Build-A-Bear Workshop 2012 Annual Report Download - page 13

BUILD-A-BEAR WORKSHOP, INC. 2012 FORM 10-K
STRATEGY
We are in the midst of a multi-year turnaround plan that
builds on a strong base of profitable stores. In 2012, our
top 200 company-owned stores had an average 20 percent
store level contribution. We believe that our store base will
be more profitable by the end of 2014 as we benefit from
our initiatives.
To improve the productivity of our company-owned
stores, we have three key strategic initiatives to improve our
store sales and profitability: first, in North America, we are
closing stores, primarily in multi-store markets where we can
transfer a portion of sales to other stores in the same markets;
second, also in North America, we are updating our brand
experience by remodeling additional stores in our newly
imagined design; and third, in both North America and in
Europe, we plan to grow our base store business with
improved merchandise selection and availability as well as
rebalancing our marketing messaging to speak to our brand
experience and product vs. product and promotion.
We expect to build the appeal of our stores and improve
our store productivity and profitability by closing select stores,
relocating and downsizing other stores and remodeling and
opening select stores in a new design. We believe that we
can optimize stores in multi-store markets with fewer locations
that have higher sales volumes. In fiscal 2012, we closed
ten stores in accordance with natural lease events such as
expirations and lease termination options, primarily in
multi-store markets, transferring a percentage of sales to other
stores in the same markets. We also relocated and downsized
11 stores within existing malls which we anticipate will lead
to higher productivity metrics in these locations. We opened
five new stores across geographies, compared to 2011 when
we opened nine new stores across geographies. We currently
expect to close an additional 50 to 60 stores in in fiscal
2013 and 2014 to reach an optimal store count of 225 to
250 Build-A-Bear Workshop stores in North America. We
believe our potential in the United Kingdom and Ireland is 60
to 70 stores. In 2012, we also introduced a new store design
which we believe enhances our interactive experience and
better showcases our products. In 2012, we successfully
opened six locations in the new design and expect to have
40 to 50 additional locations by the end of 2014, primarily
through remodels and relocations.
Our concept is a unique combination of experience and
product, both of which are keys to our growth. In terms of
product innovation, we believe that the focus on larger,
limited edition animal introductions that launch approximately
once a month creates a sense of urgency to shop and drives
traffic to our stores, increases conversion and improves sales.
We plan to further increase conversion and average
transaction value by offering additional toy products and
other branded products that are in demand with our core
demographics yet consistent with our brand attributes of
creativity and imaginative play. We will use our national
multi-media marketing programs to increase store traffic by
promoting our interactive experience and seasonal product
launches and to increase shopping frequency with guests
who are members in our loyalty program. We believe our
signature store experience is a competitive advantage and
the full integration of product, marketing and operations
enhances our guests’ brand interaction. We will continue to
grow online engagement at bearville.com, as well as grow
our e-commerce business. We also plan to drive sales
increases related to gift-giving occasions, such as birthdays
and Christmas, by promoting our products and gift cards.
In response to an emerging trend of kids’ interaction
and play in the online space, we maintain our virtual world,
bearville.com. The website is designed to complement and
continue our in-store experience and enhance our core brand
values. By the end of 2012, there have been nearly
24 million accounts created. This site drives interaction with
core demographic segments and creates loyalty with these
guests while also encouraging and promoting future store
visits. As kid’s play patterns have evolved into mobile
technology, we launched the Build-A-Bear®App for mobile
devices where users gain access to mobile-exclusive content
and bearville.com games. To date, there have been over
1.2 million downloads. In 2013, we plan to continue to
update and enhance our mobile App presence.
PRODUCT DEVELOPMENT
Through our in-house design and product development team,
we have developed a coordinated, creative and broad
merchandise assortment, including a variety of animals,
clothing, shoes and accessories. We believe our merchandise
is an integral part of our concept and that the proprietary
design of many of the products we offer is a critical element of
our success, while the authentic and fashionable nature of our
products greatly enhances our brand’s appeal to our guests.
Our product development team regularly monitors current
fashion and cultural trends in order to create products that are
most appealing to our guests, often reflecting similar styling to
the clothes our guests wear themselves. We test our products
on an ongoing basis to ensure guest demand supports order
quantities. Through our focused vendor relationships, we are
able to source our merchandise in a manner that is cost-
effective, maximizes our speed to market and facilitates rapid
reorder of our best-selling items.
Our stuffed animal skins and clothing are produced from
high quality man-made materials or natural fibers such as
cotton, and the stuffing is made of a high-grade polyester
fiber. We believe all of our products in our stores and online
at buildabear.com meet Consumer Product Safety Commission
requirements including the Consumer Product Safety
Improvement Act (CPSIA) for Children’s Products. We also
comply with American Society for Testing and Materials
(ASTM), EN71 (European standards) and Canadian
specifications for toy safety in all material respects. Our
products are tested through independent third-party testing
labs for compliance with toy safety standards. We believe
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