also the six.

But does.

Differentiation that people need to maintain is marked on the floor by their pause. So it's easy for easier for us to guide children through this process and even some of these high touch experiences like on how you go through the stuffing station process. We we have a place where they are the the consumer can.

Place the bare step away the bare builder steps up and gets the there that's the bear and they go through the same process, but you know over 60, apart and most of our which we were very happy to know and I wouldn't have been able to tell you. This beforehand. The cords on our stuffing pedal our six feet long [laughter].

So we actually have pulled them far away from the stuffing station then in most of our locations the child or the child at heart can still step on that stuffing pedal and stuff the bare six feet away from the stuffing station.

Hey.

Good luck for the rest here. Thank you. Thank you thanks, Eric.

As a reminder, if he would like to ask your question Press Star one on your telephone keypad.

Our next question comes from the line of Steph Wissink with Jefferies. Please proceed with your question.

Thank you good morning, everyone I'm going to have it just a few housekeeping questions and then share in a couple.

Bigger picture question for you going if we could just start you mentioned in your prepared remarks, you had occupancy costs.

Essentially hurried in your PML for 13 weeks, although you didn't necessarily pay cash run.

In April so can you just remind us you're expensing a full quarter upfront cost it didn't actually pay just help us tied together those comments and then if you also mentioned, but with respect to your furloughed employees. You had some expenses related to personnel that will be reimbursed and I'm. Just curious if that is a a reimbursement effect that will come in this.

Second quarter, or if you take an accrual for that reimbursement in Q1.

Good morning stuff. Thanks for the question.

First is the talk about the occupancy expense yet from the PML perspective, you recognize 13 weeks of expense in the quarter.

We did fully paid.

February and March rent in the quarter be did not pay the April around.

As of the end of Q1 VR in discussions with our landlords as I mentioned as we are working on the virus variety of different solutions from both abatements deferral and also extending or changing some of the terms on the existing leases and we will continue to work with them early to.

Navigate through these challenging time and really have the.

Occupancy structure that does make sense for our business.

On the long term basis.

In addition to death, and we think about.

The government programs and some of the reimbursement that we have we did pay our furloughed employees you know in different jurisdictions. Some of that's outside of the North America and you know the local governments are reimbursing us for some of those costs as a result of covers 19 situation.

We also have applied for the employee retention credit program with the U.S. government than some of those.

Monies are expected to come.

In second quarter or later in the year, but we did recognize some of the receivables as we expect to get that cash and some of that has already come after the second quarter.

Okay. That's very helpful. And then show my two questions for you. One is just related to a prior question. If you think about.

The post Kobe to our new normal experience and your stores distancing and other measure the safety.

How do you think about the throughput of your stores into the future. If we're operating in a more constrained volume basis over the next couple of years does that change the way you think arithmetic, leaving about your store performance and the overall fleet does it change the mathematics of the number of stores that you need how should we be thinking about the fleet.

Performance separate from E Commerce.

Yeah, and you know Stephanie that is you know thats the multimillion dollar question.

But you noted that the challenge right now is is as we both closed our prepared remarks is just.

Incredible amount of uncertainty on what will the traffic B how will how can we manage this throughput on how long will these procedures and recommended changes last.

You know in its current farm clearly you know we are throughput.

Is likely to be less even if the demand was there simply because of how long. It takes people to go through the process and the fact that in some of our stores. We may have one cash wrap close down or a namely station closed down because of social distancing guidelines.

You know I think we're going to have to watch all of that very closely and at the same time.

On drive a and build the capabilities on our ecommerce business and understand the value of of taking our CRM to the next level, particularly with a lot of these.

Related with this relationship that we've created with Salesforce that we announced at the end of the year on because that that that customer relationship management and they threesixty consumer approach provides us with both additional ways to engage with the consumer but it gives us a event.

News to remind that consumer of additional reasons to think of build a bear, particularly from affinity products and gift giving products.

So while the stores will we believe remain an important part of why you create the affinity and the love for the brand in the it from the beginning once you've created that relationship with our brand by going through the process you use a they at least in our recent experience.

The online engagement and the approach that we have online is apparently incredibly satisfying for people as well on when they want their want their build a bear and they want a new furry friend, our I want to engage with Iran that that the virtual experience on seems to be afraid desire. So.

We have opportunities to continue to enhance that and as we are monitoring what is happening from the governmental perspective. When you know we might see some of these restrictions relaxed on you know we will be responding accordingly on the bigger question Seth is.

You know in this feeds into the lease Optionality is this just no matter what happens on throughput how many stores do we need and how much flexibility do we have to respond to this new environment and the the truth is we have a tremendous amount of flexibility you know with 70% of our.

Leases with naturally since we won't have to buy out a lease you know we're in a leverageable situation here and you know 120 of those leases that we mentioned are up before the end of our fiscal year, we have an opportunity if we so choose if we can.

Not reach the proper a flexible or a variable type of rent that we believe is necessary for partnership looking forward in the fiscal physical retail environment.

You know, we may end up with a very different type of footprint, but at the end of the day. It will still be important that we manage the two sides of this coin of recognizing the original strategic insight of that experience on feed our ability to drive these other revenues.

Channels, whether its E commerce or its entertainment or it's a outbound licensing, which then feeds the retail store environment. So yeah. I'll just also add a little bit there too as well. We also recognize that at least in the very near term future. Some of these experience.

As and and events that we tend to have that build a bear we will have to manage those and have to think of those in a very different way, whether that's national Teddy bear day or some form of that new versions of pay your age day, you know, we're looking at different ways to do that that don't create crowds before it's appropriate.

Okay. That's helpful. And then my last question is just with respect to the success you've had not once or twice now with the Mandel Orient and the child.

Does that also reshape the types of brands and properties and event and that affinity audience.

That you think about in terms of expanding the Tam.

Are there other opportunities like side in the pipeline, whether it's through licensing or through your own.

Brand creation that you could create.

I'm much more robust offering online only for big key milestone or tent pole event.

In entertainment or other areas.

That you've learned now through this experience that there is an affinity customer and an audience for your brand in that form factor.

Well, we already knew there was an affinity customer and audience and that that infinity customer was a very robust and growing and willing to buy a products online we significantly over index with our adult consumer and our goal.

Given consumer on ecommerce in the as we and the path and now it would be even more so if we grand those that specific data I'm sure.

And we learned that through you know a number of Star Wars books on our poking on one thing you know where the give on any given quarter over 60, 70% of those sometimes are those particular items are going to be in the in the 12 plus age range and when I say 12, plus I don't mean 13, I mean 20 something.

30, something.

That are engaged in the brand you might I mean, it's hard sometimes to continue to remember that build a bear now been around over 20 years, and we mean something to that consumer base that grew up with both those brands and our brand. So the mash up of those two beloved characters weather.

There is the affinity for certain you know pokemon up he gets you, let say, but in the build a bear form takes a special meaning for people that the beyond what you could you in a different form.

And so yes. The child is a perfect example of a lot of a lot of different elements coming together at the same time that proves this point a in a in a really powerful way on the demand.

As the child would not it then we would not have been able to predict the the significant demand of this I think we've noted on the last call, even we had well over a quarter million people sign up for notification when the child, what's going to be available. So just that type of.

Oh sheer volume much of which was not a part of our build a bear family is is of great benefit as you might imagine now and moving forward on Additionally, during this timeframe, we had Scooby Doo launch, which was also had.

A significant success as.

As well as a stitch launch also another Disney property on the Warner Brothers property with Scooby Doo, and then Stitcher Disney property.

And so it was you know we've definitely unlocked something here and that is a significant potential when it gives the I.T. team and the marketing team and warehouse guys. It little bit of credit here they within weeks they put in.

On the virtual waiting room, so we could manage this demand and and we also put like you might get on it you know when you're buying a concert ticket because there was so much of a crash of a rough requests to purchase these products.

And we were also able to put in a chat thought to help our guest services team managed the enormous volume of of questions and comments and and requests on.

You know the timing of their order and delivery. So on those two assets now will allow us to drive a lot of I guess, what we'd call concentrated volume in these types of items.

That's great. Thank you very much.

We have no further questions at this time Miss John I would now like to turn the floor back over to you for closing comments.

Thank you so much and thanks, everybody for joining US today, we're look forward to providing a further updates on our next call following second quarter.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.