BuildABear Workshop Inc. (BBW) filed Quarterly Report for the period ended 2009-10-03.
Build-A-Bear Workshop is the leading and only national company providing a `make your own stuffed animal` interactive retail-entertainment experience. Buildabear Workshop Inc. has a market cap of $99.7 million; its shares were traded at around $4.9 with and P/S ratio of 0.2.
Highlight of Business Operations:
We hold a minority interest in Ridemakerz, LLC (Ridemakerz). Ridemakerz is an early-stage company that has developed an interactive retail concept that allows children and families to build and customize their own personalized cars. We made cash investments in 2006, 2007 and 2008. We also provide advisory and operational support services for Ridemakerz in exchange for additional equity. As of October 3, 2009, our investment in Ridemakerz was approximately $3.2 million; outstanding receivables from Ridemakerz were $1.0 million. Under current agreements, we are the sole member of an equity class that is allocated losses only following the allocation of losses to all other common and preferred equity holders to the extent of their capital contributions. All of the priority equity members’ capital was reduced to zero in the fiscal 2009 second quarter at which time we began to record non-cash pre-tax losses which reduce our investment balance. Ridemakerz incurred substantial losses during the fiscal 2009 third quarter as a result of major restructuring of its operations that included store closings. For the thirteen and thirty-nine weeks ended October 3, 2009, we recorded non-cash pre-tax losses of $4.6 million ($0.12 per diluted share) and $5.1 million ($0.15 per diluted share), respectively. As Ridemakerz continues to incur losses, we will be required to recognize those losses as non-cash charges up to the amount of our total investment, including receivables, unless additional equity investments are made by other investors.
Total revenues. Net retail sales decreased to $89.7 million for the thirteen weeks ended October 3, 2009 from $105.8 million for the thirteen weeks ended September 27, 2008, a decrease of $16.1 million, or 15.2%. This decline was primarily attributable to a $12.4 million decline in comparable store sales, a $2.9 million negative impact of foreign currency translation and a $1.9 million impact of the shift in the weeks included in the fiscal 2009 third quarter as compared to the fiscal 2008 third quarter. These declines were partially offset by a $1.8 million increase in sales from new stores. Other changes in net retail sales totaled $0.7 million and included decreased sales from non-comparable, non-store locations, partially offset by changes in deferred revenue.
Revenue from franchise fees decreased to $0.9 million for the thirteen weeks ended October 3, 2009 from $1.0 million for the thirteen weeks ended September 27, 2008, a decrease of $0.1 million. This decrease was primarily due to the decline in franchisee store sales reflecting the global economic slowdown. Licensing revenue increased to $1.1 million for the thirteen weeks ended October 3, 2009 from $0.5 million for the thirteen weeks ended September 27, 2008, an increase of $0.6 million. This increase was primarily related to increased revenues through our partnership with Landry’s Restaurant’s, Inc. and the timing of licensing activities.
Gross margin. Gross margin decreased to $32.7 million for the thirteen weeks ended October 3, 2009 from $42.3 million for the thirteen weeks ended September 27, 2008, a decrease of $9.6 million, or 22.7%. As a percentage of net retail sales, gross margin decreased to 36.5% for the thirteen weeks ended October 3, 2009 from 40.0% for the thirteen weeks ended September 27, 2008, a decrease of 350 basis points as a percentage of net retail sales (bps). This decrease resulted primarily from reduced sales leverage on store occupancy costs in North America partially offset by improved sales leverage on store occupancy costs in Europe. Additionally, promotional initiatives in the quarter resulted in a product mix shift and a slight decline in North American merchandise margin.
Total revenues. Net retail sales decreased to $267.4 million for the thirty-nine weeks ended October 3, 2009 from $321.1 million for the thirty-nine weeks ended September 27, 2008, a decrease of $53.8 million, or 16.7%. This decline was primarily attributable to a $43.1 million decline in comparable store sales, a $12.5 million negative impact of foreign currency translation and a $7.5 million impact of the shift in the weeks included in the first three quarters of fiscal 2009 as compared to the same period in fiscal 2008. These declines were partially offset by a $10.5 million increase in sales from new stores. Other changes in net retail sales totaled $1.2 million and included decreased sales from non-comparable, non-store locations, partially offset by deferred revenue adjustment.
Revenue from franchise fees decreased to $2.2 million for the thirty-nine weeks ended October 3, 2009 from $3.1 million for the thirty-nine weeks ended September 27, 2008, a decrease of $0.9 million. This decrease was primarily due to the decline in franchisee store sales reflecting the global economic slowdown. Licensing revenue increased to $2.0 million for the thirty-nine weeks ended October 3, 2009 from $1.6 million for the thirty-nine weeks ended September 27, 2008, an increase of $0.4 million. This increase was primarily related to increased revenues through our partnership with Landry’s Restaurant’s Inc. and the timing of licensing activities.
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