Build-A-Bear Workshop(BBW) - 2024 Q1 - Quarterly Report

Store Operations and Expansion - As of April 29, 2023, Build-A-Bear operated 349 corporately-operated stores globally, a net increase from 345 stores at the end of fiscal 2022[83] - The company plans to expand its retail locations, with approximately 35% of total retail locations now in non-traditional settings, including tourist destinations[80] - The company reported a total of 70 partner-operated locations, which are capital light and primarily located in the hospitality industry[86] - As of April 29, 2023, there were 63 international franchised stores, down from 64 at the end of fiscal 2022, indicating a focus on optimizing franchise operations[88] - Approximately 45% of corporately-operated stores are in an updated Discovery format, enhancing the customer experience[84] Financial Performance - Consolidated revenues increased by 2.0%, driven by a 3.6% increase in North America, partially offset by a 9.6% decrease in Europe[93] - Net retail sales for the thirteen weeks ended April 29, 2023, were $112.1 million, a decrease of $0.8 million, or 0.7%, compared to the prior year[94] - Commercial revenue increased to $6.7 million, up from $4.3 million, reflecting a $2.4 million increase due to higher sales volume from commercial accounts[96] - International franchising revenue rose to $1.3 million from $0.5 million, marking a $0.8 million increase driven by higher franchisee sales[96] - Retail gross margin dollars increased by $1.9 million to $61.2 million, with the retail gross margin rate improving by 210 basis points to 54.6%[96] - Selling, general and administrative expenses were $45.6 million, or 38.0% of consolidated revenue, up from $43.6 million, or 37.1%[97] - EBITDA for the thirteen weeks ended April 29, 2023, increased by $0.9 million to $22.4 million from $21.5 million[101] Cash Flow and Capital Expenditures - Cash provided by operating activities increased by $14.3 million to $18.8 million compared to $4.5 million in the prior year[107] - Cash used in investing activities increased by $2.0 million, primarily due to higher capital expenditures related to IT projects and new store openings[108] - Cash used in financing activities increased by $14.5 million, driven by a special cash dividend payment of $22.1 million[108] - Capital spending for IT projects and new store openings totaled $3.1 million for the thirteen weeks ended April 29, 2023, with an expected capital expenditure of approximately $15 to $20 million for fiscal 2023[112] - The company repurchased 132,385 shares for $3.1 million during the thirteen weeks ended April 29, 2023, and an additional 339,954 shares for $7.0 million after the first quarter, with $36.4 million remaining under the stock repurchase program[113] Inflation and Cost Management - Build-A-Bear plans to maintain disciplined expense management amid inflationary pressures and supply chain challenges[81] - Inflation has adversely affected business operations, particularly through rising store labor costs, with expectations for continued inflationary pressures throughout fiscal 2023[114] - The company anticipates a reduction in freight costs compared to the prior year, despite ongoing inflation in supply chain costs and minimum wage increases[114] - The company continues to monitor inflation impacts and may need to adjust prices to mitigate cost increases, which could affect financial results if consumer spending decreases[114] Inventory and Purchase Obligations - Total inventory at quarter end was $66.5 million, a decrease of $10.9 million from the end of fiscal 2022 first quarter, indicating a comfortable inventory level to support increased consumer demand[112] - Purchase obligations totaled approximately $87.9 million as of April 29, 2023, with $27.9 million due in the next 12 months, indicating sufficient operating cash flows to meet cash requirements[112] Corporate Governance and Reporting - The company has completed a share repurchase program and announced a special dividend in April 2023, reflecting confidence in its strategy and future[81] - There have been no material changes to critical accounting estimates since the last annual report, indicating stability in financial reporting practices[116] - The company has not disclosed any off-balance sheet arrangements, suggesting a straightforward financial structure[114] - No material changes were reported in market risk disclosures, maintaining consistency with previous reports[118] Strategic Initiatives - The company aims to leverage its brand strength to expand into new consumer segments, including teens and adults, through unique product offerings and licensing agreements[79] - The company expects to continue its digital transformation to drive marketing and content campaigns, aiming to increase repeat purchases from existing consumers[79]