Build-A-Bear Workshop 2012 Annual Report Download - page 38

BUILD-A-BEAR WORKSHOP, INC. 2012 FORM 10-K
Fiscal Year Ended December 31, 2011 (52 weeks) Compared
to Fiscal Year Ended January 1, 2011 (52 weeks)
Total revenues. Net retail sales were $387.0 million for
fiscal 2011, compared to $387.2 million for fiscal 2010, a
decrease of $0.2 million. Comparable store sales decreased
$7.6 million in fiscal 2011, or 2.1% and sales from
non-comparable locations, comprised primarily of relocated
and remodeled locations, decreased $3.6 million. Partially
offsetting these decreases are increases of $4.4 million from
sales in new stores, $1.0 million in e-commerce sales and of
$2.7 million in sales from non-store locations which includes
temporary locations. Other changes, adding $2.9 million to
net retail sales, resulted from the impact of foreign currency
exchange rates, changes in deferred revenue estimate, offset
by redemptions throughout the year, and other revenue.
Commercial revenue was $3.9 million in fiscal 2011
compared to $11.2 million in fiscal 2010. This decrease
was primarily due to $6.4 million from two non-recurring
wholesale transactions in fiscal 2010. Excluding these
transactions, commercial revenues decreased $0.9 million,
primarily due to the 2010 Build-A-Bear Craftshop launch that
did not reoccur in 2011. Revenue from international franchise
fees increased to $3.4 million for fiscal 2011 from
$3.0 million for fiscal 2010, an increase of $0.4 million. This
increase was primarily due to the increase in the number of
franchise locations from 63 at the end of fiscal 2010 to 79
at the end of fiscal 2011.
Gross margin. Total gross margin, calculated as net
retail sales and commercial revenues less cost of merchandise
sold, was $156.8 million for fiscal 2011 compared to
$158.9 million for fiscal 2010, a decrease of $2.1 million, or
1.3%. Retail gross margin was $154.5 million in fiscal 2011
compared to $155.1 million in fiscal 2010, a decrease
of $0.7 million or 0.4%. As a percentage of net retail sales,
retail gross margin decreased to 39.9% for fiscal 2011 from
40.1% for fiscal 2010, a decrease of 20 basis points as a
percentage of net retail sales (bps). This decline in margin
was primarily attributable to decreased merchandise margin,
decreased leverage on fixed occupancy costs and increased
purchasing costs offset by cost savings in distribution costs.
Selling, general and administrative. Selling, general and
administrative expenses were $162.9 million for fiscal 2011
as compared to $164.6 million for fiscal 2010, a decrease
of $1.7 million, or 1.1%. As a percentage of total revenues,
selling, general and administrative expenses were 41.3% for
fiscal 2011, compared to 41.0% in fiscal 2010. The dollar
decrease was primarily attributable to higher costs in 2010
of $1.6 million in charges related to the closure of our stores
in France and corporate payroll costs primarily related to a
bonus that did not reoccur in 2011. These decreases were
partially offset by consulting costs related to continuing efforts
to improve efficiencies and reduce expenses.
Interest expense (income), net. Interest income, net of
interest expense, was $0.1 million for fiscal 2011 as
compared to $0.3 million for fiscal 2010.
Provision for income taxes. Income tax expense was
$14.4 million in fiscal 2011, compared to an income tax
benefit of $2.6 million for fiscal 2010. The effective rate was
(543.4)% in 2011 and 104.2% in 2010. The fluctuation in
the effective rate in 2011 was primarily attributable to the
recording of a $15.6 million valuation allowance in 2011
on the US deferred tax assets.
NON-GAAP FINANCIAL MEASURES
We use the term “store contribution” throughout this Annual
Report on Form 10-K. Store contribution consists of income
before income tax expense, interest, store depreciation,
amortization and impairment, goodwill impairment, general
and administrative expense, excluding franchise fees, income
from licensing activities and contribution from our web store
and seasonal and event-based locations. This term, as we
define it, may not be comparable to similarly titled measures
used by other companies and is not a measure of
performance presented in accordance with U.S. generally
accepted accounting principles (GAAP).
We use store contribution as a measure of our stores’
operating performance. Store contribution should not be
considered a substitute for net income (loss), net income (loss)
per store, cash flows provided by operating activities, cash
flows provided by operating activities per store, or other
income or cash flow data prepared in accordance with
U.S. GAAP.
We believe store contribution is useful to investors in
evaluating our operating performance because it, along
with the number of stores in operation, directly impacts
our profitability.
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