Build-A-Bear Workshop's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Build-A-Bear Workshop, Inc. (BBW)

Q2 2012 Earnings Call

July 26, 2012 09:00 am ET

Executives

Allison Malkin - Senior MD, ICR

Maxine Clark - Founder & CEO

Tina Klocke - COO, CFO & Treasurer

Analysts

Gerrick Johnson - BMO Capital Markets

Sean McGowan - Needham & Company

Presentation

Operator

Greetings and welcome to the Build-A-Bear Workshop second quarter fiscal 2012 results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Allison Malkin of ICR. Thank you. Ms. Malkin, you may begin.

Allison Malkin

Good morning. Thank you for joining us. With me today are Maxine Clark, Chairman and Chief Executive 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 and one follow-up. This way, we can get to everyone’s questions during this one-hour call. Feel free to re-queue if you have further questions.

Please note, our call is being recorded and broadcast live via the Internet. The earnings release is available on the Investor Relations section on 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 in 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?

Maxine Clark

Thank you, Allison, and good morning, everyone. Thank you for joining us to discuss our 2012 second quarter and first six months results. On our call today, I will read the progress that we've made on our key strategies as well as update on you store, product and marketing initiatives. Then I’ll turn the call over to Tina Klocke, our Chief Operations and Financial Bear to review our financial results in more detail. After my concluding comments, we will open the call to answer your questions.

At the halfway mark of the fiscal year, we continue to show progress towards our 2012 objectives. We have positive comparable store sales for the first half of the year in North America, showed solid improvement in quarterly trend in Europe and drove significant growth in our e-commerce business. We also have improvement in our operating performance, reducing our pretax loss by nearly $5 million.

As we begin the second half of the year, we fully expect further improvement in sales productivity and profitability. We continue to execute our long-term strategies to optimize our store base, increase shopping frequency and improve cost efficiency.

Let me go into a bit more detail about our quarterly performance. In the second quarter, the Easter Shift had a negative impact on April sales as planned, but we returned to the positive column in May and June in North America. In Europe, where the macroeconomic climate is especially challenging, we saw marked improvement in trend and continue to focus on key initiatives to move this unit back to positive comp and we once again posted growth on the e-commerce side with a 5.5% increase coming on top of a 23% increase in last year’s second quarter. We continue to be in a strong cash position to execute our strategies ending the quarter with $26.5 million and no borrowings on our credit facility.

On the product front, one of the highlights of the second quarter was the strong reaction to our first ever tie in with the Girls Scout as we introduced a special bear in uniform in conjunction with our 100th anniversary. We saw a gain in our core demographic, Twins dress and drove an increase in our party business. We also had a great response to the Avengers costume collection that tied into the movie release, a big hit across the board, but especially with boys.

In marketing, we continue our two-prong approach, speaking to both kids and moms. We’ve had kids know about our new products and fun store experience and make it easy for moms to say yes. We see a renewed opportunity and some early positive results from rebalancing our experiential brand focus advertising and value added marketing events versus featuring only discount and promotional messages that had been needed during the economic downturn.

For example, in June, we brought back one of our most popular gifts for purchase, a summer beach towel and we saw strong guest response to the offer. Our enhanced brand focus has also shown benefit. We continue to engage on the emotional connection that guests have with our brand, with our year-long celebration of our 15th birthday and our Friends Count campaign. We are using this campaign to increase special occasion and celebratory events as reasons to visit a Build-A-Bear Workshop store.

Moms continue to be value focused. So we know it’s important to provide balance. For example, the coupon that was offered in the promotion we ran with McDonald’s continue to drive traffic into our stores throughout the second quarter.

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