Q1 2022 Build-A-Bear Workshop Inc Earnings Call
Greetings and welcome to the build a bear workshop first quarter 2022 earnings conference.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If you would like to ask a question you May press star one on your telephone keypad.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Ms. Allison Malkin of ICR. Thank you. Please go ahead.
Good morning, Thank you for joining US with me today are Sharon price, John CEO and Boy Oh Boy, that's CFO for today's call Sharon will begin with a discussion of our first quarter fiscal 2022 performance and update the progress we've made on our key priorities.
After Duane will review the financials and guidance in more detail.
We will then open the call to take your questions. We ask that you limit your questions to one question and one follow up this way we can get to everyone's questions. Jordan. This one hour call.
Feel free to re queue. If you ask further questions members of the media, who maybe on our call today should contact US. After this conference call with your questions. 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 web site.
A replay of both our call and webcast will be available later today on the IR site I will remind everyone that forward looking statements are inherently subject to risks and uncertainties actual results could differ materially from those currently anticipated due to a number of factors, including those set forth.
And the risk factors section in the company's annual report on Form 10-K, we undertake no obligation to revise any forward looking statements and now I would like to turn the call over to Sharon.
Thank you Allison and Hello, and thanks to everyone for joining us this morning.
I will start today's call by highlighting some of our financial accomplishments for the first quarter and then I will provide updates on our strategic pillars.
We believe that the disciplined execution of our plan has allowed us to build a foundation.
That has advanced our capabilities and diversified our business models and format, which we expect to fuel further growth in the fiscal year and beyond.
Following an outstanding performance in 2021, we were pleased to report that the first quarter of fiscal 2022 continued our positive trend.
Our financial results include.
Total revenues of $118 million, an increase of 28% over the prior year's period.
Total revenues were the highest for any first quarter in our company's history with growth in both North America, and Europe , and our reported business segments, including direct to consumer commercial and franchising business as well as in both net retail sales and digital demand is.
As noted we had increases in ecommerce in both North America and in Europe .
The growth in Europe is particularly impressive given that the fact that in the first quarter of 2020. One our stores were closed for the majority of the period due to government mandated restrictions and E. Commerce was the dominant channel for sales during that time.
For added dimension, our 2022 first quarter consolidated digital demand is greater than our E. Commerce sales for the entire 2017 fiscal year demonstrating the progress we have made in our digital transformation over the last five years.
And importantly, we continued our trend of record breaking profitability for the fifth consecutive quarter with pretax income of over $18 million, representing an increase of 38% over last year's previous all time high.
As noted in this morning's press release, we are pleased to see continued positive momentum in our current second quarter and are providing annual guidance with growth projected for total revenues and profit compared to the prior year's result.
We believe that ours is just a stained profitable growth is largely the result of a multifaceted multi year strategic plan that we have been successfully executing while navigating a highly volatile environment.
Our disciplined focus and agility, particularly during the prolonged pandemic related challenges I played a key role in the evolution of our company into a more digitally driven diversified omnichannel entity that includes a dynamic inefficient vertical experiential retail concept that remains relevant to today's consumers.
<unk>, who had been increasingly seeking highly engaging family friendly activities and shopping as restrictions have lifted.
With a strategy in place that has been delivering strong and consistent results. We remain focused on expanding our capabilities to drive additional profitable growth across our stated key pillars.
Each include advancing a broad ranging and comprehensive digital transformation across the company continuing to evolve our retail experience and footprint, while leveraging our expanded omni channel capabilities.
And optimizing our solid financial position to invest in initiatives intended to drive further growth.
First as it relates to leveraging our ongoing digital transformation across the organization. We have confidence that we are propelling our result by leveraging the platforms and added capabilities that we have put in place.
This includes a dynamic inefficient marketing program across a variety of media with a range of content designed to drive awareness engagement trial and repeat purchases that we believe is positively impacting our.
Financial performance.
Impressions from our paid digital media initiatives are up over 20% compared to the prior year and we believe this is contributing to higher net retail sales and both brick and mortar and digital channel.
We also believe our efficient and primarily digital marketing activities are driving traffic to our stores and to our website we.
We saw a significant increase in store football compared to the prior year's quarter, which outpaced national trends and fueled our net retail sales while also advancing digital commerce two record setting level.
Our expanded digital capabilities have allowed us to develop multi dimensional marketing campaign designed to reach diverse audiences and consumer segment with dynamic content, reaching millions of followers and delivering tens of millions of views across a number of platforms, including Facebook Instagram Twitter and tech talk.
We are in the process of updating our website later this year with a re imagined online guest experience with the goal of driving additional ecommerce business.
We expect to modernize the site improve efficiency and optimize organic traffic through leading S. C O practices.
In order to improve interfaces across all areas of the site, including gifting affinity and the bear builder three D workshop as well as improved conversion at checkout.
We have engaged with Deloitte digital to guide and elevate this process.
Deloitte digital is one of the leading agency specializing in emerging strategy experience and technology to drive digital growth and innovation.
And we expect to enhance our analytical capabilities to further refine our digital campaigns and targeted personalized messages to our 14 million opt in and first party data contacts.
As part of these efforts we remain on track to launch the new loyalty module is the next step and our multifaceted Salesforce implementation plan before the end of the year.
Moving to our second pillar, we leveraged our expanded omni channel capabilities, while further evolving our retail footprint and adding engaging experiences and purchase occasions.
As previously stated we believe there is opportunity to strategically grow our profitable North American store base that had an average contribution margin of over 25% in 2021.
We previously shared that we planned to open 15 to 20 locations over the next two to three years. However, we have elected to accelerate that timeline and now expect to add approximately 20 sites in fiscal 2022 through.
Through a combination of our Corporately managed and third party retail model.
Our high level of lease Optionality has allowed us to strategically exit select location, which we plan to continue to do however, our accelerated opening plans position us to finish the year with more total retail locations as compared to fiscal 2021.
Separately as previously announced we recently relaunched our historical popular in store Party program, which had represented approximately 5% of net retail sales in our stores.
We have seen steady demand and have held over 1000 parties since the relaunch with the average party transaction up over 15% from the last comparable period of 2019.
While the party business as a percentage of sales remains below our historic norm. We have plans to raise awareness that parties are back at build a bear to drive further demand.
We also continue to innovate experiences to expand our brand reach this includes build a bear vending machines also known as a T M. Our automatic petty machine.
We expect to have approximately 10 machines by the end of this year with more than half of them in airports through our relationship with Hudson Group a leader in travel retail throughout North America and.
In addition to the a T M. Hudson's also plans to offer a premade build a better product and more than 10 other travel stores through a wholesale model with expectations to continue to expand that in the future.
Third we remain intent on leveraging our solid financial position to invest in growth while generating sustained profitability.
As we look forward to the balance of the year, we plan to continue with the celebration of our 25th anniversary with a variety of guest facing activities designed to spur consumer interest and drive sales.
We have delivered the first furry friends that are part of a special collection, that's inspired by past popular plus product.
Other collectible options have been developed in conjunction with select licensed partners, including a 20 <unk> celebration toothless from the popular movie franchise, how to train your Dragon, which has historically been one of our best selling entertainment thing characters.
We also recently launched a silver edition of the Darth Vader bear inspired by the Evergreen Star Wars Saga.
In addition, we have encouraged consumer engagement through an anniversary themed marketing campaign.
<unk> on the millions of special memories, our guests have for build a bear by leveraging the nostalgic aspect of this iconic brand to encourage user generated content and build engagement.
And a year of special commemorative events. We also recently introduced a new collectible gift bundle as part of the Walt Disney World 50th celebration, we are offering a collectible this collectible gift bundle inexperienced to reveal an upcoming trip for families planning to travel to the beloved theme park during that anniversary.
Yeah.
We also are teaming up with other popular in licensing partners for collectible furry friends to create buzz and drive sales through our growing affinity segment.
We expect to release product from perennial favorites like Hello, Kitty Youtube sensation, Lob, Diana and Ryan's world and to update offering supporting our Harry Potter and Pokemon collection.
We will also be adding select build a bear after dark offering and updated products to the bear cave selection of our website, including items from popular pulp pulp program like the office and friends.
In addition, we plan to have merchandise that will tie in with a number of highly anticipated upcoming films, including Jurassic World Elvis and later in the year Lord of the rings in person boots too.
We will also offer products inspired by the highly anticipated movies, Disney and Pixar as light year, and Marvel Studios Doctor Strange in the multi verse of madness, as well as Thor Love and Thunder.
We are proud to have kicked off this special anniversary year with a successful quarter and I want to thank everyone at build a bear for their commitment and drive to once again deliver record breaking results.
I would also like to share that our company has been recognized as one of America's best retailers for 2020 two.
I left that was recently published by Newsweek and stuff Tusa.
And lastly, we wanted to offer our appreciation for the support from our suppliers and other strategic partners that continue to work with us to achieve the sustained business expansion.
In closing as a nearly 25 year old company that offers a relevant in demand personalised retail payment experience founded on a classic toy we have evolved into additional driven diversified omnichannel entity with expanded products offer.
During and diversified consumer segment by leveraging the power of our iconic brand.
With this distinct combination we believe our company is well positioned to achieve the growth anticipated in the annual guidance shared this morning.
And to achieve our broader longer term objectives, including the continued increasing of our shareholder value.
Now I would like to turn the call over to Maureen to discuss financial metrics, including providing more detail on our outlook for the fiscal year.
Thanks, Sharon and good morning, everyone.
We are pleased to speak with you today to share another quarter of strong results highlighted by a record breaking first quarter revenue.
All in gross margin and leverage in SG&A.
Combined this drove another first quarter record for pretax income and EBITDA.
We believe our ongoing growth demonstrates the successful execution of our strategy.
Some highlights of the quarter include.
Broad based revenue growth across channels geographies and customers, reflecting the worldwide appeal of our experience with revenues rising in physical stores and online across the geographies we operate.
We capitalize on our unique advantages that include a differentiated and sought after product offering that consistently cells with minimal discounts.
<unk> marketing that Leverages, our robust loyalty program to drive traffic and transactions and energized organization that enabled us to navigate supply chain disruption and mitigate a significant portion of the inflationary headwinds.
Given our consistent results strong balance sheet and positive outlook for the year.
We are pleased to share that we continued to return value to our shareholders utilizing $14 $1 million to repurchase approximately 800000 shares of our common stock as of market close yesterday under the $25 million program authorized by our board in November <unk> 2021.
As we begin the second quarter, we recognize that the macro environment remains uncertain.
That said, we are continuing to experience positive sales trends and believe we remain well positioned to deliver fiscal 2022 revenue pretax income and EBITDA ahead of the records. We set in 2021 and in line with today's guidance, which I will discuss in further detail shortly.
Okay.
Moving now to a review of first quarter results.
Total revenues were $117 $7 million.
28, 4% increase compared to $91 7 million in the first quarter of fiscal 2021.
Our revenue growth was broad based across channels, both retail and digital geographies and business segments.
Approximately one third of the total revenue increase was related to our European locations that were opened for the full quarter. This year versus being closed for a majority of first quarter last year.
Web demand was down 212, 1% compared to fiscal 2021.
On a two year basis, we saw growth in digital demand of about 90% and compares to fiscal 2019 first quarter the increase was over 200%.
Gross profit margin was 52, 5%.
<unk> record setting gross margin of 52, 8% in our fiscal 2021 first quarter.
And noteworthy result, when factoring in the significant price and product cost inflation, we have experienced.
Overall gross profit margin contracted by 30 basis points from last year's first quarter, reflecting 360 basis points reduction in merchandise margin offset by 330 basis points of leverage in occupancy and distribution costs driven by higher sales.
The merchandise margin decline was driven by inflationary pressures, mostly shown in significant phrase freight cost increases partially mitigated through strategic price increases and lower promotional activity.
We expect to see some relief in transportation cost in the second half of this fiscal year, which is reflected in our full year guidance.
SG&A was $43 6 million up $8 4 million from the first quarter of fiscal 2021.
An improvement of 130 basis points as a percentage of total revenues.
About one half of the incremental SG&A was driven by increased salary expenses as expected as expected given the reopening of substantially all of our European store base.
In addition, SG&A in fiscal 2021 first quarter was favorably impacted by approximately $1 million in government subsidies.
We delivered pretax income of $18 2 million or 15, 5% of sales.
Highest level pretax income for the first quarter and build a bear's 25 year history.
Handily exceeding last year's already record setting first quarter pretax income of $13 2 million.
And EBITA was $21 5 million, an increase of 31, 5% from $16 3 million in the 2021 first quarter.
Turning to the balance sheet.
We ended the first quarter with cash and cash equivalents of $26 1 million compared to 45 9 million at the end of the first quarter last year.
The reduced cash position at quarter end compared to the prior year reflects the share repurchases of common stock payment of a special dividend and the higher investment in working capital to support strategic initiatives intended to drive further growth inclusive of the pull forward of inventory receipts.
Inventory at quarter end was $77 4 million, an increase of $33 $6 million versus the end of last year's first quarter.
As I just noted we proactively and strategically accelerated the timing of our order placement, resulting in increased quantities for core products and evergreen merchandise collection to support our business momentum.
And as part of our effort to mitigate ongoing supply chain challenges.
Yeah.
In addition to expected higher units levels, the inventory balance reflects both higher transportation and private costs.
We remain comfortable with the level and composition of our inventory.
As we anticipate a more stabilized supply chain environment in the latter part of the year, we expect to be able to return to a more normalized receipt flow, which would result in ending this fiscal year below prior year's inventory level.
At quarter end, we had no borrowings on our credit facility.
Based on our strong first quarter performance and positive trends and outlook, we are introducing fiscal 2022 guidance, which includes.
Total revenues in the range of $440 million to $460 million as compared to 411 5 million in fiscal 2021.
Pre tax income in the range of $50 million to $62 million as compared to $57 million in fiscal 2021.
EBITA in the range of $65 million to $75 million as compared to $63 million in fiscal 2021.
The income tax rate in the range of 24% to 25%.
Capital expenditures in the range of $10 million to $15 million and depreciation and amortization of approximately $13 million.
Yeah.
Please keep in mind that our guidance for growth and profitability takes into account anticipated ongoing inflationary pressures as well as our plans to mitigate the impact on margins.
Also notable our outlook assumes no further material changes in the operations of our supply chain, including the ability to receive and ship product on a timely basis the.
The macro economic environment old relevant foreign currency exchange rates.
In closing I am proud of the hard work and accomplishments of our team to deliver another record setting quarter on the heels of a successful 2021.
Fiscal 2022 is off to a strong start and we look forward to continuing our momentum and reporting further success and our investments in strategic initiatives.
This concludes our prepared remarks, and we will now turn the call back over to the operator for questions operator.
Thank you the floor is now open for questions. If he would like to ask a question. Please press star one on your telephone keypad at this time I'll confirmation tone will indicate your line is in the question queue. You May press star two if he would like to meet with your question from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.
We do ask that you. Please limit yourself to one question and one follow up in the interest of time and to allow as many questions as possible you may re queue for additional questions. If you have them again that is star one to register a question at this time. The first question is coming from Eric better of SCC Research. Please go ahead.
Good morning, congratulations on a solid start to the year.
Thanks, Eric.
When you look.
So this year you had the 20th anniversary and now the rollout of parties are you seeing are important the demand being driven by people who have.
Rediscovered build a bear.
That's what these products in a long time ago, we're now come to the parties and see what's going on in doing that and how do you plan on kind of capturing those people and driving them. Even further after kind of the initial run.
Yeah. So on a separate some of those concepts and we're still in the middle of our 25th anniversary. That's an all year long experience that they're at that's not behind us that's actually in front of us.
We've just been doing a lot of.
Product launches in preparation and are creating marketing momentum based on the fact that our 20 <unk> anniversary is actually later this year. So this is our 20 <unk> anniversary celebration year. Now. Your question about is that engaging people that may have gone to build a bear in the past and now on to come.
Again, yes, indeed that is the case in fact, our entire marketing program is trying to capture that in theory sentiment.
<unk> of it is expecting and encouraging people to remember.
How fun it is to go to build a bear and in fact as an advertising itself.
<unk> is designed to talk about to get you to think about that you're most.
Fun experiences at build a bear and come back in and either celebrate that again as a teenager when you win as a kid her celebrate it with your child because you haven't.
Because you went when you were also a child so an awful lot of nostalgia brand a brand building historical engagement because of the 200 and over 200.
Million bears that we sold over the course of the last 25 years. Each one of those is a memory and an opportunity to reengage. The second question about parties. We just that the last call. We had announced that we would expect it to start the party business and start that marketing shortly after right around that time.
And as I noted, we have already had over 1000 parties and we're starting to see the ramp up of those party. It does take a while to get people back into the habit of AR and the recognition that parties are back at build a bear since they had been closed down for the vast majority of the entire pandemic period. So we.
We expected to see some ramp up on that to get back to our historical 5% of sales.
But those parties as you're noting Eric they are an important trial mechanism for us because not only are.
Are the parties themselves generate sales and.
High value sales high DPT, because it's usually multiple buyers and multiple kid, but a lot of times through our research we know that the kids that come to the party.
To celebrate with the birthday person for example, often have not been to build a bear.
A lot of times that creates a desire for them to want to come back and create their own special there. So all of those things are good for US yeah. So we're getting repeat trial and repeat from the 25th anniversary, bringing back different types of guests older gas people that have been before one I'm wondering reengage with build a bear and the parties are.
Are have always been a great mechanism for us to drive future sales.
And those have not been a part of our mix for nearly two years now so we're certainly hoping that that helps.
Great.
One here.
Relation so have you seen.
And I know you always offer some there in the 20 or so dollar range have you seen pushback from raising pricing or from.
Not discounting as much what has been the feed.
Feedback from our customer on that.
Well, we always have we have offered as you know it's not just a 20 dollar bear or a.
$14 $15 that we have a product called our birthday treat bear where on any month of the birthday child. They.
They can pay the age that they're turning for that year, and so that from one year old to 14 years old and that is.
No very accessible price point, and so the opportunity to experience build a bear remain.
Comparatively affordable for what you get not just this furry friend, but this entire personalized experience. This one on one engagement.
Very special experience and part of the reason we do that is not just to assure that we have a.
Broader socio economic strata reach for the entry.
Entry level price point.
But because we know that that really special engagement that experience is what creates a build a bear fan for lat.
So that's an important part of our strategy not just an important part of our strike pricing strategy.
It's a it's a big part of the way, we think about filling the pipeline in the future and driving that loyalty, which is so important to us.
But.
We to the degree that you could measure pushback you to.
To your question our sales are up our traffic is up.
And we have not a lot of times, we might hear some of that may be in social or you know specific emails or through our bear builders. They are very good at sharing information from our guests.
And then <unk>.
Keeping terms.
We have not.
Alright.
Well, congrats and good luck for the rest of the year. Thank you.
Thank you. The next question is coming from David Cannon of Cannon wealth management. Please go ahead.
Good morning, Congratulations Sharon to U N team.
Thank you David Good morning, it's okay. Good morning, if it's okay I have several questions. So I'm gonna be traveling later, so if I can to stretch the rules a little bit.
So.
First question is in regards to the the 20 sites that you expect to open this year.
Can you just take me through the economics, what you expect to spend.
And Capex per site and then if you could give us. Some early results I believe you opened a new format I think in the St. Louis area with an augmented experience. If you could just give us an early read on that it's open yet appreciate it.
Thanks, David We you know, yes, we have a pipeline now we wanted to share that with me.
We feel very good about.
That has evolved over the last.
Two to three months that we feel more comfortable pulling forward a lot of these store openings and getting a benefit from them earlier in the process. We've never believed that we've been over stored.
We just needed to make sure that we had the right economic model to assure continued.
While profit and that expansion, particularly as it relates to the expansion that we've seen over the past few years of getting to that 25% profitability.
Profitability on a retail side, but I wanted to be clear that the stores that we're opening are not just corporately managed and owned stores. They are also third party retail stores, which have very different economics, which I think you know so I just wanted to clarify that and give them.
Some of them are stores, where youre going to see this capital that we're opening the locations and some more than more traditional form and those third party stores are what we consider cap light.
And that the third party like a great Wolf Lodge. For example are some of the theme parks that we do business with they buy the fixtures at their labor they buy the product.
So again those are treated more like a wholesale business and.
With very different economics, so that's not that's not going to impact our capital spend and the way you might think so going to add a little more color of that yes. So as Chad said like the third party retail locations very asset light and you know the mix of these stores.
Hold out 20 stores and again.
Timing of those probably going to be more in the second half of the year, but you know.
David We are also looking to open a lot more of these stores in tourist locations in some of these unique spaces. So we have done a really good job. The teams have done a really good job managing our capital expenditures and <unk>.
Managing the cost associated with these stores, we have variety of different formats and cost structure for those that is reflected within our capital plan.
<unk> some of those costs are at some of the inflationary pressures versus couple of years are going to be shifting and challenges in the labor market, but I don't expect an average probably in that range between three and $500000 per store, depending on the mix and the composition of these owned and operated it as I mentioned some of the third party REIT.
<unk> location and there is no capital investment.
Okay. So on the stores that you open you know if you can hit that 25% store level Mark you were talking about one to two year.
Our rois essentially.
Yeah, that's hitting that 25% is our typical.
Stores in North America do yes, your math is correct.
Thank you. Our next question is coming from William.
The lessee of the Saverio capital and just as a reminder to please limit yourself to one question and one follow up in the interest of time.
William Please go ahead.
Sure. It's the visit Darrow Street anyway.
Really quickly can you guys just speak to the linearity in the quarter based on our checks it seems like and we're looking at things on a kind of a three year basis. It looks like the business accelerated pretty materially from.
Throughout the quarter with April being resoundingly, the strongest month.
Compared to 19 in an environment, where a lot of people are having their businesses get a little worse given some of the macro noise. So it's just an outlier that you've got your business is accelerating.
When others are decelerating so was that parties or can you speak to what drove that acceleration, where you might have picked up on so maybe if you can speak to whether there was an acceleration.
Throughout the quarter versus 19, and then maybe a little color.
If that indeed happened on what drove that.
So it really.
I'll start.
Definitely we did see some of the improvements in the second.
Half of the quarter.
Even in the.
Paul when we were guiding that we still expect to see the growth forward.
Revenue and profit for Q1.
We were a little bit skeptical as vivo starting to anniversary some of the results from last year and the impact of the stimulus and.
Pending demands and things of that nature that we had last year.
But you know our results were surprisingly well in the health and they keep holding also as well in may some of the stuff that March April timeframe also could be related to.
The timing of Easter and spring break shifts as kids are out of school.
Definitely change of some of the timing by definitely.
Were pleased with results that we have seen in the second part of the quarter. What we are seeing in May and Thats part of the reason that we are feeling.
More comfortable about giving full year guidance on the result, as we have seen so far.
Okay. That's helpful and I guess, just on the share repurchase and I. Appreciate there are a lot of moving pieces.
This year with some of the macro but Stephanie.
Stepping back it seems like your business is accelerating throughout Q1, if you take the EBITDA percentage of the full year versus.
Kind of what you did.
The EBITDA in Q1 last year was about 26% of the full year EBITDA. So if you run that math forward based on what you guys reported today.
I'm getting new and obviously you shouldn't guide to this because there are a lot of moving pieces, but the flip side of that as things seem to be getting better not worse, but I'm getting up over $3 50 in earnings here in the stock today is sub $20.
And I'm happy you guys bought $14 million of stock in the quarter, but the dislocation here.
He is so pronounced that I would encourage you guys to be more aggressive with the buyback and maybe do more than the 25 million. So there was some unsolicited advice, but again the results are very strong and I. Appreciate the hard work you guys are doing so thank you. Thank you.
Thank you. The next question is coming from Justin Albert of Capstone Equities. Please go ahead.
Hi, Good morning first of all just great job on the quarter I just wanted to second what was just mentioned about the multiple the multiples. Your stock is trading up and just ask how do you guys think about that relative to the <unk>.
Accelerating let's say growth prospects, our new stores I mean, it seems like you can just kind of buybacks or old stores at pretty good multiples and just wanted to get a sense for your thoughts in that regard.
Well. Thanks for the question Justin you know definitely you know we are focused on.
The operations and what things that are within our control and I think the teams have been executed an excellent last year and as we started this year as well.
So we feel good about things that we are controlling things that we are doing and what we are trying to do to mitigate the ongoing supply chain challenges and inflationary pressures.
What's happening in the overall market and some of the multiples as you can see.
Significant market fluctuations.
There are some unexplained shifts, but you know I personally believe based on the results and the economics.
Of the business the market feel properly reflect the value of our business.
With the results that we continue to deliver.
I just need a little help oh, sorry, not to interrupt just wanted to say Oh, no. That's fine and we agree and you could yeah and you can you can help it out and you can take advantage right. It's not the worst thing if you guys have plenty of cash so.
And I know you hear this a lot I'm just saying.
You guys can also take advantage of this opportunity as well.
Sorry, I did not mean control.
Now that scientists and I was just going to reiterate that.
That is the underlying strategy of the buyback program.
Recognizing that our stock does have a lot of volatility and in fact, the market has a lot of volatility right now, particularly in the luxury and the recent trading period.
And that is that volatility that we believe that allows us to.
Purchase.
Opportunistically.
And yes, we could as we do with our board on a regular basis get into a lot of conversations about what is the right level and this was approved in November and you know right now we're more than halfway through that.
That in the first six months of.
The process so.
But is there opportunity certainly and we will we will cancel with our board as we always do on those types of decisions.
I would also note that there are a lot of things that I believe that the company has done organization to help us through some of these uncertain times, but I want to reiterate that it is in our belief it's been the ongoing strategic shifts and the multiple years of.
The building blocks to get us to this point.
Yes, we've made choices like pulling forward inventory and tightly managing our expenses and being conscientious of you know.
Strategic price increases and how that would impact and affect our sales overall in all of those types of levers that everyone pulling.
But it's it's so much more of our shift to expand who we are as a company the consumer base.
On to not just have children, but also teens tweens and adults.
Expanding the why people come to build a bear.
From gifting to collectibles to affinity products so that.
That makes us a more resilient company and those underlying a.
Mac strategic shifts have been important for us to be able to manage through a lot of the external volatile times.
Thank you we'll move on to the next question, but once again if you do have a question. Please press star one on your telephone keypad. The next question is a follow up coming from David Cannon of Cannon wealth management. Please go ahead.
Hi.
Just to piggyback to previous.
Question Posers in regards to buyback.
You said that Youre going to go back to the board.
To discuss potentially augmenting it now.
Outside of yourself, Sharon I appreciate about the amount of skin that you have in the game and alignment, but the board really doesn't have.
Any equity to speak up so the message from owners, meaning us the shareholders.
You need to buy back more stock in fact, when we look at real estate today in particular your distribution center Theyre going.
Usually for 50 Bucks a foot, we're seeing even here in Florida in excess of $100 a foot 150.
Which means we're sitting on an asset that doesn't really generate an ROI that could be worse for sure. That's worth 335 million that could be worth 50, or $60 million, where we can return that to shareholders in the form of a very large buyback that would significantly increase our EBITDA per.
Sure.
<unk> per share so my message to the board, who has very little little to no skin in the game is listened to us owners and return that cash Okay, and then and the last question that I pose I asked for just an update on that new store format. I believe it was in St. Louis.
What's the early read is if its open yet.
Yeah. Thank you, yes, I had that written in my notes and did not address that I. Appreciate you, bringing that back up yes, it's called build a bear adventure.
And it is here in St. Louis and it is an off mall concept with a larger square footage.
It has a build a bear experience in there, but it's really designed for bigger parties of groups of kids groups of adults different types of the opportunities and we say well adventures for them to go on and it also has an arcade.
Inclusive of a <unk>.
Sort of a party rooms in a place that you can make your own cupcakes and all kinds of things. So one of the challenges that was that we hear a lot from our guests when we do surveys and we were about to reopen our party business is that in our stores for certain health recent and health and safety reasons, we really do not have.
Food allowed in our stores and that's like the last check box that moms are often looking for for the perfect kind of parties have been wanted to that we partner with people in the mall to try to to try to make that full service experience for them, but we wanted to test it tests that concept, where we could see Uh huh.
How build a bear with fair in this growing environment, if big activity base Party.
We've been open for nine weeks.
And we are learning a lot and we're pretty excited about it there's a lot of people that love. It we've had a lot of parties and the and a lot of a lot of traffic. So.
We would expect to be able to provide some information in the coming quarters on where what we're doing with that and where that's going the other piece to that David that's important as it has that oversized back room.
We see as a part of our solution for our Omnichannel capabilities, where you've done the buy online and ship from store, having a really robust.
Network.
Larger larger kind of I don't know if this is kind of a.
Kind of contradictory, but larger many warehouses.
It's just our own stores could.
Could be an interesting solution for US is our E. Commerce business continues to accelerate and it gives us space to do more personalized types of products.
So it's a multifaceted.
The solution for a lot of different opportunities for us.
Thank you. Our next question is coming from Gary <unk> of River Park funds. Please go ahead.
Good morning, Sharon and void.
This execution can you give us a little color on how you expect the revenue.
<unk> to go quarterly this year given the.
Last couple of years have not been typical.
Good morning, Gary Thanks for the question.
As we think about some of the revenue definitely as we called out in the first quarter, we did see an impact.
All of our UK stores being reopened in a full year basis, and I called out assorted and a full quarter basis and I called out that one third of our growth in Q1 was related to that.
As we think about the rest of the year definitely.
<unk>.
Some of that is reflected in our guidance.
Low to high end of the range, we are trying to encompass some of the.
Ongoing macro.
Environment challenges as well as you know the impact.
Of exchange rates is particularly in UK.
The dollar strengthening against the pound, it's hurting us from that perspective for the rest of the year. So.
Has some impact as we think about this year you definitely you know there could be some choppiness between the quarter. We believe even when you are looking at that absolute dollars Q2 to Q4 versus last year. There is going to be some growth how thats going to manifest itself. We are confident what we are seeing now that is.
Strong trends, but we'll just have to wait and see and provide a little bit more color as information becomes available for us.
On that particular timing, but maybe using last year and just extrapolating some of the overall growth that we are seeing on a full year basis for the last three quarters would be one way to manage that.
Right, but last year.
Second quarter was second and third quarter sales were greater than first quarter.
And.
Presumably you're you're guiding to second and third quarter being below first quarter. This year.
Sure.
Right how it.
Was in previous you know if we go pre COVID-19. So I'm just trying to understand the inputs on all that great.
Historically speaking Q1 was the second largest quarter of the year for US last year Q1 was smaller again because of the impact of UK stores being closed for the majority of the quarter now some of the timing with Q2 Q3 last year.
UK stores open late Q1, so there was some of that pent up demand some of the impact that we have seen and so that definitely we believe this helps some sales in that particular region, but typically speaking if we start using prior to covert our seasonality.
Q1 was the second biggest quarter of the year.
After Q4, okay, but what should potentially offset that to some extent is the.
Parties, returning which should benefit.
A benefit to Q3.
Three Q when you didn't have versus <unk>.
Is that fair.
Correct. We started as Sharon mentioned, we started body as you know to ramp up in late Q1, so definitely.
Are below our historical levels, we are expecting and working on those things to improve so definitely that could be one of those headwinds for the rest of the year.
Alright.
Right right Okay great.
Relative to your guidance is it fair that free cash flow for the year should be.
Greater than net income.
Given inventory being flat year over year.
For modeling purposes.
I think for modeling purposes.
Fair to assume.
There is a little bit elevated capex, but you know.
Probably correct, but you are right. Your Capex is is give or take.
Equal to your depreciation could be able to add a little bit more right. Okay.
Great. Thanks, so much.
Thanks, Gary.
Thank you at this time I'd like to turn the floor back over to MS. Jones for closing comments.
Thank you all for joining US today, we really appreciate it and we look forward to updating you on our second quarter results at our next call.
Ladies and gentlemen, thank you for your participation and interest in build a bear workshop you may disconnect. Your lines have log off the webcast at this time and enjoy the rest of your day.
Okay.
Yes.