Build-A-Bear Workshop 2011 Annual Report Download - page 34

BUILD-A-BEAR WORKSHOP, INC. 2011 FORM 10-K
The percentage increase (or decrease) in comparable
store sales for the periods presented below is as follows:
Fiscal
2011
Fiscal
2010
Fiscal
2009
Comparable store sales change —
North America (%)(1)(2)
Store Age > 5 years (220, 194 and
164 stores, respectively) (2.1)% (0.4)% (15.1)%
Store Age 3-5 years (56, 71 and
62 stores respectively) (5.1)% (3.3)% (17.7)%
Store Age <3 years (4, 21 and
59 stores, respectively) 1.0% (3.8)% (22.2)%
Total comparable store sales change (2.5)% (1.2)% (16.7)%
Comparable store sales change —
Europe (%)(1)(2) (0.2)% (5.5)% 5.0%
Comparable store sales change —
Consolidated (%)(1)(2) (2.1)% (2.0)% (13.4)%
(1) Comparable store sales percentage changes are based on net retail sales
and stores are considered comparable beginning in their thirteenth full
month of operation.
(2) Excludes our webstore, temporary and seasonal and event-based locations.
Fiscal 2011 consolidated comparable store sales
decreased by 2.1%, including a 0.2% decrease in Europe
and a 2.5% decrease in North America (full year comparable
store sales are compared to the 52 week period ended
Jan. 1, 2011). We believe the overall decline in consolidated
comparable store sales for the full year was attributed
primarily to the following factors:
• Through the third quarter, we had experienced a
0.9% decrease in consolidated comparable store sale.
Growth in third quarter sales, which resulted from
improved merchandise assortments and successful
promotional events, only partially offset comparable
stores sales declines in the first half of the year, which
were primarily driven by a decline in transactions and
negative consumer sentiment and spending in the UK.
• Further sales declines in the fourth quarter, attributable to
underperforming licensed movie product, resulted in a
decline for the full year.
Fiscal 2010 consolidated comparable store sales
decreased by 2.0%, including a 5.5% decrease in Europe
and a 1.2% decrease in North America (full year comparable
store sales are compared to the 52 week period ended
Jan. 2, 2010). We believe the decline in consolidated
comparable store sales was attributed primarily to the
following factors:
• The continuing impact of the economic recession and
resulting pullback in consumer spending impacted our
comparable store sales particularly in Europe. While
these factors impact many retailers we believe that they
impact our comparable store sales particularly given the
discretionary nature of our products and our experience.
• We believe that our product selection and improved
integration of product marketing and store operations
positively impacted our North American comparable
store sales trend in 2010.
Commercial revenue: Commercial revenue, includes the
company’s transactions with other businesses, mainly through
wholesale and licensing transactions. Revenue from licensing
activities is generally based on a percentage of sales made
by licensees to third parties and is recognized at the time the
product is shipped by the licensee or at the point of sale. We
have entered into a number of licensing arrangements
whereby third parties manufacture and sell to other retailers
merchandise carrying the Build-A-Bear Workshop
trademark. Revenue from wholesale product sales includes
revenue from merchandise sold at stores operated by third
parties under licensing agreements like Landry’s
restaurants. In 2010, it also includes two transactions totaling
$6.4 million with no associated gross margin.
Franchise fees: We receive an initial, one-time franchise
fee for each master franchise agreement which is amortized to
revenue over the life of the respective franchise agreements,
which extend for periods up to 25 years. Master franchise
rights are typically granted to a franchisee for an entire
country or countries. Continuing franchise fees are based on a
percentage of sales made by the franchisees’ stores and are
recognized as revenue at the time of those sales.
As of December 31, 2011, we had 79 stores, including
19 opened and three closed in fiscal 2011, operating under
franchise arrangements in the following countries:
Germany . . . ............................. 17
Japan . . . ................................ 10
Australia . . . . ............................. 10
Denmark . . . . ............................. 9
Mexico . . . . . ............................. 8
South Africa .............................. 7
Thailand . . . . ............................. 5
Singapore . . ............................. 4
Gulf States(1) .............................. 4
Norway . . . . ............................. 3
Brazil . . . ................................ 1
Sweden . . . . ............................. 1
Total . . . . . ............................. 79
(1) Gulf States agreement includes Kuwait, Bahrain, Qatar, Oman and the
United Arab Emirates.
COSTS AND EXPENSES
Cost of merchandise sold and retail gross margin: Cost of
merchandise sold includes the cost of the merchandise,
including royalties paid to licensors of third party branded
merchandise; store occupancy cost, including store
depreciation and store asset impairment charges; cost of
warehousing and distribution; packaging; stuffing; damages
and shortages; and shipping and handling costs incurred in
shipment to customers. Retail gross margin is defined as net
retail sales less the cost of retail merchandise sold, which
excludes cost of wholesale merchandise sold.
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