Q3 2023 Build-A-Bear Workshop Inc Earnings Call

Speaker 1: Greetings and welcome to the Build the Bear Workshop 3rd quarter, 2023 earnings call. At this time, all participants earn a listen only mode. A brief question and answer session will follow the formal presentation. If you would like to ask a question at that time, please press star one on your telephone keypad.

Greetings and welcome to the adult care workshop third quarter 2023 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. She would like to ask a question at that time. Please press star one on your telephone keypad.

Speaker 1: If anyone's 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, Gary Sianaro, investor relations. Thank you, please go ahead.

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 scary scenario Investor Relations. Thank you. Please go ahead.

Speaker 2: Good morning. Thank you for joining us with me today our Sharon Christ John CEO and Voin to Door of Edge CFS.

Good morning, Thank you for joining US with me today are Sharon price, John CEO invoice to Doron <unk> CFO.

Speaker 2: For today's call, Sharon will begin with a discussion of our third quarter performance and update the progress we've made on our key priorities.

For today's call Sharon will begin with a discussion of our third quarter performance and update the progress we've made on our key priorities.

Speaker 2: After, Boeing will review the financials in more detail and provide our guidance. We will then open the call to take your question.

After Brian will review the financials in more detail and provide our guidance. We will then open the call to take your questions members of the media, who maybe on our call today should contact us. After this conference call with your questions.

Speaker 2: Members of the media who may be on our call today should contact us after this conference call with your question.

Speaker 2: Please note the calls being recorded in broadcast live via the Internet. The earnings release is available on the Investor Relations portion of our corporate website. The replay of both our call and webcast will be available later today on the IR site.

Please note the call is being recorded and broadcast live via the Internet. The earnings release is available on the Investor Relations portion.

All of our corporate website, a replay of both our call and webcast will be available later today on the IR site.

Speaker 2: 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.

I want to 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 in the risk factors section of the company's annual report on Form 10-K.

Speaker 2: including those set forth in the risk factor section of the company's annual report on Form 10K. We undertake no obligation to revise any forward looking statement unless required by law.

We undertake no obligation to revise any forward looking statements unless required by law.

Speaker 2: Also during this call we may discuss non-gape financial measures, which adjust our gap results to eliminate the impact of certain items, which management believes can be useful in evaluating the company's performance.

Also during this call we may discuss non-GAAP financial measures, which adjust our GAAP results to eliminate the impact of certain items, which management believes can be useful in evaluating the company's performance.

Speaker 3: The presentation of non- GAAP financial measures should not be considered in isolation or substitute for results prepared in accordance with GAP. If non- GAAP measures are presented, you will find information regarding these non- GAAP financial measures and a reconciliation of these non-GAP to GAAP measures in the company's earnings release. And now, I would like to turn the call over to Sheridan. Thank you, Gary. Good morning. And thank you for joining us for our Builder Bear's third quarter 2023 earnings call.

The presentation of non-GAAP financial measures should not be considered in isolation or a substitute for results prepared in accordance with GAAP and non.

non-GAAP measures are presented you'll find information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in the company's earnings release, and now I would like to turn the call over to Sharon. Thank you Gary Good morning, and thank you for joining us for build a bear as third quarter 2023.

Earnings call.

Speaker 3: We are pleased to again report strong results as we continue to execute against our strategic initiatives to evolve our business model by leveraging the power of the Builder Bear Branch.

We are pleased to again report strong results as we continue to execute against our strategic initiatives to evolve our business model by leveraging the power of the build a bear brand.

Speaker 3: As noted in this morning's press release, while we have revised our guidance to reflect some unexpected softness in the business, starting in the latter part of October and continuing in November , we intend to stay focused on delivering our fourth quarter plan during the remainder of the most critical holiday shopping period. As we continue to expect to deliver, our third consecutive record breaking year.

As noted in this morning's press release, while we have revised our guidance to reflect some unexpected softness in the business starting in the latter part of October and continuing into November we intend to stay focused on delivering our fourth quarter plans during the remainder of the most critical holiday shopping period.

We continue to expect to deliver our third consecutive record breaking year.

Speaker 3: Our results represent the best ever third quarter in first non-month revenue and pre-tax income in build-a-bare history.

Our results represent the best ever third quarter, and first nine months revenue and pre tax income in building their history.

Speaker 3: specifically for the third quarter, revenues increased nearly 3% to over $107 million and pre-tax income increased almost 5% to $10 million.

Specifically for the third quarter revenues increased nearly 3% to over $107 million and pre tax income increased almost 5% to $10 million.

Speaker 3: For the first fiscal nine months of 2023, revenues increased 4% to almost $337 million, and income increased 12% to $40 million.

For the first nine months of 2023 revenues increased 4% to almost $337 million and pre tax income increased 12% to $40 million.

Speaker 3: We attribute our meaningful expansion and profitable growth over the past few years to the successful execution of our strategy and business model evolution.

We attribute our meaningful expansion and profitable growth over the past few years to the successful execution of our strategy and business model evolution.

Speaker 3: Note that the $337 million in revenue, we generated over the first nine months of fiscal 2023, approximates the $339 million in revenue recorded for the entire fiscal 2019, the last pre-pendemic year.

Note that the $337 million in revenue we generated over the first nine months of fiscal 2023 approximate the $339 million in revenue recorded for the entire fiscal 2019 last pre pandemic year.

Speaker 3: Additionally, this revenue is at a significantly improved level of profitability, generating $40 million in pre-tax income over the 2023 fiscal nine months period, as compared to less than $2 million in the 2019 fiscal year.

Additionally, this revenue is at a significantly improved level of profitability generating $40 million in pretax income over the 2023 fiscal nine month period.

Compared to less than $2 million in 2019 fiscal year.

Speaker 3: As a reminder, the three key strategic initiatives we have focused on that have contributed to our results such as those noted above are, one, the evolution and expansion of our experience location footprint, two, the acceleration of our comprehensive digital transformation, and three, the investment to support initiatives that leverage our significant brand equity to drive incremental growth.

As a reminder, the three key strategic initiatives, we have focused on and that has contributed to our results such as those noted above our <unk>.

One the evolution and expansion of experienced location footprint to the acceleration of our comprehensive digital transformation and three the investment to support initiatives that leverage our significant brand equity to drive incremental growth.

Speaker 3: Some of the recent progress we've made across each of these initiatives includes.

Some of the recent progress we've made across each of these initiatives include further.

Speaker 3: First, build a bare experience locations or a critical part of what makes our valuable point of difference in the marketplace.

First build a bear experience locations are a critical part of what makes our valuable point of difference in the marketplace.

Speaker 3: We cultivate memorable and shareable one-to-one experiences with guests through our exclusive bear building process.

We cultivate memorable and Shareable wonder one experiences with yeah. They are exclusive they're building process.

Speaker 3: We do this while capturing first party and loyalty club data enabling us to directly communicate the guests to drive further engagement and repeat purchases.

We do this while capturing first party and loyalty club data, enabling us to directly communicate to get to drive further engagement and repeat purchases.

Speaker 3: Substantially all of our stores are profitable and deliver on average greater than 25% annual store level contribution margin.

Substantially all of our stores are profitable and deliver on average greater than 25% annual store level contribution margin.

Speaker 3: These top-tier unit economics, along with independent research, showing an opportunity for additional Build-A-Bear workshops, has led us to our recent domestic and international strategic market expansion.

These top tier unit economics, along with independent research showing an opportunity for additional build a bear workshop has let us to our recent domestic and international strategic expansion.

Speaker 3: This store expansion utilizes a variety of business models, including appropriately operated partner operated and franchise stores.

This store expansion utilizes a variety of business models, including Corporately operated partner operated and franchised stores.

Speaker 3: Last year we saw a net new unit growth of 13 corporate and partner operated stores.

Last year, we saw net new unit growth of 13, corporate and partner operated stores.

Speaker 3: Through the first nine months of fiscal 2023, we opened 21 new stores and expect to end the year with 30 new corporate and partner-operated locations.

Through the first nine months of fiscal 2023, we opened 21, new stores and expect to end the year with 30, new corporate and partner operated location.

Speaker 3: Additionally, our existing international franchise partners have also started reinvesting in the brand's location expansion, with the expectation of seven new franchise-operated locations by the end of this fiscal year, on top of the 63 that were opened at the end of our first quarter.

Additionally, our existing international franchise partners have also started reinvesting in the brand location expansion with the expectation of seven new franchise operated locations by the end of this fiscal year on top of the 63 that were opened at the end of our first quarter.

Speaker 3: Demonstrating both the business model evolution and global opportunity, and in the third quarter, we opened our first location in Italy.

Demonstrating both the business model evolution and global opportunity and in the third quarter, we opened our first location in Italy.

Speaker 3: It is a store-in-a-store utilizing our partner-operated model.

It is a store in a store utilizing our partner operated model.

Speaker 3: Recall, our partner-operated stores require little to no direct investment, producing high returns on capital.

Recall, our partner operated stores require little to no direct investment producing high returns on capital.

Speaker 3: The new location is in conjunction with the Milan opening of the famed toy store chain, Hamley, a longtime successful partnership for Build-A-Bear in their London location.

The new location is in conjunction with the Milan opening of the famed toy store chain family. Our long time successful partnership for build a bear and their London location.

Speaker 3: We believe the strong initial success of this store further supports the potential broad geographic appeal of the brand, while expecting more stores in Italy, even as we are in discussions for additional continental European expansions.

We believe the strong initial success at this store further supports the potential broad geographic appeal of the brand while expecting more stores in Italy, even as we are in discussions for additional continental European expansion.

Speaker 3: Our second strategic initiative is a comprehensive digital transformation that touches nearly every aspect of our company and is designed to elevate our business efficiency, increase consumer engagement, and build incremental opportunities like gifting and personalization programs, while extending the lifetime value of guests both in stores and online to ultimately increase overall sales and profitability.

Our second strategic initiative is a comprehensive digital transformation that touches nearly every aspect of our company.

And it's designed to elevate our business efficiency increased consumer engagement and build incremental opportunities like gifting and personalization program.

While extending the lifetime value of guests both in stores and online to ultimately increase overall sales and profitability.

Speaker 3: More recent examples include upgrades in our corporate wide business system, further integration of our website, CRM and loyalty program, as well as the current rollout of our new POS system and other integrated in-store technology.

More recent examples include upgrades in our corporate wide business system.

Further integration of our website CRM and loyalty program as well as the current rollout of our new P. O S system and other integrated in store technology.

Speaker 3: Our third key strategic initiative is our increased investment to support growth.

Our third key strategic initiative is our increased investment to support growth.

Speaker 3: As we continue to generate favorable returns on capital, we are focused on driving our growth by leveraging the power of the Build-A-Bear brand.

As we continue to generate favorable returns on capital we are focused on driving our growth by leveraging the power of the building their brand and.

Speaker 3: In addition to the capital associated with our footprint expansion and digital evolution, we have also been investing in content, product, and concept innovation.

In addition to the capital associated with our footprint expansion and digital evolution. We have also been investing in content product and concept innovation.

Speaker 3: Given our broad, multi-generational audience, some of these initiatives take advantage of the increasingly publicized conducting trends.

Given our broad multigenerational audience. Some of these initiatives take advantage of the increasingly publicized conducting trend.

Speaker 3: Examples in the third quarter include launching a productive and creative Halloween collection appealing to kids and adults who often look for unique items in our age-gated, bear-cade e-commerce sites.

Examples in the third quarter include launching a productive and creative Halloween collection appealing to kids and adults, who often look for unique items and our age gated barricade ecommerce site.

Speaker 3: Additionally, at the New York Toy Fair, we celebrated Build-A-Bear's first-time nomination for plush toy of the year with one of our series of popular teen-centric TikTok trend animals, the oxolotl.

Additionally, at the New York Toy Fair, we celebrate at build a bear as first time nomination for plush toy of the year with one of our theories of popular teen centric tick tock trend animal the ox of Lotto.

Speaker 3: Also, as a part of our ongoing entertainment and content strategy, at the New York Toy Fair, we premiered our new documentary, Unstuffed, A Build-A-Bear Story. This star-studded film is available on demand through major digital platforms and chronicles the amazing 20-plus year journey of the company's evolution from a mall-based retailer for kids to a global iconic brand.

Also as a part of our ongoing entertainment and content strategy at the New York Toy Fair, We premiered our new documentary.

I'm stuck a build a bear story.

The star studded film is.

Bailable on demand through a major digital platforms and chronicles the amazing 'twenty.

Your journey of the company evolution from a mall based retailer for kids to a global iconic brand.

Speaker 3: During the quarter, we also pre-marketed the early November release of our first-ever animated theatrical film, GLSEN and the Merry Mission. The movie, based on the characters and storyline of our multi-year, top-selling holiday plush collection that has generated over $150 million in revenue since its launch, features GLSEN, the magical snow deer that saves Christmas, voiced by multi-Grammy-nominated Leona Lewis and other top talent like Chevy Chase as Santa.

During the quarter. We also pre marketed the early November release of our first ever animated theatrical film Glisten and the Merry mission.

The movie based on the characters and storylines of our multiyear top selling holiday plus collection that has generated over $150 million in revenue since its launch features glass and the magical snow Dear that taste Christmas voiced by multi Grammy nominated Liana Lewis and other top talent like Chevy Chase.

Santa.

Speaker 3: While the film was originally expected to be distributed directly to streaming platforms as a holiday marketing catalyst, we were delighted to strike a partnership with Cinemark for a limited theatrical release in overlapping geographies.

While the film was originally expected to be distribute directly to streaming platforms as a holiday marketing catalyst we were delighted to strike a partnership with cinemark for a limited theatrical release and overlapping geography speech.

Speaker 3: featuring a unique multi-faceted consumer engagement program including in-theater stuffing events and co-marketing with a free children's movie ticket with the purchase of a furry friend at select Build-A-Bear workshops.

Featuring a unique multifaceted consumer engagement program, including in theater stuffing events and co marketing with a free children's movie ticket with the purchase of a furry friend at select build a bear workshop.

Speaker 3: The movie launched in approximately 250 theaters, and while we strategically scaled down screens through Thanksgiving due to the competitive film landscape, we are returning to distribution across the country for this weekend, just as we kick off our core December Christmas marketing effort.

The movie launched in approximately 250 theaters and while we strategically scaled down screens. They thanksgiving due to the competitive landscape. We are returning to distribution across the country for this weekend just as we kick off our core December Christmas marketing effort.

Speaker 3: The film is also scheduled to be rolling out across a number of digital platforms in the U.S., Canada, the U.K., and Australia starting tomorrow.

The same is also scheduled to be rolling out across a number of digital platforms in the U S, Canada, the UK and Australia starting tomorrow.

Speaker 3: Of notes, the collective marketing and PR initiatives associated with this effort have already generated over 4 billion media impressions, likely increasing our top of mind awareness as we move into the critical holiday season.

Of note the collective marketing and PR initiatives associated with this effort have already generated over 4 billion media impressions likely increasing our top of mind awareness as we move into the critical holiday season.

Speaker 3: So, while we are excited about our content as pure entertainment vehicles, much of the strategic value is as a marketing tool designed to bring our entire consumer-facing communications to life.

So while we are excited about our content is pure entertainment vehicle much of the strategic value. It as a marketing tool designed to bring our entire consumer facing communications to life.

Speaker 3: We believe our content will enhance and expand consumer engagement while supporting and even inspiring our product offering, ultimately driving sales.

We believe our content will enhance and expand consumer engagement, while supporting and even inspiring our product offering ultimately driving sales.

Speaker 3: In the case of Mary Mission, assets ranging from the art style to the tagline of the film, it's about believing. Our optimized across multiple consumer touchpoints, ranging from our Mary Mission music video and app to a holiday activation in our Roblox Build-A-Bair Tycoon game with over 12 and a half million players.

In the case of Merry mission assets, ranging from the art style to the tagline. Another film it's about believing our optimized across multiple consumer touch point, ranging from our Merry mission music video and App to a holiday activation in our roadblocks build a bear tycoon gay with over 12, and a half million player.

Speaker 3: to transforming of our build-a-bare workshop into temporary Santa's workshop, inclusive of our beloved bear builders, Donning Elf Constance.

To transforming of our build a bear workshop into temporary santas workshop inclusive of our beloved bear builders dialing else costumes.

Speaker 3: In fact, as a final example of our ongoing investment in new and innovative concepts, we launched, supported by a dedicated commercial, our first animatronic, interactive, make-your-own Build-A-Bear called The Bear Leave Bear, inspired by the featured teddy bear in the GLSEN and the Merry Mission movies.

In fact as a final example of our ongoing investment in new and innovative concepts.

We launched supported by a dedicated commercial are first and I'm not tronic interactive make your own build there called the bare leave they're inspired by the featured Teddy bear in the Glisten and the Merry mission movie.

Speaker 3: This unique barely there comes to life with blinking eyes, wiggling airs and sounds during the stuffing process, responding to the child's voice and touch as they explain, I barely.

This unique their lead there comes to life with blinking eyes Wiggling airs in town during the stuffing process responding to the child's voice and touch as they explain I barely.

Speaker 3: Over the next two months, which typically represents the vast majority of our fourth quarter, we are intensely focused on delivering yet another record-breaking year for the company.

Over the next two much months, which typically represent the vast majority of our fourth quarter. We are intensely focused on delivering yet another record breaking year for the company.

Speaker 3: We believe the combination of our integrated holiday marketing program informed by GLSEN and the Mary Mission combined with a broad gifting message and a cadre of proven licenses from Sanrio to Stitch provides meaningful tools to drive sales throughout December .

We believe the combination of our integrated holiday marketing program informed by Glisten and the Merry mission.

Combined with a broad gifting message and a cadre of proven licenses from sanrio to stitch provide meaningful tool to drive sales throughout December.

Speaker 3: Separately as a reminder, unlike many traditional retailers, redemptions of gift cards given as stocking stuffers, drives ongoing traffic even the week after Christmas.

Separately as a reminder, unlike many traditional retailers redemptions as gift card, giving us stocking stuffers.

<unk> ongoing traffic, even the week after Christmas.

Yeah.

Speaker 3: In closing, while our sales were negatively impacted simultaneously with the widely reported consumer spending softness during the last two weeks of our fiscal third quarter, which continued into early November , our web business was further challenged due to a disruption caused by a new platform implementation during the period.

In closing, while our sales were negatively impacted simultaneously with the widely reported consumer spending softness during the last two weeks of our fiscal third quarter, which continued into early November.

Our web business was further challenged due to the disruption caused by a new platform implementation during the period.

Speaker 3: However, we are encouraged to see that our overall trend has started to show some improvements as we had into December .

However, we are encouraged to see that our overall trend has started to show some improvement as we head into December.

Speaker 3: And as we look beyond the current macro economic situation, we continue to expect to execute against our top priority and to the future, including.

And as we look beyond the current macro economic situation, we continue to expect to execute against our top priority into the future including.

Speaker 3: the evolution of our experienced location footprint, the acceleration of our digital transformation, and while still returning cash to shareholders, continued investment in our strategic growth initiatives that leveraged the power of the Builder Bear brand.

The evolution of our variance location footprint, the acceleration of our digital transformation and while still returning cash to shareholders continued investment in our strategic growth initiatives that leverage the power of the build a bear brand.

Speaker 3: Our mission to add a little more heart to life is never more evident than during the holiday. And I would like to take this moment to thank our associates, partners, and guests as we enter this magical season. Now I would like to turn the call over to Voin. Thank you.

Our mission to add a little more heart to life is never more evident than during the holiday.

And I would like to take this moment to thank our associates partners and guests as we enter this magical season.

Now I would like to turn the call over to Voip.

Thank you Sharon and good morning, everyone.

Speaker 4: It's good to speak with you again today and share our result for fiscal third quarter and nine months of 2023.

It's good to speak with you again today and share our results for fiscal third quarter and nine months of 2023.

Speaker 4: Our performance was highlighted by growth across all segments, expansion in growth profit margin, and an increase in pre-tax income versus life.

Our performance was highlighted by growth across all segments expansion in gross profit margin and an increase in pretax income versus last year.

Speaker 4: The attributes, our ability to report ongoing positive results in a challenging retail environment to the increasing resonance and strength of the Build-A-Bare brand in the successful execution of our strategic initiatives at Sharon previously mentioned.

We attribute our ability to report ongoing positive results in a challenging retail environment. So the increase in resident and strength of the build a bear brand and the successful execution of our strategic initiatives and certain previously mentioned.

Speaker 4: Even with an increase in SGNA from higher wages due to inflation, plus investments in marketing and talent for growth, we have continued to expand our margins, deliver a record profit, and return capital to sharehold.

Even with an increase in SG&A from higher wages due to inflation plus investments in marketing and talent for growth. We have continued to expand our margins deliver a record profit and return capital to shareholders.

Speaker 4: Specifically, over the past eight quarters, we have paid two special dividends and repurchased more than 1 million shares, returning $86 million to shareholders. To put this in perspective, this return of capital to shareholders represents more than 20% of our current market capitalization. Turning to a more...

Specifically over the past eight quarters, we have paid two special dividends and repurchased more than 1 million shares Richard on the $86 million to shareholders to put this in perspective. This return of capital to shareholders represents more than 20% of our current market capitalization.

Sure.

Turning to a more detailed review of third quarter.

Speaker 4: So low revenues were $107.6 million up to 2.9% year over year.

Total revenues were $107 $6 million up 49% year over year.

Speaker 4: Net retail sales increased 1.2% year over year with positive contributions from both stores and equals.

Net retail sales increased one 2% year over year with positive contributions from both stores and E Commerce.

Speaker 4: Store sales benefited from transaction growth offset by a decline in dollars per transaction.

Store sales benefited from transaction growth.

Offset by a decline in dollars per transaction.

Speaker 4: e-commerce demand increased 7.1% for the period.

E Commerce demand increased seven 1% for the period.

Speaker 4: Total North American sales increase while UK sales increase.

Total North American sales increased while U K sales decrease.

Speaker 4: We open a net nine corporate stores year over year, including five stores in the course.

We opened a net nine corporate stores year over year, including five stores in the quarter.

Speaker 4: Commercial revenue, which primarily represents wholesale sales to our partner operators, and international franchise revenue wrote a combined 36.2% versus the prior year.

Commercial revenue, which primarily represents wholesale sales to our partner operators and international franchise revenue Rose a combined 36, 2% versus the prior year.

Speaker 4: Our partners open 20 stores over the trailing 12 months, ending with 85 locations. And our franchisees open and met four locations over the past 12 months, ending with 10.

Our partners opened 20 stores over the trailing 12 months ending with 85 locations and our franchisees opened four locations over the past 12 months ending with seven.

Speaker 4: Gross profit margin was 52.7%. And improvement of 70 basis points compared to life.

Gross profit margin was 52, 7% an improvement of 70 basis points compared to last year.

Speaker 4: benefiting from merchandise margin expansion through reflective of expected lower phrase costs and leverage of distribution costs.

Benefiting from merchandise margin expansion reflective of expected lower freight costs and the leverage of distribution costs.

Speaker 4: Gross profit also benefited from growth in margin expansion in our commercial and franchise.

Gross profit also benefited from growth and margin expansion in our commercial and franchise segment.

Speaker 4: S.V.N. expenses were $46.6 million or $43.3% of federal revenues compared to $44.4 million or $42.5 and $42.5% of federal revenues in the 2022-34.

SG&A expenses were $46 $6 million or 43, 3% of total revenues compared to $44 4 million or 42 five.

40% to 45% of total revenue in the 2022 third quarter.

Speaker 4: The 80th basis point increase in S-GNA was driven by higher wages at the store level from inflationary pressures, as well as the addition of talent plus investments in marketing to support future growth.

The 80 basis point increase in SG&A was driven by higher wages at the store level from inflationary pressures as well as the addition of talent plus investments in marketing to support future growth.

Speaker 4: As a reference, our S-GNA rate is 700 basis points lower than in third quarter of 2019.

As a reference.

SG&A rate is 700 basis points lower than in third quarter of 2019.

Speaker 4: High gross profit dollars plus interest income more than offset the increase in S-GNA and led to pre-tax income growth of 4.7%.

Higher gross profit dollars plus interest income more than offset the increase in SG&A and lead to pretax income growth of four 7%.

Speaker 4: EPS, aided by a lower share count and offset by an increased in tax rate, was 53 cents per deluded share, a 3.9 percenting.

EPS aided by a lower share count and offset by an increase in tax rate was 53 cents per diluted share a three 9% increase.

Speaker 4: Turning to our results for the first nine months of our fiscal 2023.

Turning to our results for the first nine months of our fiscal 'twenty to 'twenty three.

Speaker 4: So all the revenues were $336.9 million at 4.3% year-over-year.

Total revenues were $376 $9 million up four 3% year over year.

Speaker 4: As Sharon noted, our first nine months revenue was just shy of our entire fiscal 2019 ruby.

It's Sharon noted our first nine months revenue was just shy of our entire fiscal 2019 revenue.

Our store traffic also outpaced reported national traffic for the first nine months of the year.

Speaker 4: Our store traffic grow, while it has recently moderated, remains positive and continues to outpace reported national traffic to an of them.

Our store traffic growth, while they're there.

As recently moderated remains positive and continues to outpace reported national traffic through November.

Speaker 4: He comers demanded down approximately 2% for the first 9 months.

E Commerce demand is down approximately 2% for the first nine months.

Speaker 4: Although the third quarter was positive, it was below our expectations.

Although the third quarter was positive this was below our expectations.

Speaker 4: Over the last nine months, we have seen volatility in that demand largely due to new platform implementation.

Over the last nine months, we have seen volatility in web demand largely due to new platform implementation.

Speaker 4: as we remain focused on the evolution of our digital pencil.

We remain focused on the evolution of our digital business.

Speaker 4: Additionally, the timing of new product launches is compared to last year, contributed to the e-commerce demand fluctuations for the first nine months.

Additionally, the timing of new product launches as compared to last year contributed to the ecommerce demand fluctuations for the first nine months.

Speaker 4: Commercial and international franchise revenue rose a combined 40.7% versus the prior year.

Commercial and international franchise revenue rose, a combined 47% versus the prior year.

Speaker 4: Gross profit margin was 53.5%, a 210 basis point improvement compared to last year. Driven by merchandise margin expansion, reflective of expected lower-fraid expense and leverage of distribution costs, as well as from gross and margin expansion in our commercial and franchise.

Gross profit margin was 53, 5%, a 210 basis point improvement compared to last year.

Driven by merchandise margin expansion reflective of expected lower freight expense and leverage of distribution costs as well as from growth and margin expansion in our commercial and franchise segment.

Speaker 4: SG&X Pences were $140.5 million or 41.10% of total revenues compared to $130.3 million or $140.4% of total revenues in the 2022-30 quad.

SG&A expenses were $145 million or 41, 7% of total revenues compared to $133 million or 44% of total revenues in the 2022 third quarter.

Speaker 4: The hundred authority basis point increase in S-GNA was driven by half-wages at the store level from inflationary pressures, as well as the addition of talent plus investments in marketing to support future.

The 130 basis point increase in SG&A was driven by higher wages at the store level from inflationary pressures as well as the addition of talent plus investments in marketing to support future growth.

Speaker 4: 3 tax income grew 12.5% to $40.2 million for the nine months.

Pretax income grew 12, 5% to $42 million for the nine month high.

Speaker 4: high-gross profit dollars, plus interest income more than offset the increase in S-GNA and led to three tax margin expanding 80 basis points to 11.9% of total ruby.

Higher gross profit dollars plus interest income more than offset the increase in SG&A and led to a pre tax margin expanding 80 basis points to 11, 9% total revenue.

Speaker 4: EPS was $2.10 for the LUSD share.

EPS was $2 10 per diluted share.

Speaker 4: and 18% increase reflecting a lower share count offset by an increase in the tax.

An 18% increase reflecting a lower share count offset by an increase in the tax rate.

Speaker 4: We've respected the balance sheet at a quarter-enth. We had cash and cash accrual in of $24.8 million. And the increase of $12.8 million compared to the same period last year.

With respect to the balance sheet.

As of quarter end, we had cash and cash equivalents of $24.8 million, an increase of about $8 million compared to the same period last year.

Speaker 4: This was after returning $7 million to shareholders through dividend payment and share purchases over the last couple.

This was after we've currently got or the $7 million to shareholders through dividend payments and share repurchases over the last 12 months.

Speaker 4: Inventory at quarter end was $64.5 million, declining $23.9 billion or 27% from the end of the third quarter last year, and in line with our expectation.

Inventory at quarter end was $64 $5 million declining $23 $9 billion for 27% from the end of the third quarter last year and in line with our expectation.

Speaker 4: Keep in mind last year's third quarter and inventory will intentionally elevate it to avoid potential supply chain disrupt.

Keep in mind last year's third quarter, and inventory was intentionally elevated to avoid potential supply chain disruption.

Speaker 4: be remain comfortable with our inventory level and composition as we begin the fourth quarter and continue to expect to finish the year below last year's $70.5 million dollar local.

We remain comfortable with our inventory level and composition as we begin the fourth quarter and continue to expect to finish the year below last year's 75 million Blah Blah blah blah.

Turning to the outlook.

Speaker 4: given the most recent challenges in the retail environment. We are revising our fiscal 2023.

Given the most recent challenges in the retail environment, we are revising our fiscal 2023 guidance.

Speaker 4: The full details of our guidance are included in the press release, but that will highlight two key methods.

The full details of our guidance are included in the press release, but I will highlight two key metrics.

Speaker 4: So all revenues to now increase in the range of 3% to 5% growth, compared to the previous guidance of 5% to 7%.

Total revenues to increase in the range of 3% to 5% growth compared to the previous guidance of 5% to 7%.

Speaker 4: and pre-tax income to now grow 5% to 10% as compared to previous guidance of 10 to 15%.

And pretax income to grow 5% to 10% as compared to the previous guidance of 10% to 15%.

Speaker 4: Please keep in mind that December and January have historically accounted for a significant portion of our fourth quarter revenue, and our outfit assumes no further material changes in the macroeconomic and geopolitical environment, or relevant foreign currency exchange rate. In closing.

Please keep in mind that the.

Remember in January have historically accounted for a significant portion of our fourth quarter revenue.

Our outlook assumes no further material changes in the macroeconomic and geopolitical environment old relevant foreign currency exchange rates.

In closing.

I would like to turn.

Speaker 4: All our store and warehouse associates as well as corporate teams.

All our store and warehouse associates as well as corporate fee.

Speaker 4: for contributing to a record result, which even with the revised guidance has positioned that for our third consecutive record breaking year in 2023. This concludes our prepared remarks, and we will now turn the call back over to the operator for questions. Operator.

For contributing to our record results, which even with the revised guidance has positioned us for our third consecutive record breaking year 2023.

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

Speaker 1: Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at the time. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Thank you the floor is now open for questions.

I would like to ask a question. Please press star one on your telephone keypad at this time.

A confirmation tone will indicate your line is in the question queue you.

You May press star two if he would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker 1: We do ask the Euclisum yourself to one question and one follow up. Once again, that is Star One for any questions at this time. Today's first question is coming from Michael Baker of the Davidson. Please go ahead.

We do ask that you. Please limit yourself to one question and one follow up once again that is star one for any questions. At this time. Today's first question is coming from Michael Baker of D. A Davidson. Please go ahead.

Speaker 5: uh... okay thanks guys uh... so i'd just want to clarify the the fourth quarter outlook so you said the the December in January assumes no change in the macro environment and and understanding those big months i guess what i'm trying to understand it is the the implied fourth quarter guidance

Okay. Thanks, guys.

So I just want to clarify the fourth quarter outlook. So you said December and January assumes no change in the macro environment and understanding those are big months I guess, what I'm trying to understand is does the implied fourth quarter guidance.

Speaker 5: It assume any pickup from the weakness you saw in October in November I think you would said that you're already starting to see it come back a little bit You know as we head into December , but so does that full fourth quarter need any kind of pickup over the next couple months relative to what you saw in October in November

Assume any pickup from the weakness you saw in October and November I think you had said that you're already starting to see it come back a little bit.

You know as we head into December but if it does that full fourth quarter did any kind of pick up over the next couple of months relative to what you saw in October and November.

Speaker 4: So thanks Mike for the question. You know, definitely as we talked about our results and you know our finish to Q3 was softer than what we expected and you know as we mentioned you know our November results uh, only in the month have continued at that pace but like later in November and as we said like now is the I'm going to be entering into December our current heavy reversal like we are contemplating that as we are.

So thanks, Mike for the question definitely as we talked about.

Our results in our finish to Q3 was softer than what we expected and you know as we mentioned in our November results are early and demand have continue at that pace, but like later in November and as we said like now is the items going into December our trends have reversed so like VR contemplating death.

As we are.

Speaker 4: projecting for Q4 and fiscal results even in our guidance.

Projecting for Q4 and fiscal year results EBIT in our guidance when we think about some of those who clearly you know there are multiple things to consider definitely there are some challenges that we called out from our perspective, that's not performing.

Speaker 4: When we think about some of those in clearly, you know, there are multiple things to consider. You know, definitely there are some challenges that we call down from our web perspective that's not performing in line with our expectations. We also talked about our US business has been stronger than our UK business. So there is a little bit more to that guidance than just.

In line with our expectations. We also talked about our U S business has been stronger than our U K business. So there is a little bit more to the guidance and just necessarily extrapolating the current trends, but you know.

Speaker 4: necessarily extra-plating the current trends, but you know, people leave based on what we are seeing in recent days and last couple of weeks.

Belief based on what we are seeing in recent days than last couple of weeks that.

Speaker 4: that we are properly accounting for that staff in our projection for the rest of the year.

We are profitable the accounting for that stuff and our projections for the rest of the year.

Speaker 5: okay uh... make sense uh... to fall also on that uh... combined i guess uh... because we're on a close-up one fall up uh... but when you say you know the last few weeks of a better presume that means that uh... the black friday weekend was okay for you guys uh... and then related to the other thing you talk about the web issue can you talk a little more about that what happened how much to that impact you what you know how should we think about that going forward you have your arms around whatever the

Okay.

Sense to follow up on that are combined I guess, because we're only supposed to ask one follow up but when you say the last few weeks has gotten better I presume that means that the black Friday weekend was okay for you guys and then related the other thing you talked about the web issue can you talk a little bit more about that what happened how much did that.

Impact you.

How should we think about that going forward do you have your arms around whatever the issue was.

Speaker 4: Yeah, so Black Friday for us was good, not great. You know, definitely we have seen sequencil improvement when you are comparing our business versus prior year versus early November . So there were some positive things. And again, some differences between different geographies, definitely our US business was better than other geographies. And we are seeing more of...

Yeah, So black Friday for I suppose is good not great no definitely we have seen a sick.

Sequential improvement when you are comparing our business versus prior year versus earlier in November. So there was some positive things and again some differences between different geographies definitely our U S business was better.

Better than other geographies and we are seeing more of Oh.

Speaker 4: positive improvement in that business compared to some of the other regions. When we think about the web business, you know, we have been working, you know, in our digital evolution and digital transformation and that ongoing process. And, you know, with some of the...

Positive improvement in that business compared to some of the other regions.

When we think about the web business you know be have been working on our digital evolution of digital transformation and that's an ongoing process and you know with some of the.

Speaker 4: implementations, you know, we had some challenges that impacted our business. We believe, you know, like that we are working on some of those initiatives to fix some of those things in place.

Implementation, even though we had some challenges that impacted our business.

We believe you know like that we are working on some of those initiatives to fix some of those things in place.

Speaker 4: then that's going to be over time the result. But you know, we also talked about some of the product launches in tiny ink. And so definitely some of those things.

That's gonna be overtime result, but you also talked about some of the product launches and tiny and so definitely some of those things.

Speaker 4: and how people are shopping. We are still seeing more traffic that's coming to our stores, even though our best traffic is up, but you know, like...

And how people are shopping we are still seeing more traffic that's coming to our stores, even though our web traffic is up but you know like we are one of those retailers that you know like people are coming and going to be on driving more visits in our stores and thats definitely reflected in our year to date results, but you know a desk.

Speaker 3: We are one of those retailers that people are coming and we are driving more visits in our stores and that definitely reflected in our year-to-date results. But definitely there is some room for improvement on the web because being down 2% on the year-to-day basis, it's definitely behind our expectations. Right, and Mike, I'll just give you a little more color in that when you obviously, when you're

A little bit there is some room for improvement on the web because being down 2% on a year to date basis are definitely behind our expectations right and Mike I'll, just give you a little more color and that when you obviously when you're implementing are upgrades to technology and some of them.

Speaker 3: implementing upgrades to technology. Some of it is not always associated with what quote-unquote what you're doing wrong or what you need to fix.

It is not always associated with what quote unquote, what you're doing wrong or what you need to fix there's just a moment, where when you're setting up a new platform or changing some sort of process that theres going to be some volatility in the results as you're kind of mastering the new technology.

Speaker 3: There's just a moment where when you're setting up a new platform or changing some sort of process, that there's going to be some volatility in...

Speaker 3: the results as you're kind of mastering the new technology. That also goes for the rollout of a new POS system. You know, there's going to be times when you're down so you can put the new POS system as you're rolling across the entire enterprise. So that's why when we look at things like this.

That also goes for the rollout of a new POS system, you know, there's going to be times, when you're down. So you can put the new P. S estimates you're rolling across the entire enterprise. So that's why when we look at things like that you if you're tracking the business that sometimes we'll talk about that kind of disruption that usually is around that September October time.

Speaker 3: If you're tracking the business, sometimes we'll talk about that kind of disruption. It usually is around that September , October time period because...

I mean, because that's a low portion of our seasonality and we're trying to cause the least amount of disruption.

Speaker 3: That's a low portion of our seasonality and we're trying to cause the least amount of disruption.

Speaker 3: And we have to stay focused on the continuous upgrade from a digital transformation perspective. There's so many new opportunities that are coming out for us to continue to optimize that business. And I would expect that there will be continued evolution for us to master and optimize that part of our business.

And that's and we have to stay focused on the continuous upgrade from a digital transformation perspective, there's so many new opportunities that are coming out for us to continue to optimize that business and I would expect that there will be continued evolution breath to master and optimize that.

Our business and we did mention that we did see some of that to our web business tends to over index on some of these core licensed products and things that are focused more on adult and we saw some volatility in that some of it was timing some of it was performance on some of these key licenses that have definitely delivered.

Speaker 3: A voice did mention that we did see some of that too. Our web business tends to over index on some of these core licensed products and things that are focused more on adults.

Speaker 3: And we saw some volatility in that, some of it was timing, some of it was performance on some of these key licenses that have delivered for us pretty consistently. But on the flip side, we're seeing strong results in our core holiday product.

Pretty consistently.

But on the flip side, we're seeing strong results in our core holiday product and that has been a big contributor to a little bit of that turn around in the last couple of weeks here. So there's there's a lot of puts and takes them and we're trying to balance that as best as we can and we're looking out on the guidance.

Speaker 3: And that has been the big contributor to a little bit of that turnaround in the last couple of weeks here. So there's a lot of puts and takes.

Speaker 3: And we're trying to balance that as best as we can and we're looking out on the guide.

Speaker 5: Yep, make sense. Alright, I appreciate the color. Thank you.

Yeah that makes sense alright, I appreciate the.

The color. Thank you.

Thank you.

Speaker 1: Thank you. The next question is coming from Greg Gibbos of Northland Securities. Please go ahead.

Thank you. The next question is coming from Greg <unk> of Northland Securities. Please go ahead.

Hey, good morning, Sharon envoy and thanks for taking the questions.

Speaker 6: You know, one of you could comment on any operating metric trends that you're seeing, you know, specifically average revenue for customer versus maybe overall traffic customer count trends.

Wondering if you could comment on any operating metric trends that youre seeing you know specifically average revenue per customer versus maybe overall traffic.

Customer count trends.

Speaker 3: Yeah, in a general generally, as we noted, our traffic continues to outpace national traffic. We had...

Yeah, and a general generally as Roy noted our traffic continues to outpace national traffic we had.

Speaker 3: you know, people plan their visits to build a bear upwards of 80% of those visits are planned in advance.

Yeah people plan their visits to build a bear upwards of 80% of those visits are planned in advance and that speaks to the loyalty of the brand and it also speaks to the wide variety of locations that we can have whether we're taking advantage of tourist locations, where there's a natural traffic and tendency Buddy.

Speaker 6: whether we're taking advantage of tourist locations where there's a natural traffic intensity but even in some of the malls which by the way there have been some positive reports on mall traffic recently but in some of the malls we're still a planned visit. So that's what drives and can that consistency with traffic but as you're implying and we mentioned kind of the flip side of that was we did see a little bit of a downturn in our dollars per transaction that is possibly somewhat related to some of the softness and consumers spending I would suppose but it's also related to continued increases in which is a part of our strategy our birthday treat there which is the offer for consumers to purchase a birthday treat there the month of their birthday for the age they are turning and the reason that's a really good we don't mind that metric it's our number one acquisition tool so when we talk about the integration of our POS system with our loyalty program with our CRM program it's the capture data that allows us to pull that lifetime value through over the course of time so those are a couple of the things that are impacting that but yes we've seen a little bit of softness in the dollars per transaction and that is the offset of our strong traffic great that's helpful and then you know as my follow up it really nice to see the commerce demand growth

And in some of the malls, which by the way they've been some positive reports on mall traffic recently, but in some of the malls were still a planned visit so that's what drives it can convert consistency with traffic, but as you're implying and we mentioned kind of the flip side of that was we did see a little bit of a down turn in.

In our dollars per transaction.

That is possibly somewhat related to some of the softness in consumer spending I would suppose but it's also related to our continued increases in which is the part of our strategy our birthday treat bear which is the offer for our consumers to purchase our birthday treat bear in the month of their birthday for the.

Age they are turning and the reason that's a really good we we don't mind that metric is that it's the it's our number one acquisition tool. So when we talk about the integration of our Pos system with our loyalty program with our CRM program.

The capture of data.

That that allows us to to pull that lifetime value through over the course of time. So those are a couple of the things that are impacting that they yes, we've seen a little bit of softness in the dollars per transaction and that is the offset of our strong traffic.

Speaker 6: Great, that's helpful. And then as my follow up, it really nice to see the Commerce Demand growth, outpacing overall, and then also the expectation for the increased store counts this year, being at the high end of the previous range. And I guess the question is kind of a two part of, what are maybe the expectations for the E-commerce business heading into the holiday season? Like,

Great. That's helpful. And then as my follow up really nice to see the e-commerce demand growth outpacing overall and then also you know the expectation for.

The increase store count this year being at the high end of the previous range and I guess the question is kind of a two parter what are maybe the expectations for the e-commerce business heading into the holiday season.

Speaker 6: relative to maybe performance at your locations, like you expected to continue out performing, like we saw on Q3, and then along those lines, where are you seeing as practice maybe new brick and mortar locations? Like I said, it's coming in at a faster pace and expecting to be 30 new stores this year. Curious, we would expect a similar range next year, maybe 20 to 30. Anything you can share there would be helpful.

Relative to maybe performance at your location. It sounds like you expect it to continue outperforming like we saw in Q3 and then.

Those lines, where are you seeing attractive maybe new brick and mortar locations.

Like I said, it's coming in at a faster pace and you're not expecting to be 30, new stores. This year.

I'm curious just like we would expect a similar range next year, maybe 20 to 30 anything you can share there would be helpful.

Speaker 3: In general terms, as we noted, the guidance still is inclusive of...

In general terms as we noted the guidance still is inclusive of the best year crop was profitable year in our history and we're still looking at a record breaking year for 2023, and whereas we noted.

Speaker 3: The best year, you know, probably the past year in our history, we're still looking at a record breaking year.

<unk> and pre tax were record breaking through the first nine months for the third quarter.

Speaker 3: for the third quarter. So we want to be careful that we're not implying that the guidance shift is...

So we wanted to be careful that we're not implying that the.

The you know the guidance shift is saying that we're going to be down for the year, we're expecting to grow for the year and that is inclusive of you know we expect of course, the web and our North American stores in our retail footprint too to be up that that has to be.

Speaker 3: saying that we're going to be down for the year. We're expected to grow for the year. And that is inclusive of...

Speaker 3: You know, we expect, of course, to the web and are going to clear con stores and our retail footprint to be up.

Speaker 3: That has to be a part of the equation for us to do that, but on the store count evolution and growth.

A part of the equation for us to do that but on the store count evolution and and growth. We too are quite quite pleased with the expectation of the 30 stores by the end of the year and we are as we noted in our in the call pipelining additional stores and we'd hope to be able to share some more.

Speaker 3: We too are quite pleased with the expectation of the 30 stores by the end of the year. And we are, as we noted in the call, pipelining additional stores. And we'd hope to be able to stick, share some more store count information with you at the end of the next call when we're planning out providing guidance for 2024. And we also shared that we expect to see some growth in continental Europe based on the success that we saw in our family's relationship in Milan.

Store count information with you at the end of the next call when we're planning out providing guidance for 2020 for them and we also shared that we expect to see some growth in continental Europe based on the success that we saw in our Hamleys relationship in Milan.

Okay, Great I appreciate the color.

Speaker 1: Thank you. The next question is coming from Steve Silver of Argus Research. Please go ahead.

Thank you. The next question is coming from Steve Silver of Argus Research. Please go ahead.

Speaker 7: Good morning and thanks for taking my questions. It's also reiterating it's great to see that the guidance for the new location adds trending to the higher end of the previous range. It's also great to see the positive impact that the expanding footprint having on a couple of gross margins. Just trying to get a sense without looking for any guidance for 2024. Just given the fact that it looks like your pipeline for new locations maybe have brought some of those.

Oh, good morning, and thanks for taking my questions.

It's also you are reiterating it's great to see that the the.

The guidance for the new location adds trending to the higher end of the previous range. It's also great to see the positive impact that the expanding footprints having on company gross margins.

Just trying to get a sense without looking for any guidance for 2024.

Just given the fact that it looks like your pipeline for new locations. Maybe has has brought some of those opportunities forward to launching in the second half of 2023.

Speaker 7: opportunities forward to launching in the second half of 2023.

Speaker 7: I'm just trying to get a census to your time frame for the potential for some of these newer location openings to contribute to 2024 results or maybe it's a little bit slower of a build and then also maybe if there's anything you could speak to just in terms of the broader macro trends that you might be seeing in some of these markets where some of these opportunities were chosen to be moved forward given all the retail challenges out there. Thanks.

I'm, just trying to get a sense as to your timeframe for the potential for some of these newer location openings to contribute to 2024 results or maybe it's a little bit slower of a build.

And then also maybe if there's anything you could speak to just in terms of the broader macro trends that you might be seeing in some of these markets where some of these.

Opportunities were chosen to be moved forward given all the the retail challenges out there. Thanks.

Speaker 3: Well, as soon as we open the stores and start our marketing, we expect it's a positive contribution from those stores.

Well as soon as we open the stores and sorry, our marketing we expect to see positive contribution from the from those stores and so you know you kind of look at the calendar. They shouldn't have those and there will be some oh, well, we'll be anniversarying a call it across the year.

Speaker 3: So, you know, you kind of look at the calendarization of those and there will be some...

Speaker 3: opened them in the prior year. But they're usually, well, at least that's our plan. They work right out of the gate. And most of the time, based on the fact that we're substantially 100% profitable, most of them do. Or we mitigate them quickly to the best of our ability. But yeah, we have a very strong store process which gives us the confidence to tell you, you know, a range of ranges that we've been able to provide.

As we opened up in the prior year.

But they're they're usually well that at least that's our plan.

They weren't right out of the gate and most of the time based on the fact that we're substantially 100% profitable most of them do Oh are we mitigate them quickly to the best of our ability, but yeah, where are we have a very strong store process, which gives us the confidence to tell you.

Speaker 3: which gives us the confidence to tell you, you know, a range of ranges that we've been able to provide over the last few years.

You know the rate ranges that we've been able to provide over the last few years that the combination of our corporately operated and partner operated stores announced them, even increasing franchise stores. So that that's a very I think strong and important part of our model as I noted in my remarks that build a bear workshop X.

Speaker 3: the combination of our corporately operated partner operated stores and now some even increasing franchise stores. So that's a very, I think, strong and important part of our model. As I noted in my remarks, that Build a Bear workshop experience is...

Sirius is the key part of our difference in how we create these valuable relationships with our guests. So and then the next piece of that is the integration of that with all of the digital technology. They would talk about them in the CRM and the loyalty strategy, which is why our strategy is what it is.

Speaker 3: the key part of our difference in how we create these valuable relationships with our guests. So, and then the next piece of that is the integration of that with all of the digital technology that we'll talk about, and the CRM and the loyalty strategy, which is why our strategy is what it is.

Speaker 3: The expansion of the store footprint followed by the evolution of the digital transformation, which integrates everything that we do.

Pension of the store footprint, followed by the evolution of the digital transformation, which integrate everything that we do so on the macroeconomic front I mean, I think we've shared about as much as it is as we know them and that there's seem to have been some macro softness out there.

Speaker 3: So on the macroeconomic front, I mean, I think we've shared about as much as we know in that there's seen to have been some macro softness out there when you look at some of the reports in a number of sectors starting in the late.

And when you look at some of the reports and a number of sectors.

Starting in the late what would be our fiscal third quarter and it continued a little bit into the early parts of November we've seen as we noted as I think we went into more detail in his script a little bit of a turn in the trend and I noted it as well going into the whole Black Friday.

Speaker 3: what would be our fiscal third quarter. And it continued a little bit into the early parts of November . We since, as we noted, it's I think going into more detail and his script a little bit of a turn on the trend. And I noted it as well. Going into the whole Black Friday Cyber Monday time frame. And as we're turning the page on December , which...

Monday timeframe and it's we're turning the page on two December which these next two launches as you know in retail in a business like ours. The combination of retail toy represent the vast majority of the quarter for us and we're happy to be going into it with a little more momentum.

Speaker 3: The next advance is, as you know, in retail and a business like ours, the combination of retail tools represent the vast majority of the quarter for us. We're happy to be going into it with a little more momentum.

Speaker 7: Great, that's helpful. Thanks so much and best of luck with the movie launch on the holiday season.

Great. That's helpful. Thanks, so much in the best of luck with the movie launch and the holiday season.

Thank you.

Speaker 1: Once again, ladies and gentlemen, that is Star One. If you have a question at this time. The next question is coming from Nancy Frona of 1492 Capital Management. Please go ahead.

Once again, ladies and gentlemen that is star one if you have a question at this time.

Next question is coming from Nancy <unk> of 14 92 capital management. Please go ahead.

Speaker 8: Good morning. My question really is about the Glisten movie and the release of it early.

Good morning, My question really is about.

Glisten movie and the release of it early.

Speaker 8: and then pulling back of a due to the competitive movie slate.

And then the pulling back of it due to the competitive movie slate.

Speaker 8: That coupled with the results that can you attribute to sales or the sales results that you can attribute specifically to that movie. Can you discuss that a little bit more?

That coupled with the results that can you attribute to sales or the sales yourself that you can attribute specifically to that movie can you discuss that a little bit more.

Speaker 3: Yeah, I think that, thank you Nancy. I think that it's important to understand as we highlight in the script that the creation of content and entertainment for us, we created in the construct of primarily to elevate and integrate our...

Yeah, I think that thank you Nancy.

Thank you.

It's important to understand as we highlight in the script that they.

The creation of content.

And entertainment for US we created in the construct of primarily to elevate and integrate you know are our characters and storylines and our intellectual property with our marketing and then create more engagement with our consumers. So as I noted the.

Speaker 3: our characters and our storylines and our intellectual property with our marketing and create more engagement with our consumers. So as I noted, the original Glitzenden and the Manning Mission movie was based on our best selling product line that we've had as a part of Builda Bear for many, many years, including Glitzenden being the number one unit selling product for the holiday time period.

Original glisten and the Merry Mission movie was based on our best selling product line that we've had.

As a part of build a bear for many many years, including Clifton being the number one unit selling a product for a holiday time period.

Speaker 3: since we launched it. So that's over $150 million worth of products that we sold without any embellishment from a character evolution or character creation story art

Since we launched it so that's over $150 million worth of product that we sold without any embellishment from a character evolution or art character creation our story arc.

Speaker 3: So when we first envisioned this, we want it, we initiated as a tool to create a marketing catalyst.

So when we first envisioned this we wanted we initiated as a tool as to create a marketing catalyst.

Speaker 3: that marketing catalyst was expected to be more in a streaming or digital environment, which will be starting tomorrow, exciting. But Syna Mark and Builda Bear created a very unique, very interesting relationship because Syna Mark and Builda Bear are co-located in numerous malls in numerous markets.

That marketing catalyst was expected to be more in a streaming or digital environment, which will be starting tomorrow.

Exciting, but cinemark and and build a bear created a very unique very interesting relationship because cinemark and build a bear or cold Lake located in numerous malls in numerous markets.

Speaker 3: and it's a really natural interplay for kids to come to Build a Bear and then go to movies. And we do that a lot even with our licensed films.

And it's a really natural interplay mm for kids to come to build a bear and then go to movies and we do that a lot even with our licensed film and so it was the leveraging of that moment and that sort of proven a tool to create stuffing events in some of their theatres were built.

Speaker 3: And so it was the leveraging of that moment and that sort of

Speaker 3: proven tool to create stuffing events in some of their theaters where bill the bearer is just right down the hallway and create excitement early excitement and the holiday business.

The bear is just right down the hallway and create excitement early excitement and they holiday business.

Speaker 3: And so, indeed, we have generated, as I noted, over 4 billion impressions, leading into the key holiday shopping period, the sales of the products associated with the film are indeed very positive. But the key there is that the objective is to raise the water level and build a better top of mind. As again, we turn the page into the highest

And so indeed, you know we have generated as I noted over 4 billion impressions, leading into the key holiday shopping period. The sales of the products associated with the film are indeed very positive, but the key there is that the objective is to raise the bar.

Water level and can't build a bear top of mind as again, we turn the page into the highest potential opportunity, which is the the big selling period of December.

Speaker 3: potential opportunity, which is the big selling period of December . For us, when you imagine the family's coming into malls, visiting Santa, a lot of planned bill of air purchases, and it's a big arc of opportunity when you think about it. So the-

For us when you imagine the families coming into malls visiting Santa a lot of plans build a bear purchases and it's it's a big arc of opportunity. When you think about it so that the paring. It down is there were multiple big budget.

Speaker 3: The pairing it down is there were multiple big budget films from major film companies that came out last week, the last in the middle two weeks of November . And so that was just a combination of working with our partner on how we wanted to manage that and we're excited to go that nationwide. This...

From major.

The film company that came out last week are the lap that in the middle two weeks of November and so that was just a combination of working with our partner on how we wanted to manage that and we're excited to go back nationwide. This this coming weekend, but then we will transfer to the digital.

Speaker 3: this coming weekend, but then we will transfer to the digital side and drive that in-home view.

Side and drive that in home view.

Okay.

Thank you.

Thank you. The next question is coming from Zach Miller of <unk> capital. Please go ahead.

Speaker 6: Hey guys, thanks for taking the question. So I wanted to go back to the guidance. I think the implied fourth quarter at the midpoint is something like little over 3% revenue growth. So can you just help us with what's embedded in that from we look at new store contribution versus same store sales?

Hey, guys. Thanks for taking my question.

Wanted to go back to the guidance. So you think the implied fourth quarter at the midpoint is something like little over 3% revenue growth. So can you just help us with what's embedded in that from when we look at new store contribution versus same store sales.

Speaker 4: I mean, so first, thanks for a question, Zach. And you know, this is one of those things as we...

I mean, so first thanks for the question Zack.

As one of those things as we provide.

Speaker 4: you know, we are providing the guidance. You are absolutely right at midpoint of that new guidance range. It shows that like...

Providing the guidance you're absolutely right that the midpoint of the new guidance range. It shows that's like.

Speaker 4: mid-trees, you know, from the total revenue growth perspective. We don't specifically talk about columns.

Mid threes, you know from the total revenue growth perspective, we don't specifically talk about comps, but definitely we have opened some.

Speaker 4: But you know, definitely we have opened some stores and you know, there is a mix of these stores that we are opening. So definitely when we talk about partner-operated locations, when we sell to them on a wholesale basis, we are not getting the full retail revenue. So when you are looking at some of those sales,

Stores and you know there is a mix of these stores that are opening so definitely when we talk about the partner operated locations than we sell to them on a wholesale basis, we are not getting the full retail revenue. So when you are looking at some of those sales clearly the I'm not going to grow at the same pace.

Speaker 4: Clearly, they are not going to grow at the same pace as your retail sales. So that's one of the pieces. What we talked about also is that you know, we are seeing some softness in our UK business. So different geographies are going to be performing.

Retail sales so that's one of the pieces.

What we talked about also is that you know we are seeing some softness in our U K business. So different geographies are going to be performing.

Speaker 4: Please that performs so far in a different pace. So we are contemplating some of that as well as our E-Combusiness has been softer than what we have planned Late in Q2E and you know like so far in Q

They have performed so far at a different pace. So we are contemplating some of that as well as our <unk>.

E Com business has been softer than what we have planned late in Q3, and and you know like so far in Q4.

Speaker 2: got it. I guess without getting a specific number, I mean, generally, or you guys expecting positive comps in the fourth quarter, or does the guy contemplate negative comps there?

Got it I guess without giving a specific number I mean generally are you guys expecting positive comps in the fourth quarter or does the guide contemplate negative comps there.

Speaker 4: I mean, just like if you think about low versus high end, you know, like you can get to the different numbers, you know, we are considering, you know, how some of the challenges from the macro environment, how prominent they were, like, especially late in October , and, you know, it was a big <expletive> .

I mean, just like if you think about low versus high end you know like you can get to the different numbers. You know we are considering you know how some of the challenges from the macro environment, how prominent Dave or like especially of late in October and you know it was a big shift. So we are just trying to be cautious.

Speaker 4: So we are just trying to be cautious and you know, as we still have some big weeks ahead of us.

And you know as we still have some big weeks ahead of us and we just want to make sure. You know that you have these big weeks, if the traffic and things normalize as you know like in its positive you know like it's one outcome, but I suppose if you know you have the opposite so yeah, I'm trying to kind of like walk the middle line and.

Speaker 4: And we just want to make sure that if these big weeks, if the traffic and things normalizes, and it's positive, it's one outcome versus if you have the opposite.

Speaker 4: We are trying to walk that middle line and just based on the information that we have, control team that are within our control, and execute and stay focused on profitability, stay focused on...

Just based on the information that we have control things that are within our control and execute and stay focused on profitability staying focused on are things that are directly within our control and I think that's part of the reason we are able to grow even in the smaller numbers you know still a profit and expand our profit booked from the March.

Speaker 2: things that are directly within our control. And I think that's part of the reason we are able to grow even in the smaller numbers, you know, still our profit and expand our profit, both from that margin as well as pre-tax margin.

As the pre tax margin perspective, I think that point point about controlling what we control I think that that is a great note here because that is what we have done to the best of our ability over the past few years that have resulted and continue with them.

Speaker 3: I think that points point about controlling what we control. I think that that is a great note here because that is what we have done to the best of our ability over the past few years that have resulted in continuous profitable growth for the company. And there is a cautious optimistic.

Profitable growth for the company.

And the there is a cautious optimistic attitude and that's embedded in this guidance and I think that it given that there was a broad a consumer pull back in the last two weeks.

Speaker 3: attitude that's embedded in this guidance. And I think that it's given that there was a broad consumer pullback in the last two weeks.

Speaker 3: the quarter for us in the last two weeks of October , that we did our best to pause and respond, which is what we do quite well. And now we're seeing that moment and shift for us. But it really is just a matter of looking at the macro data and being as transparent as we can with the community.

The quarter for us in the last two weeks of October.

That we we did our best to pause and respond which is what we do quite well.

And now we're seeing that momentum shift for us, but it really is just a matter of looking at the macro data.

And being as transparent as we can with the community.

Got it perfect. Thank you guys.

Speaker 1: Thank you. The next question is coming from Michael Baker. If the data Davidson, please go ahead.

Thank you. The next question is coming from Michael Baker of D. A Davidson. Please go ahead.

Speaker 5: Okay, thanks. I figured I just had one more fall-up on what you said about the dollars per transaction.

Okay. Thanks, I figured I'd just ask one more follow up on what you said about the dollars per transaction you said it could be related to our consumer but also could be related to the birthday treat situations.

Speaker 5: You said it could be related to the slow down consumer, but also could be related to the birthday treat situation.

Speaker 5: if i could push on that i i i assume you have data showing you know that that kind of stuff so uh... maybe i can have to this way within the the non birthday sales

If I could push you on that I assume you have data showing you know that kind of stuff. So.

Maybe I can ask it this way within the <unk>. The non birthday sales are you seeing anything in terms of lower dollars per transaction and you know would that be a function of people trading down to lower cost bears it maybe fewer attachments or you know any other way just to take out the impact of the birthday thing.

Speaker 5: Are you seeing anything in terms of lower dollars per transaction?

Speaker 5: and you know, would that be a function of people trading down to lower cost bears or maybe

Speaker 5: fewer attachments or any other way just to take out the impact of the birthday thing in in figure out what you're seeing in terms of dollars per transaction as i think that's you know sort of important metric to gauge consumer health

And figure out what you're seeing in terms of dollars per transaction is because I think that's sort of an important metric to gauge consumer health.

<unk>.

Speaker 4: Yes, so let me try to add a little bit more color to that, Michael. Birthday treat bear represents a big portion of our new customer acquisition and definitely dollar for transaction that we associated with that particular product. It's lower than our blended rate of everything else that people are buying. So if that grows at a faster pace, that's one thing and a certain point it on earlier. We like that because it's

Yes, So let me try to add a little bit more color to that Michael.

Birthday treat bear.

Presents a big portion of our new customer acquisition indefinitely dollar per transaction that we get associated with that particular product is slower than our blended rates of everything else that people are buying so as that grows at a faster pace. That's one thing going as Sharon pointed out earlier, we like that because it's.

Speaker 4: profitable marketing, it's marketing for profit in this case is we continue to drive more Get and acquire them and still make some money and you know extend the lifetime value of these guests

Profitable marketing as marketing for profit in this case as we continue to drive more guests and acquire them and still make some money and you know extend the lifetime value of these get.

Speaker 4: At the same time, that's just one of the components that's driving that dollar per transaction down. As I mentioned in my remarks, our transactions are up, but the dollar per transaction down, country or candles program and birthday bear it's driving that down. The other piece is, you know, all the other transactions and that's a little bit more challenging to figure out like, okay, it is...

At the same time Thats, just one of the components to driving that dollar per transaction down as I mentioned in my remarks, our transactions are up but the dollar per transactions down Concho candles program and birthday Berry driving that down the other piece as you know all the other transaction and that's a little bit more challenging.

To figure out like Okay. You. These are really what the consumer confidence is in like what choices. They are making but definitely when you are looking at some of those metrics. You know they are down year over year and we are seeing some change but you know this is an area.

Speaker 4: really what the consumer confidence is and like what choices they are making but definitely when you are looking at some of those metrics, you know, they are down year over year and we are seeing some change, but you know

Speaker 4: This is an area that, you know, we continue to stay focused because, you know, driving more transactions, it's really helping drive the overall. We want people to come to our stores. We are going to continue to drive that. And again, providing great experiences. Always the goal is to upsell more. But at the end of the day, I rather have people coming to a store and even if they are spending a lower amount versus not coming to a store.

That's you know we continue to stay focused because you're driving more transaction its really helping drive the overall, we want people to come to our stores. We are going to continue to drive that and again, providing great experiences always the goal is to up sell more but at the end of the day I'd rather have people coming first stories, even if they are spending a lot of them.

But it's just not coming to a store at all.

Speaker 5: yeah fair enough one more real quick i was gonna ask if uh... you know you think student loans led to that or repayment of the loans i should say we restarting those repayments led to the weakness in October but if it i would presume maybe not if it is coming back

Yeah Fair enough one more real quick I was going to ask if you.

Do you think student loans led to that or repayment of student loans I should say restarting those repayments led to the weakness in October, but if I would presume maybe not if it is coming back.

Speaker 5: you know it towards the end of November or or maybe they would make it out of any way of the cost for maybe sort of step back a little bit as a restarting student loans and now they sort of have incorporated that into the budget or you think student loans had anything to do with with what you said and act to what you saw in a

Towards the end of November or maybe they don't.

I don't know if there's any way to know if your customer maybe sort of stepped back a little bit as we're restarting student loans and how they sort of have incorporated that into the budget or.

You think student loans had anything to do with what you said what you saw in October.

Speaker 3: I believe that the shift in consumer macro consumer sentiment in the second two weeks of October , which has been widely reported at this point, probably a large combination of things, is that a piece of it could be.

I believe that the shift in consumer macro consumer sentiment and the second two weeks of October which has been widely reported at this point.

Probably a large combination of thing is that a piece of it could be.

Speaker 3: Can I link that directly to us? I really have no data to do that. But is it in the may lieu of what consumers are considering when they do or don't?

What can I link that directly to us I really have no data to do that but you know is it in the may Lou of what consumers are considering when they do or don't shop, how many things are choosing when they go or what price point they are willing to pay them.

Speaker 3: shop how many things they're choosing when they go or what price point they're willing to pay. You know, all of those things in some way could impact consumer confidence, but that would be a difficult stuff, thing for me to link that directly to Bill Leber. Yeah.

You know it it is all of those things in some way could impact consumer confidence.

That would be a difficult thing for me to link that directly to fill there.

Fair enough I appreciate it all the time today. Thank you.

Q.

Speaker 1: Thank you at this time. I'd like to turn the floor back over to Sharon John for closing comments.

Thank you at this time I'd like to turn the floor back over to Sharon John for closing comments.

Speaker 3: Thank you, operator, and thanks to everyone really for joining us today on our third quarter call.

Thank you operator, and thanks to everyone really for joining us today on our third quarter call I did want to let you know that later today build a bear is honored to be participating in the closing bell ceremony here at the New York Stock Exchange, where we're having this call today.

Speaker 3: I did want to let you know that later today, BuildAbear is honored to be participating in the closing bail ceremony here at the New York Stock Exchange where we're having this call today.

Speaker 3: We will be following that bell ringing with the 100th anniversary, Wall Street, Christmas tree lighting celebration, which we look forward to to kick off this amazing holiday season. And the performance tonight will be featuring our own Glisten and Mary Mission theme song. So as you kick off your holiday season as well, we would like to wish you and your families a wonderful, wonderful holiday.

We will be following that a bell ringing with the 100th anniversary Wall Street Christmas tree lighting celebration, which.

Which we look forward to to kickoff, that's amazing holiday season, and the performance Tonight will be featuring our own glisten and the Merry mission theme song. So as you kick off your holiday season, as well, we would like to wish you and your families a wonderful wonderful holiday.

Speaker 1: Ladies and gentlemen, thank you for your participation. This concludes today's event. You may just connect your lines and walk off the webcast at this time and enjoy the rest of your day.

Ladies and gentlemen, thank you for your participation. This concludes today's event.

May disconnect your lines of log off the webcast at this time and enjoy the rest of your day.

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