Build-A-Bear Workshop, Inc. (BBW)
Second Quarter 2010 Earnings Conference Call
July 29, 2010, 9:00 AM ET
Allison Malkin - Senior Managing Director
Maxine Clark - Chief Executive Bear, Chairman of the Board
John Haugh - President and Chief Marketing & Merchandising Bear
Tina Klocke - Chief Financial Bear, Secretary and Treasurer
Tom Filandro - Susquehanna Financial Group
Sean McGowan - Needham & Company
Jamie Albertine - Stifel Nicolaus
Janet Kloppenburg - JJK Research
Justin Orlando - Dolphin Management
Previous Statements by BBW
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Good day, ladies and gentlemen, and welcome to the Build-A-Bear Workshop second quarter fiscal 2010 results conference call. My name is [Modesta] and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)
As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Allison Malkin of ICR. Please proceed.
Good morning and thank you for joining us. With me this morning are Maxine Clark, Chairman and Chief Executive Bear; John Haugh, our President 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 can get to everyone's question during this one-hour call. 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 our 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 factors section and 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?
Thank you, Allison, and good morning, everyone. Thank you for joining us to discuss our second quarter fiscal 2010 results. For our call this morning I will begin with comments on our second quarter and update you on our progress towards achieving our priorities we set at the start of the year.
John Haugh, our president, will provide additional insight into our product and marketing strategy and then Tina Clarke, 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.
Overall, our second quarter results fell short of our expectations but we remain on track towards achieving our primary goal of increasing shareholder value by profitably growing our sales. As you look back on the quarter, April cost decline met our expectations given the shift of Easter to our first quarter.
Combined comp sales for March and April were up modestly, consistent with the increase we indicated during our first quarter call. May, however, fell short of our expectations. Our comp sales trend improved in June making it the best month of our quarter as store traffic improved and the later ending of the school year brought moms and kids back to the mall.
In July we've had strong comp sales growth giving us confidence that overall our key strategies are moving us closer to achieving our objectives. Despite the roller coaster results there were several bright spots of the second quarter and some key learnings that will help us better position our business for the back half of the year.
Highlighting our accomplishments for the quarter, average transaction value rose 2% or $0.62 per transaction on a consolidated basis. We drew visits of engagement with our virtual world. We advanced our licensing programs adding an exciting new program, Build-A-Bear Craftshop Kit that will launch in all Michael stores at the end of September.
We ended the quarter with a strong balance sheet with $31.2 million in cash and invested $3.3 million since the beginning of the year to repurchase shares of our common stock. Once again, we had no borrowings on our credit line and remain debt free.
In total for the second quarter, consolidated net retail sales declined 10% which included a comp store sales decline of 9.7% in North America. In Europe, following nine consecutive quarters of comp sales increases, our comp sales declined by 11.2% driven by the Easter shift, election uncertainty and general economic concerns that weigh down discretionary consumer spending.
We believe the brunt of an initial increase in January in the UK that was buffered by the earlier Easter that we have seen the retail environment in general turn highly promotional in the UK most recently.
As I indicated, May proved to be very challenging for Build-A-Bear Workshop. We delivered our strategy to improve the size and value of our animal launches and fully integrate products, marketing and operations with the return of one of our most popular licensed properties, Tropical Hello Kitty went so well throughout the month.
However, having just one animal in the featured product story was not sufficient to drive our total business for an entire month. As soon as the focus shifted to our Zoo Animal collection, the multi-animal assortment consisting of both core and limited edition products, our business rebounded with June producing the best results of the quarter with low, single-digit decline and spring momentum that has built into strong double-digit July comp sales increases with the release of the Ice Cream Bears collection.