Build-A-Bear Workshop 2012 Annual Report Download - page 37

BUILD-A-BEAR WORKSHOP, INC. 2012 FORM 10-K
Fiscal 2013 will be a year of significant transition as we
expect to hire a new chief executive bear and execute
significant real estate strategy with the closure of
approximately 35 to 40 stores and the remodeling or
relocation of approximately 25 stores in our new design.
The following table sets forth, for the periods indicated,
selected statement of operations data expressed as a
percentage of total revenues, except where otherwise
indicated. Percentages will not total due to cost of
merchandise sold being expressed as a percentage of net
retail sales and commercial revenue and immaterial rounding:
Fiscal 2012 Fiscal 2011 Fiscal 2010
Revenues:
Net retail sales 98.3% 98.1% 96.4%
Commercial revenues 0.7 1.0 2.8
Franchise fees 0.9 0.9 0.8
Total revenues 100.0 100.0 100.0
Costs and expenses:
Cost of merchandise
sold(1) 61.0 59.9 60.1
Selling, general, and
administrative 43.4 41.3 41.0
Goodwill impairment 8.8 ——
Interest expense
(income), net 0.0 (0.0) (0.1)
Total costs and expenses 112.7 100.7 100.6
Loss before income taxes (12.7) (0.7) (0.6)
Income tax expense
(benefit) 0.2 3.7 (0.6)
Net income (loss) (12.9) (4.3) 0.0
Retail gross margin (%)(2) 38.9% 39.9% 40.1%
(1) Cost of merchandise sold is expressed as a percentage of net retail sales
and commercial revenue.
(2) Retail gross margin represents net retail sales less cost of retail merchandise
sold, which excludes cost of wholesale merchandise sold. Retail gross
margin was $145.7 million, $154.5 million and $155.1 million in 2012,
2011 and 2010, respectively. Retail gross margin percentage represents
retail gross margin divided by net retail sales.
Fiscal Year Ended December 29, 2012 (52 weeks) Compared
to Fiscal Year Ended December 31, 2011 (52 weeks)
Total revenues. Net retail sales were $374.6 million for
fiscal 2012, compared to $387.0 million for fiscal 2011, a
decrease of $12.5 million. Comparable store sales decreased
$11.6 million in fiscal 2012, or 3.3%. Other decreases
include $4.3 million in sales from non-comparable locations,
comprised primarily of relocated and remodeled locations,
$1.0 million in deferred revenue adjustment as compared
to the prior year, $0.9 million from the impact of foreign
exchange rates and $0.6 million in sales from non-store
locations which includes temporary locations. Partially
offsetting these decreases are increases of $5.0 million from
sales in new stores and $1.0 million in e-commerce sales.
Commercial revenue was $2.8 million in fiscal 2012
compared to $3.9 million in fiscal 2011, a decrease of
$1.2 million. This decrease was primarily due to an overall
decrease in licensing activity in 2012. Revenue from
international franchise fees increased to $3.6 million for fiscal
2012 from $3.4 million for fiscal 2011, an increase of
$0.2 million. This increase was primarily due to the increase
in the number of franchise locations from 79 at the end of
fiscal 2011 to 91 at the end of fiscal 2012.
Gross margin. Total gross margin, calculated as net
retail sales and commercial revenues less cost of merchandise
sold, was $147.2 million for fiscal 2012 compared to
$156.8 million for fiscal 2011, a decrease of $9.6 million, or
6.1%. Retail gross margin was $145.7 million in fiscal 2012
compared to $154.5 million in fiscal 2011, a decrease of
$8.8 million, or 5.7%. As a percentage of net retail sales,
retail gross margin decreased to 38.9% for fiscal 2012 from
39.9% for fiscal 2011, a decrease of 100 basis points as a
percentage of net retail sales (bps). This decline in margin
was primarily attributable to decreased leverage on fixed
occupancy costs, including store asset impairment charges
and decreased merchandise margin, partially offset by cost
savings in distribution and packaging costs.
Selling, general and administrative. Selling, general and
administrative expenses were $165.5 million for fiscal 2012
as compared to $162.9 million for fiscal 2011, an increase
of $2.6 million, or 1.6%. As a percentage of total revenues,
selling, general and administrative expenses were 43.4% for
fiscal 2012, compared to 41.3% in fiscal 2011. The dollar
increase was primarily attributable to $3 million in asset
impairment charges and investment in marketing and
store-related costs as part of our long-term initiatives.
Excluding the impairment charges, selling general and
administrative expenses were 42.6% of total revenues.
Goodwill impairment. In 2012, the goodwill associated
with the UK business was fully impaired, resulting in a
$33.7 million non-cash charge.
Interest expense (income), net. Interest expense, net of
interest income, was $3,000 for fiscal 2012 as compared
to $0.1 million of income for fiscal 2011.
Provision for income taxes. Income tax expense was
$0.9 million in fiscal 2012, compared to $14.4 million
for fiscal 2011. The effective rate was 1.8% in 2012 and
543.4% in 2011. The fluctuation in the effective rate
was primarily attributable to the recording of a valuation
allowance in 2011 on the US deferred tax assets.
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