Build-A-Bear Workshop 2013 Annual Report Download - page 17

If we are unable to generate interest in and demand for our
interactive retail experience, including being able to identify and
respond to consumer preferences in a timely manner, our financial
condition and profitability could be adversely affected.
We believe that our success depends in large part upon our ability to
continue to attract guests with our interactive shopping experience
and our ability to anticipate, gauge and respond in a timely manner
to changing consumer preferences and fashion trends. We cannot
assure you that there will continue to be a demand for our “make-
your-own stuffed animal” interactive experience, or for our stuffed
animals, animal apparel and accessories. A decline in demand for
our interactive shopping experience, our animals, animal apparel
or accessories, or a misjudgment of consumer preferences or fashion
trends, could have a negative impact on our business, financial
condition and results of operations. In addition, if we miscalculate
the market for our merchandise or the purchasing preferences of
our guests, we may be required to sell a significant amount of our
inventory at discounted prices or even below costs, thereby adversely
affecting our financial condition and profitability.
Our future growth and profitability could be adversely affected if
our marketing and online initiatives are not effective in generating
sufficient levels of brand awareness and guest traffic or if consumer
preferences change significantly.
We continue to update and evaluate our marketing initiatives,
focusing on brand awareness, new product news, timely promotions
and rapidly changing consumer preferences. Our future growth and
profitability will depend in large part upon the effectiveness and
efficiency of our marketing and advertising programs and future
marketing and advertising efforts that we undertake, including our
ability to:
• create greater awareness of our brand, interactive shopping
experience and products;
• identify the most effective and efficient level of spending in each
market;
• determine the appropriate creative message and media mix for
marketing expenditures;
• effectively manage marketing costs (including creative and media)
in order to maintain acceptable operating margins and return on
marketing investment;
• select the right geographic areas in which to market; and
• convert consumer awareness into actual store visits and product
purchases.
Our planned marketing expenditures may not result in increased
total or comparable store sales or generate sufficient levels of product
and brand awareness which could have a material adverse effect on
our financial condition and profitability.
If we are unable to increase our comparable store sales trends, our
results of operations and financial condition could be adversely
affected.
Our consolidated comparable store sales increased by 5.1% in 2013
following a multi-year decline. We believe the principal factors that
will affect comparable store results include the following:
• the continuing appeal of our concept;
• the effectiveness of our marketing efforts to attract new and repeat
guests;
• consumer confidence and general economic conditions;
• the impact of changes in governmental policies on consumer
sentiment and discretionary spending levels;
• the impact of store closures, relocations and openings in existing
markets;
• the impact of our new store design;
• our ability to anticipate and to respond, in a timely manner, to
consumer trends;
• the continued introduction and expansion of our merchandise
offerings;
• mall traffic;
• competition for product offerings including in the online space;
• the timing and frequency of national media appearances and other
public relations events; and
• weather conditions.
As a result of these and other factors, we may not be able to generate
or achieve comparable stores sales growth in the future. If we are
unable to do so, our results of operations could be significantly
harmed and we may be required to record significant impairment
charges.
We are subject to a number of risks related to disruptions, failures
or security breaches of our information technology infrastructure.
If we improperly obtain, or are unable to protect, our data or violate
privacy or security laws or expectations, we could be subject to
liability and damage to our reputation.
Information technology is a critically important part of our
business operations. We depend on information systems to process
transactions, manage inventory, operate our Web sites, purchase,
sell and ship goods on a timely basis, and maintain cost-efficient
operations. There is a risk that we could experience a business
interruption, theft of information, or reputational damage as a
result of a cyber-attack, such as an infiltration of a data center, or
data leakage of confidential information either internally or at our
third-party providers. We may experience operational problems
with our information systems as a result of system failures, system
implementation issues, viruses, malicious hackers, sabotage, or other
causes.
BUILD- A-BEAR WORKSHOP, INC. 2013 FORM 10-K 7