Build-A-Bear Workshop, Inc. Q1 2010 Earnings Call Transcript

Build-A-Bear Workshop, Inc. Q1 2010 Earnings Call Transcript
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Build-A-Bear Workshop, Inc. (BBW)

Q1 2010 Earnings Call

April 29, 2010 9:00 am ET

Executives

Allison Malkin – ICR

Maxine Clark - Chairman and Chief Executive Bear

John Haugh - President and Chief Marketing and Merchandising Bear

Tina Klocke - Chief Operations and Financial Bear

Analysts

Tom Filandro – SIG

Tracy Cogan – Credit Suisse

Gerrick Johnson – BMO Capital Markets

Sean McGowan – Needham & Company

Brad Leonard – BML Capital Management

Presentation

Operator

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(Operator Instructions) Welcome to the Build-A-Bear Workshop First Quarter Fiscal 2010 Results Conference Call. I would now like to hand the call over to Ms. Allison Malkin of ICR.

Allison Malkin

With me this morning are Maxine Clark, Chairman and Chief Executive Bear, John Haugh, President and Chief Marketing and Merchandising Bear, and Tina Klocke, Chief Operations and Financial Bear.

Before I turn the call over to management, I want to remind members of the media who may be on our call today to contact us after this conference call with their questions. We ask that you limit your questions to one question at a time. This way, we will get to everyone’s questions during this one hour call. Do feel free to re-queue if you have further questions. Please note that our call is being recorded and broadcast live via the internet. The earnings release is available on our Investor Relations portion of our corporate website and a replay of both the call and webcast will be available later today on the IR site.

Before we get started, I will remind everyone that forward looking statements are inherently subject to risks and uncertainties. Our actual results could differ materially from those currently anticipated due to a number of factors including those set forth in the risk factor section of our annual report on form 10-K and we undertake no obligation to update or revise any forward looking statements.

Now, I would like to turn the call over to Maxine Clark.

Maxine Clark

Thank you for joining us to discuss our first quarter fiscal 2010 results. For our call this morning I’ll begin with comments on our first quarter and update you on our progress toward achieving the priorities we set at the start of the year. John Haugh, our President will provide additional insight into our product and market strategies, and then Tina Klocke, Chief Operating and Financial Bear will review our financial results and outlook. Following my closing comments we will open the call to take your questions.

We have begun 2010 in a solid position and are pleased to show progress towards our number one objective of increasing shareholder value by profitably growing our sales. We posted positive comparable store sales in North America. We continued our positive growth in our European operations and we improved our profitability from last year, reporting positive earnings on a consolidated basis.

For the first quarter, consolidated net sales increased 3.6% driven primarily by total comp store sales increase of 2.1% including a 1.9% comp increase in North America. We previously advised that the sequential improvement in our North American comp sales that began in 2009 was carrying into 2010 from negative single digits in January 2010 to flat in February. The trend continued throughout the quarter with March posting positive low double digit comp store sales.

While the shift in Easter will impact our April results, when we look at March and April combined with just a few days remaining in the month, we expect comparable store sales for the two months together to show a modest increase over 2009.

Moving to Europe, our first quarter comps increased 3.2% continuing the positive trends we’ve had there for the last nine quarters or each quarter since we began reporting European comps. We believe we have future growth opportunities in both existing and new stores, particularly in the UK and Ireland. We are focused on continuing the positive trends that our stores have delivered.

In addition to the Easter shift, we also attribute our improved results in the quarter to initial progress implementing our key strategies regarding product, marketing, our online initiatives, and our brand extension. Already the improved integration of our product, marketing and store operations has had a significant impact and we continue to see strong sales online.

Our business has always been the strongest during the times that consumers have reason to go to malls, around holidays or for gift giving as well as times when kids are out of school on breaks. We’ve given increased focus to these must win periods with strong visual presentation of new products, supported with strong promotions to capitalize on mall traffic and maximize our in store conversion. In the first quarter this approach was successful. We delivered strong results in the key periods which included Valentine’s Day, St. Patrick’s Day, and Easter which drove our overall quarter’s results.

During the quarter our HPG or average transaction value grew approximately 2% driven primarily by a higher average skin price as well as higher skins per transaction. While our opening price animals continue to sell well, during the quarter we focused on clearly distinguishing the value in our middle price range of $16 to $20. Guests responded very positively particularly to the new animals that were launched. Many of these launches were limited editions products supported with strong gift with purchase and value promotions.

In particular this year we declared Build-A-Bear Workshop as the headquarters for Easter plush and saw strong consumer reaction. Kids loved our Easter products and mom’s loved our Easter basket candy gift with purchase. We will continue to offer relevant products for kids and promotions to mom’s to grow our business in all must win times.

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