Build-A-Bear Workshop 2013 Annual Report Download - page 22

Our profitability could be adversely affected by high petroleum
products prices.
The profitability of our business depends to a certain degree
upon the price of petroleum products, both as a component of the
transportation costs for delivery of inventory from our vendors
to our stores and as a raw material used in the production of our
animal skins and stuffing. For example, our results in fiscal 2011were
impacted by significant increases in fuel surcharges due to higher
petroleum products prices. We are unable to predict what the price of
crude oil and the resulting petroleum products will be in the future.
We may be unable to pass along to our customers the increased
costs that would result from higher petroleum prices. Therefore, any
such increase could have an adverse impact on our business and
profitability.
Our market share may be adversely impacted at any time by a
significant number of competitors.
We operate in a highly competitive environment characterized by low
barriers to entry. We compete against a diverse group of competitors.
Because we are primarily mall-based, we see our competition as
those mall-based retailers that compete for prime mall locations,
including various apparel, footwear and specialty retailers. As a
retailer whose signature product is a stuffed animal that is typically
purchased as a toy or gift, we also compete with big box retailers
and toy stores, as well as manufacturers that sell plush toys. Since
we offer our guests an experience as well as merchandise, we also
view our competition as any company that competes for our guests’
time and entertainment dollars, such as movie theaters, restaurants,
amusement parks and arcades. In addition, there are several small
companies that operate “make your own” teddy bear and stuffed
animal experiences in retail stores and kiosks. Although we believe
that currently none of these companies offers the breadth and depth
of the Build-A-Bear Workshop products and experience, we cannot
assure you that they will not compete directly with us in the future.
Many of our competitors have longer operating histories, significantly
greater financial, marketing and other resources, and greater name
recognition. We cannot assure you that we will be able to compete
successfully with them in the future, particularly in geographic
locations that represent new markets for us. If we fail to compete
successfully, our market share and results of operations could be
materially and adversely affected.
We may suffer negative publicity or a decrease in sales or
profitability if the non-proprietary toy products we sell in our
stores do not meet our quality standards or fail to achieve our sales
expectations.
We may expand our product assortment to include interactive
toy products manufactured by other toy companies. If sales of
such products do not meet our expectations or are impacted by
competitors’ pricing, we may have to take markdowns or employ
other strategies to liquidate the product. If other toy companies do
not meet quality standards or violate any manufacturing or labor
laws, we suffer negative publicity and not realize our sales plans.
Poor global economic conditions could have a material adverse
effect on our liquidity and capital resources.
Although we believe that our capital structure and credit facilities
will provide sufficient liquidity, there can be no assurance that our
liquidity will not be affected by changes in the capital markets or that
our capital resources will at all times be sufficient or at an acceptable
cost to satisfy our liquidity needs. Capital market conditions may
affect the renewal or replacement of our credit agreement, which was
originally entered into in 2000 and has been extended annually since
then and currently expires December 31, 2015.
Risks Related to Owning Our Common Stock
Fluctuations in our quarterly results of operations could cause the
price of our common stock to substantially decline.
Retailers generally are subject to fluctuations in quarterly results.
Our operating results for one period may not be indicative of results
for other periods, and may fluctuate significantly due to a variety of
factors, including:
• the profitability of our stores;
• increases or decreases in comparable store sales;
• changes in general economic conditions and consumer spending
patterns;
• seasonal shopping patterns, including whether the Easter holiday
occurs in the first or second quarter and other school holiday
schedules;
• the impact of the 53rd week;
• the effectiveness of our inventory management;
• the timing and frequency of our marketing initiatives;
• changes in consumer preferences;
• the continued introduction and expansion of merchandise
offerings;
• actions of competitors or mall anchors and co-tenants;
• weather conditions;
• the timing of store closures, relocations and openings and related
expenses; and
• the timing and frequency of national media appearances and other
public relations events.
If our future quarterly results fluctuate significantly or fail to meet the
expectations of the investment community, then the market price of
our common stock could decline substantially.
12 BUILD- A-BEAR WORKSHOP, INC. 2013 FORM 10 -K