Build-A-Bear Workshop 2013 Annual Report Download - page 16

We have developed licensing and strategic relationships with some of
the leading retail and cultural organizations. We plan to continue to
add partnerships with companies that have strong, family-oriented
brands and provide us with attractive marketing and merchandising
opportunities. These relationships for specific products are generally
reflected in contractual arrangements for limited terms that are
terminable by either party upon specified notice. Specifically, we
have key strategic relationships with select companies in which we
feature their brands on products sold in our stores, including Disney®,
Hasbro, Sanrio®, Star Wars, and major professional and collegiate
sports along with other culturally relevant brands. Additionally, we
have developed promotional arrangements with select organizations.
Our arrangements with Major League Baseball teams, including the
Chicago Cubs®, St. Louis Cardinals™ and Pittsburg Pirates® have
featured stuffed animal giveaways at each club’s ballpark on a day
when our brand is highly promoted within the stadium. In 2013,
we partnered with McDonald’s® for the fifth time to feature limited
edition, collectible mini Build-A-Bear Workshop animals in Happy
Meals® . We also have had arrangements featuring product sampling,
cross promotions and shared media with companies such as Dairy
Queen in North America and Betty Crocker’s Fruit Roll-ups.
Availability of Information
We make certain filings with the Securities and Exchange
Commission (the “SEC”), including our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
all amendments and exhibits to those reports, available free of charge
in the Investor Relations section of our corporate website, http://
ir.buildabear.com, as soon as reasonably practicable after they are
filed with the SEC. The filings are also available through the SEC at
the SEC’s Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20549 or by calling 1-800-SEC-0330. Also, these filings are
available on the internet at http://www.sec.gov. Our Annual Reports
to shareholders, press releases and investor updates are also available
on our website, free of charge, in the Investor Relations section or by
writing to the Investor Relations department at World Bearquarters,
1954 Innerbelt Business Center Dr., St. Louis, MO 63114.
ITEM 1A. RISK FACTORS
We operate in a changing environment that involves numerous known
and unknown risks and uncertainties that could materially affect our
operations. The risks, uncertainties and other factors set forth below
may cause our actual results, performances or achievements to be
materially different from those expressed or implied by our forward-
looking statements. If any of these risks or events occur, our business,
financial condition or results of operations may be adversely affected.
Risks Related to Our Business
A decline in general global economic conditions could lead to
disproportionately reduced consumer demand for our products,
which represent relatively discretionary spending, and have an
adverse effect on our liquidity and profitability.
Since purchases of our merchandise are dependent upon
discretionary spending by our guests, our financial performance
is sensitive to changes in overall economic conditions that affect
consumer spending. Consumer spending habits are affected by,
among other things, prevailing economic conditions, levels of
employment, salaries and wage rates, consumer confidence and
consumer perception of economic conditions. A continued slowdown
in the United States, Canadian or European economies or uncertainty
as to the economic outlook could reduce discretionary spending or
cause a shift in consumer discretionary spending to other products.
Any of these factors would likely result in lower net retail sales and
could also result in excess inventories, which could, in turn, lead
to increased merchandise markdowns and related costs associated
with higher levels of inventory and adversely affect our liquidity and
profitability. For example, for fiscal 2008 through 2010 and again in
2012, we attributed a portion of our decline in comparable store sales
to the slower economy in the United States and Europe.
A decrease in the customer traffic generated by the shopping malls
in which we are located, which we depend upon to attract guests
to our stores, could adversely affect our financial condition and
profitability.
While we invest heavily in integrated marketing efforts and believe
we are more of a destination location than traditional retailers, we
rely to a great extent on customer traffic in the malls in which our
stores are located. In order to generate guest traffic, we generally
attempt to locate our stores in prominent locations within high
traffic shopping malls. We rely on the ability of the malls’ anchor
tenants, generally large department stores, and on the continuing
popularity of malls as shopping destinations. We cannot control the
development of new shopping malls, the addition or loss of anchors
and co-tenants, the availability or cost of appropriate locations within
existing or new shopping malls or the desirability, safety or success
of shopping malls. In addition, customer mall traffic may be reduced
due to a loss of consumer confidence because of the economy,
terrorism or war. If we are unable to generate sufficient guest traffic,
our sales and results of operations will be harmed. A significant
decrease in shopping mall traffic could have a material adverse effect
on our financial condition and profitability. For example, we have
experienced flat or declining transactions at comparable locations for
the last three years.
6 BUILD-A -BEAR WORKSHOP, INC. 2013 FORM 10-K