Build-A-Bear Workshop misses by $0.40, misses on revs:
- Reports Q4 (Dec) adj. earnings of $0.31 per share, $0.40 worse than the Capital IQ Consensus of $0.71; revenues fell 6.3% year/year to $110.3 mln vs the $126.54 mln Capital IQ Consensus. The decline in total revenues reflects a decrease in consolidated comparable sales and unfavorable currency exchange rates partially offset by increases in commercial revenue from the Company's strategic wholesale and licensing initiatives; Consolidated net retail sales were $107.7 million compared to $116.5 million in the fiscal 2015 fourth quarter. Consolidated comparable sales decreased 8.3%, including a 10.2% decrease in North America and a 0.4% decrease in Europe. Consolidated comparable e-commerce sales increased 2.0%; Sales from stores remodeled in the Company's Discovery format in North America and the United Kingdom decreased an average of 1.7%. Retail gross margin declined 520 basis points to 46.0% compared to 51.2% in the fiscal 2015 fourth quarter, primarily driven by impairment charges and the deleveraging of fixed occupancy expenses.
- In addition to the impact of the overall industry reported declines in mall traffic, principally in North America in December, the sales decrease versus expectations is attributable to: Changes in media and marketing tactics, shifts in licensed product sales and the execution of unplanned promotional activities; A decrease in Build-A-Bear gift card redemptions (despite a double-digit increase in fourth quarter gift card sales); and Missed e-commerce sales in December due to the inability of the Company's systems to manage the increased traffic to its site.
- In May 2016, the Company announced that its Board of Directors had authorized an exploration of a full range of strategic alternatives. No timetable has been set for the Company's review process. The Company does not expect to comment further or update the market with any additional information on the process unless and until the Board of Directors deems disclosure appropriate or necessary.
- Initiative: The Company expects to continue to make improvements to its aged store fleet by leveraging its new Discovery format in conjunction with select natural lease events. The Company also expects to continue to diversify stores into non-traditional locations inclusive of its new, lower capital, more flexible "concourse shop" model following initial results of a fourth quarter test. As noted, the Company expects to add 20 to 25 new locations in fiscal 2017 and close 5 to 10 existing locations to finish 2017 with 356 to 366 company-owned retail locations. Additionally, the Company expects its international franchisees to open approximately 10 stores in 2017, and it intends to add new franchise partners in select markets. Separately, the Company is planning a comprehensive enhancement of its website platform and upgrade of its e-commerce systems in order to capitalize on the changing consumer shopping patterns while expanding its enterprise selling capabilities. Company plans to continue to develop and expand its offering of successful intellectual property concepts balanced with core products and a comprehensive program of key licensed properties. The Company also expects to continue to expand its plush wholesale/corporate sales initiative and to build on its outbound branded licensed programs. The Company is focused on improving profitability through the execution of its stated strategies detailed above as well as disciplined expense management and on-going efforts in process and systems upgrades.
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