Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Build-A-Bear Workshop Second Quarter 2023 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Gary Schnierow, Vice President, Investor Relations and Corporate Finance. Thank you, sir.

begin. may You

Gary Schnierow

you Sharon Thank us. me With Good John, for CEO; are Price CFO. and today morning. joining Voin Todorovic,

call, our in key more with begin After, Voin quarter the Sharon and the of priorities. we today's financials review progress on second update performance provide a made have detail will our and For discussion will our guidance.

the call [Operator questions. to Instructions]. your open take then will We

differ inherently on earnings of the and recorded subject Form Relations no Please later note Factors will report unless materially revise site. a due release XX-K. live including currently remind that factors, section by IR annual the any corporate is undertake law. forward-looking to Internet. in number is to anticipated in be I the available risks of call everyone those our and the of the could forward-looking broadcast on The set replay We both results Investor via from portion being forth those available company's Risk A required are to and statements the on will call uncertainties. obligation website. today statements our Actual webcast

measures the with regarding reconciliation company's measures measures, in Also, not GAAP. management useful eliminate considered may during we in non-GAAP these non-GAAP accordance a to measures adjust should isolation the company's find items, discuss evaluating or financial and non-GAAP release. of to of GAAP in If in for a this presented, GAAP prepared non-GAAP you substitute financial earnings our be believes are these results presentation measures will results information the financial non-GAAP certain call, of be impact which which can The performance.

to the would like I now, turn call And over to Sharon.

Sharon Price John

Earnings and you, thank joining XXXX for Good Gary. morning, Build-A-Bear's Second Quarter you Call. us Thank for

revenues second remain headline pleased and to in the for diluted income EPS and XX% Pretax million, the At XX% report first $XXX over annual a year. XXXX X.X% quarter level, record to grew guidance increased our and million. second We quarter, we increased half confident $XX are to for $X.XX. to results,

first to to income of the XX% $XX increased EPS almost $X.XX. half For revenues million. increased million, $XXX and XX.X% grew Pretax XXXX, diluted to X%

to our note record second fiscal data first quarter We these points are represent each levels that of fiscal pleased half. for and

profitability Voin revenue Additionally, will detail his address our remarks. more and during in

best-selling Day high to program we of drive the and Listen featuring warming which multiyear Teddy new exclusive; media in the promotion sales Christmas collection the Build-A-Bear X, September part film Bear a awareness continuing by the to on new and a second we year, of time important our As strong to interest to in of currently the and holiday the ongoing including: and driven our forward traffic execute brand to see we period phasing into a new the expect by collectible Build-A-Bear back proven with look by half sales of and inspired expect animated to a of momentum license our openings; including and traffic offerings Foundation; to strategy half. Bear continue be from our products of designed launch additional National the conjunction new the our the store during variety celebration introduction a ranging growth the Give initiatives, Mission, and marketing Merry season. our Buy of integrated and elevated Bear with drive

range in continue these X% XX%. XX% that place, year for With revenues initiatives remain important to and results pretax of total growth we will increase to we the in the to and income to X% quarter-to-date our of positive third fiscal confident deliver

and demonstrate to brand level sustainably both and follow at XXXX, record-setting our profitability. grow the for XXXX of a results Our record first half ability higher Build-A-Bear our XXXX results

key our leveraging by strategic and continue one, three, investments profitable into X significant grow profitably support to footprint; expanding into accelerating our to on digital experienced location our deliver our growth by our this to initiatives We as to to next increasing diversify two, expand to transformation; able equity of: are strategically continuing these we categories initiatives sustained our our consumer appeal new brand to base a and enter broader chapter. execute

why Our Build-A-Bear a first XXX experienced weeks trips is outpaced and up in traffic are the which Because growth location destination, industry our row. strategic planned. of workshops our see the evolution footprint. has X to XX% initiative continuing is of our guests to reason a for retail as

level on store investment Additionally, contribution with average, margin, delivering XXX% and a profitable than generate than greater our they XX% X-year less of stores payback.

and With stores, potential post-COVID the for corporate more our effort top-tier markets growing by to began showing research concerted reach footprint. opportunity we more economics store store a

we are many local also guests workshop that as such, closer to desire opening a into continue and tourists visit As at a for and hospitality to destination more to first home. the a also locations, vacation expand time on locations experienced localized level we Build-A-Bear experience

or allowing Over years, store created highly corporately managed profitable, different sizes it's model, we open and types us models, our and the to and several past concourse different locations our whether smaller many configurations model within store multiple traditional have flexible stores geographies. of a in store,

in of stores growth growth. our Our existing well second reflects quarter unit at X% as growth retail traffic nearly as sales continued

managed store store growth corporately our growth. to partner-operated in Our is addition

locations. Lodge, Our continue of the partner-operated is variety Cruise Wolf growth stores in captured specialized such our other Kalahari store add reporting as to partners Great or Note revenue Carnival segment. Lines that in commercial Resorts wide

strategic number company. loyalty management, driving our our sales and other data both personalization dedicated our These areas to and our second repeat touches increase building all upgrade capabilities, technology. ranging CRM in-store and from the tools and lifetime of been value new a to website a aspect increasing and system to designed has POS optimizing of gifts, Our in-store redesign, are and AI consumer rollout engagement, for of profitability our the current omnichannel gifting the improved includes across programs, optimization, and digital business online. which and transformation, ongoing integrated initiative nearly every This of

we To and our highlight that that is just on few e-commerce consumer, by driven and core product primarily transformations. buildabear.com kid our collectibles. beyond our are focused business, who creating for looking expand adult our appeal gifts offerings a why team which of Recall had consumers is to

ongoing XX% our website adults include evolution generate market and is ago Build-A-Bear Our addressable to enlarging a of XX these purchase total large occasions, at part years now sales. teens predominantly who approximately of our kids addressing from inception

The recently perks digits and loyalty new quarter's new repeat growth as XX% digital demand product web up second new reflects XX our team trailing through transformation, at delivering business these digital months. increase acquisition, majority targeted both in we double and an the and transformations consumers. assortment personalized of our Additionally, in adult tested have is marketing, for well as which messaging, target member

focus Having able areas of key our consistently generated we to strategic leverage our that growth investment have increasing high to initiatives brand. the on the returns third of been on capital, support power

to and sales addition that footprint ranging these with to players capital making digital has and drive the with game have Tycoon rating systematic in and driving associated raise we designed been infrastructure our of Build-A-Bear and from sales, film expansion growth characters. guests approval XX% while investments Roadblock action live to continued awareness Honey million a evolution, to Specifically, endear the content entertainment XX over creation in our

significant Glisten, and Merry favorite of investment will has our The that a film featuring holiday since talent launch lead example our is season Another during furry animated Mission U.S., million the the The Workshop, upcoming the our within else Snow across Deer. film, or storyline type themed opportunities. co-marketing Michaels supported this allowing has generated include feature XXXX. will of be movie Mission. of same holiday on Merry over fan XXX its Cinemark from the the movie, collection, Build-A-Bear as as the many voice which to Claus Christmas based the Chevy key Julia malls The in best-selling $XXX Chase the Glisten host Santa shown revenue is magical screens in for

include example, inside promotions in-store theaters. plans ticket plus Cinemark promotions incremental attendance, to For drive the physical marketing Build-A-Bear's movie

ICE Merry the part also activities across promotional as the store annual a Mission cities country. Resorts are our in major holiday In Glisten Gaylord planned events conjunction, pop-up program at and of X

plans launch. social in-store Merry plus and Mission a digital campaigns and takeover an Our other and game marketing multidimensional media Merry Mission online include

To to expand it's continuing investments I important margins our believe have managed context, to while to return provide these highlight shareholders. capital that and we

efforts and of capital Specifically, dividends both over in the million these and X past shareholders. X our X quarters, $XX we repurchased prospects. to more investment have our shares, believe future We returning confidence demonstrate returns million paid special than

on focusing for call more while yet add the long-term associates and in working like setting turning a heart Build-A-Bear of thank I the profitable Voin? to company to would Voin, up efforts for little record-setting a another their life the growth. partners to all while together to Before year. over achieving

Voin Todorovic

Thanks, Sharon, and morning, good everyone.

with to last growth all in today a speak share highlighted to second best income significant This pleased our you by are our of and year. expansion margin half and increase was segments, quarter gross first across performance XXXX. profit in pretax We versus ever

diluted XX%, and positive capabilities to of strategic our XX.X%. report brand and XXXX repurchase marketing including our We successful to EPS resonance traffic. Build-A-Bear ability share strong of with elevated Combined attribute rose to environment the EPS drive the activity, the results second retail a ongoing dynamic rose in quarter the and to strength half first increasing execution initiatives,

of from SG&A higher wages provides free our to for adding partner-operated strong strong our margins model opportunity earnings to inflation business in increase talent, next invest and sector capital-light and due an still with store the in growth Even delivering cash and contribution flow. our while growth us

to Year-to-date, and we allows cash free shareholders. $XX cash to to dividends in share return strong capital million Our over returned shareholders. to have repurchases, us flow also continue through

both e-commerce. net review were up more $XXX.X significantly demand with positive to number as growth sales our and Total million, quarter. the data. continues quarter. transactions revenues year-over-year. Turning to increased including stores year-over-year of a period. to for X sales contributions corporate in in the retail XX.X% outpace detailed stores Net a We the Store from increase national X.X% of reported increased year-over-year opened retail traffic X E-commerce traffic second

which revenue, rose year. represents sales and to primarily international wholesale franchise XX.X% revenue operators partner Commercial combined the versus our prior a

an quarter. lower compared improvement year-over-year XX.X%, and franchisees year-over-year costs of from distribution merchandise our the freight X Our and reflective benefiting and profit margin costs. partners XX expected margin year, quarter. and basis X in stores expansion, the to opened of opened leverage points and X XXX last of was occupancy in Gross stores

talent. XX.X% driven pressures, corporate SG&A level store a SG&A by quarter. point inflationary $XX.X higher total in or increase basis the from at The from to in in compared the XXX expenses million, revenues of XX% $XX.X at was revenues mostly were planned million, or of XXXX wages, total second investment level and

reference, basis rate XXX a in quarter second SG&A the is lower As XXXX. almost than points

gross XX.X%, and income margin rate share, store in share pretax XX% in SG&A X.X% dollars increase. to total and and a basis the growth increase a of a $X.XX count by tax to XXX in aided offset with profit margin revenues. of points expanding Higher per expansion contribution more reduction was EPS, pretax lower than diluted led

half million, For year-over-year. the up total X% first $XXX.X of were revenues year, the

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

volatility declined to the E-commerce launches second half. Driven impacted to the quarter a continue positive in by basis. compared as rebounding by grow our year on the The up product to first demand of almost timing full year. momentum, finish XX% was be down demand e-commerce to X% quarter XX% before and we for expect current last in the first primarily

by revenue improvement and expansion, point basis International margin leverage reflective the XX.X% combined costs occupancy distribution of and merchandise compared lower was to profit year. rose prior a XX.X%, Commercial freight last franchise margin costs. driven versus year. XXX and of a expected Gross

to store higher in a SG&A profit the revenues planned of in of revenues. SG&A XXX growth million compared than pretax dollars slight income the from total to the in or of for gross investment quarter. increase wages, The $XX $XX.X a SG&A offset count level XX.X% expenses revenues $XX.X basis share level with Reflecting to mostly million second at pretax lower increase, increased more fiscal in margin the and XXXX is $X.XX expanding the inflationary the of the first and Higher and corporate or a to rate, million, half increase share, XX.X% XX% from talent. pressures XX.X% per for of was led which was EPS tax at and $XX.X EBITDA record basis level our first by point increase XX.X% driven million XXX were half, points to XX% total total in year. diluted

At million quarter shareholders period the increase sheet. $XX over to balance the and last end, returned cash the through Turning year. last months. million of $XX.X we XX compared and $XX.X to payments equivalents an We same the share over had cash of dividend million, repurchases to

$XX.X composition expectations. year's Keep Inventory level from quarter quarter year to at $XX.X begin avoid potential as $X.X quarter remain expect with supply We elevated our finish was to the end inventory comfortable, end of quarter of million third million chain million, we the last XX% line and was the level. or be disruptions. and in and inventory second end declining mind, intentionally last the last year below the year's our inventory to continue in

outlook. the to Turning

total to I'd details which XX-week of guidance guidance in fiscal range We $XX $XXX is X the to pretax the $XX million key release, full XX% to like revenue and metrics: in income but for our our XXXX, included of to are and reaffirming increase are a the growth highlight year, in X%, X% of range or XX% to million; million. $XXX revenues resulting the of to press million

Conference closing, first for and store in our Consumer seeing contributing half Riley the as including continued warehouse XXXX. to another our Nashville the well associates on upcoming to for are with positioned year all on our forward record-breaking would XXXX. B. has Conference from record-setting Exchange New XX. September you Stock team our sharing at Consumer the like We results XX, thank Day York we September In with of year our corporate to progress September I Piper on their Access record of look which conferences, members efforts, move you of and we and as us Sandler as growth through is and the investor XX, many in pleased

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

Operator

SCC Beder first from with Eric the Instructions] question comes Research. [Operator Our line of

Eric Beder

in I Congratulations with anniversaried about that you driver? in-store with are a some a of on the thinking how What going you quarter. pieces great should the be trends terms talk of potential of a in we potential forward little rollout the And resuming. to want bi about stores, the seeing as parties that?

Sharon Price John

parties part particularly, parties has many as important we period And been recently during the So parties I birthday have the time you noted. celebrations, and such you and always hiatus of COVID restarted, think a Build-A-Bear. know, of as did really to as

long We are still in pipeline. the building phase. That's a

traditional And our what at of to that. pre-pandemic Girl versus and prior not excited concerted that, of be we much we're see are beyond other tremendous about our was Parties parties party. but still although themed year, up they future with a some levels. building of the of types we're in opportunity very amount marketing started it's actually birthday and into or Scouts even partners we're like the more

past, the X% sales. in that's noted, around Now as been we've of total

the call well, tremendous back not that as growing we're and noted And it is be still today's see we in but in our total But same -- pie with clear, growing so was as the -- few party past as at we still business. opportunity a you the to at percentage. quarters,

Eric Beder

that seeing are more movies look coming how of some can I How have that successful we of of And Barbie know excitement fit regular coming your you you forward? out, you the And rising other the at very the know for How lot do a with leverage going all this movies at how best had we Glisten Great. I offering do kind core customer. and movie. does year opportunities you that look movies? in? with for for a

Sharon Price John

Thanks, Right. Eric.

best-in-class well on evergreen a that as properties film. based example, for gaming, a of high-impact of are ranging which type of be then different long now And would movie license entertainment, has those a also that partners, as Star from product with history or So that of types events types inclusive started maybe with but films. is we've had a Pokemon Wars,

Teenage Turtles, our rather, had consumers. have this which successful, year. for of Patrol, And a lot You're with our release that scheduled Barbie a we've right, year, is this recently for was movie and of we that. broad launched long Paw looking relationship item into a did We people out range very later collection

that try those to just build a a own visibility it a way and powerful and in by we slot Build-A-Bear type we a in tremendous plan, of experience is in, lot business create because that And spikiness business. we part our that own have those doesn't of the such special of our in options a course But plan measuring we the powerful of our our overarching time. and against consumers understand them and brings partners for over value that license create,

right our total higher sales example, than return in even now, own than total film, license of Build-A-Bear for our business. the So is of a property in intellectual year

Operator

of [Operator Research. comes Instructions] next question Our line Argus Steve from the Silver with

Steve Silver

offer me inflationary reiterating my morning's the you on I costs in among let hoping press just cite of factors pressures could This freight effect provide the a quarter continues you release outlook. on color then and as ongoing there well. to on the more And is the just much on macro And year little congratulations year the as was inflation in come full right level? particularly of now? impacting the whether supply business are chain impact more whether in of beyond results. issues down the any wages a they've half note business the going considered

Voin Todorovic

Steve, Thank the question. for and you, thanks

freight in contemplated XX% shared been was X% guidance. past full same several we that As last and grow to months. the we highlighted we basis pretax within the year revenue our of on inflation, And that guidance reaffirm impact income, the the that's to the a for basically our to X% guidance impact have of XX%,

color. reminder, some in market freight of to year, second the fiscal the reduction Just half the our start overall freight year, to 'XX, really just starting additional I'll with during were we a provide Last like see as rates. in

perspective, the of little with that half were in know, of seeing bit a realize first second half freight tougher starting year, were the be to in in the from P&L of from it's we benefits So of this a the year, going more anniversary benefit comping as to year, we you a XXXX.

have country talking of talked result wage a as we right. are seen the are seeing are you inflation, absolutely compression through know, across yes, from we that the those. We about we both minimum -- wages, as about that we inflation you wage As as well increases

In in are are numbers. it's that, we overall that's many across addition But still to reflected. in making inflation our that of lines investments the talent the P&L, reflected of hitting impact other

of were despite and those improve are able we pretax some pressures XXX some our basis by seeing, increases points. we that, the within are margin We quarter, contemplating inflationary of even that to

challenges are are we to we And of some things So dealing offset into of some with, are able those some them. those those. of again, and we planning

to several control. I components over that track of outside external last the may what control the a record continue that are definitely were of years are things certain hear of the all And the news, our from to P&L. to that think we things definitely within but execute, we is in that keep good and manage the we There have our a feel what's reacting on environment, we uncertainty we happening economic the to we we to monitor about level able will that be and how good manage people continue

Steve Silver

follow-up, I you potential last ahead buildup of just in the there if can. higher some that was of said QX been some has And issues. helpful. year, I Historically, terms know one very That’s Great. inventory. quarters among

inventories of intention in of you as the your year-end you the initiatives should below wondering have and Just ahead Obviously, reiterated new we well openings whether season more store some inventories meaningful to discussed. of holiday increase anticipate levels. as a

think curious trajectory as in quarter. would third the Just the to what be you

Voin Todorovic

inventory see season. for Steve, QX a we you elevation the holiday levels are right. in would are Like more historically we as bit building speaking, little

we similar stuff Some trajectories. naturally, maybe see that expect of would to some

of are they think because year as going be to don’t been last to I of have pull profound some inventory that maybe intention forward. they as However,

to some expect see builds. inventory So normal we still

the continue below one to of composition as We the has by impacting is But us past, a end level inventory mentioned, bit than we inventory we that different little has levels. that trajectory expect of that have. our about inventory. good as our in also we bit of our And year, last inventory the inventory grow year partner-operated to retail of than it little more and business, feel things be is a confident a we the

again, So and that earlier partner-operated and bringing location. selling our are inventory polishing to are we the then we

is we a as that’s number bit year little have a inventory, there definitely, full in but think about So we shared. that that contemplated mix of all overall

Sharon Price John

Right.

partner-operated grows, important with bit, really a that’s because unravel inventory Lodge, they business like are selling -- of capital-light buy we companies we as the Wolf things that relationship a think kind as little it. the I wholesaler point with Great we’re to as that a though, our mentioned, if

bigger early it buying they’re it them So to will. if chunks, usually selling then we in and and they’re through, you sell

Operator

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

Sharon Price John

that look with the Voin Thank of conferences information joining today. you you mentioned. us at upcoming more sharing third you and forward results quarter our for about to some seeing We

Operator

Ladies teleconference. today's and this conclude does gentlemen,

lines wonderful your and participation, your disconnect day. this you may at You for have Thank time. a

Build-A-Bear Workshop (BBW) 24 Aug 232023 Q2 Earnings call transcript