Build-A-Bear Workshop 2011 Annual Report Download - page 33

BUILD-A-BEAR WORKSHOP, INC. 2011 FORM 10-K
primarily due to a significant decrease in store asset
impairment charges as compared to 2009 as well as
improvements in margin and leverage of fixed store costs. In
2009, our total store contribution declined, primarily due to a
13.4% decrease in comparable store sales. This decrease in
total store contribution was partially offset by approximately
$25 million in cost reductions in North America in 2009.
Our 2012 plan balances our long term business goals
while recognizing the continuing challenges of the retail
environment. We plan to improve store productivity and
profitability by strategically closing fifteen to twenty stores
during the year and reducing the square footage of select
stores by relocating them within the same malls. While we
believe our market potential in North America is
approximately 300 to 325, stores, this right-sizing will allow
us to focus on our business and align all operations around our
goals of improving our comparable stores sales performance
and store productivity, while also building our long term brand
value. At the same time, we will build our first newly designed
stores that feature a bold new look and enhanced experience
as we continue to be a leader in the interactive experiential
retail space. While Build-A-Bear Workshop in North America
will be leaner with fewer stores that have higher volumes and
profitability, we will continue to grow internationally in our
company-owned operations in the UK and through our
franchisees. We also intend to increase shopping frequency by
increasing new guest traffic to its stores, specifically focusing
on families with children, by refreshing our loyalty program
and intensifying digital engagement to increase visits from our
existing guests and by reinforcing our store as a top
destination for gifts. In 2009, we implemented cost reduction
initiatives that resulted in approximately $25 million in pre-tax
savings. We were able to maintain these savings in 2010 and
2011 and saved an additional $3 million in 2011. We
anticipate an additional $9 million in savings in 2012, a
portion of which will offset expected product cost
increases. We ended fiscal 2011 with no borrowings under
our bank loan agreement and with $46 million in cash and
cash equivalents after investing $12 million in capital projects
and $15 million in share repurchases.
Following is a description and discussion of the major
components of our statement of operations:
REVENUES
Net retail sales: Net retail sales are revenues from retail sales
(including our webstore and other non-store locations), are net
of discounts, exclude sales tax, include shipping and handling
costs billed to customers, and are recognized at the time of
sale. Revenues from gift cards are recognized at the time of
redemption. Our guests use cash, checks, gift cards and third
party credit cards to make purchases. We classify stores as
new, non-comparable and comparable stores. Stores enter the
comparable store calculation in their thirteenth full month of
operation. Our webstore and temporary, seasonal and event-
based locations are not included in our store count or in our
comparable store calculations. Non-comparable stores also
result from a store relocation or remodel that results in a
significant change in square footage. The net retail sales for
that location are excluded from comparable store sales
calculations until the thirteenth full month of operation after the
date of the change. In fiscal 2008 and 2009, we closed all
Friends 2B Made locations. All but one of these locations
were inside or adjacent to a Build-A-Bear Workshop store and
were excluded from our store count Other than one stand-
alone store in Ontario, California, the closures of these
locations were considered remodels of existing Build-A-Bear
Workshop stores and were not included as closures. The net
retail sales of these expanded Build-A-Bear Workshop stores
were excluded from comparable store sales calculations until
the thirteenth full month of operation after the date of the
expansion as well as after the subsequent closure.
We have a loyalty program with a frequent shopper
reward feature in North America, the Stuff Fur Stuff
club. Through 2011, guests enrolled in the program received
one point for every dollar or partial dollar spent and, after
reaching 100 points, received a $10 discount on a future
purchase. On a quarterly basis, an estimate of the obligation
related to the program, based on actual points and
certificates outstanding and historical point conversion and
certificate redemption patterns, is recorded as an adjustment
to deferred revenue and net retail sales. At the time of
redemption of the $10 discount, the deferred revenue
obligation is reduced, and a corresponding amount is
recognized in net retail sales. As the reward certificates can
be earned or redeemed at any of our store locations, we
account for changes in the deferred revenue account at the
total company level only. Therefore, when we refer to net
retail sales by location, such as comparable stores or new
stores, these amounts do not include any changes in the
deferred revenue amount. See “— Critical Accounting
Estimates” for additional details on the accounting for the
deferred revenue under our customer loyalty program.
We use net retail sales per gross square foot and
comparable store sales as performance measures for our
business. The following table details net retail sales per gross
square foot by age of store for the periods presented:
Fiscal
2011
Fiscal
2010
Fiscal
2009
Net retail sales per gross square foot —
North America(1)(2)
Store Age > 5 years (220, 194 and
164 stores, respectively) $362 $370 $372
Store Age 3-5 years (56, 71 and
62 stores respectively) $315 $321 $341
Store Age <3 years (4, 21 and
59 stores, respectively) $369 $317 $333
All comparable stores $354 $356 $358
(1) Net retail sales per gross square foot represents net retail sales from North
American stores open throughout the entire period divided by the total gross
square footage of such stores. Calculated on an annual basis only.
(2) Excludes our webstore, temporary and seasonal and event-based locations.
25