Build-A-Bear Workshop 2013 Annual Report Download - page 31

(1) Cost of merchandise sold is expressed as a percentage of net
(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 $153.5 million, $145.7 million and $154.5 million in 2013, 2012 and 2011,
respectively. Retail gross margin percentage represents retail gross margin
divided by net retail sales.
Fiscal Year Ended December 28, 2013 (52 weeks)
Compared to Fiscal Year Ended December 29, 2012 (52 weeks)
Total revenues. Net retail sales were $373.2 million for fiscal 2013,
compared to $374.6 million for fiscal 2012, a decrease of $1.4 million.
The components of this decrease are as follows:
Revenue from international franchise fees were $3.6 million for
fiscal 2013 and fiscal 2012. Commercial revenue was $2.3 million in
fiscal 2013 compared to $2.8 million in fiscal 2012, a decrease of $0.5
million. This decrease was primarily due to an overall decrease in
licensing activity in 2013.
Gross margin. Total gross margin, calculated as net retail sales
and commercial revenues less cost of merchandise sold, was $154.8
million for fiscal 2013 compared to $147.2 million for fiscal 2012, an
increase of $7.6 million, or 5.2%. Retail gross margin increased to
$153.5 million in fiscal 2013 compared to $145.7 million in fiscal 2012,
an increase of $7.8 million, or 5.4%. As a percentage of net retail sales,
retail gross margin increased to 41.1% for fiscal 2013 from 38.9% for
fiscal 2012, an increase of 220 basis points as a percentage of net retail
sales (bps). This improvement in margin was primarily attributable to
160 basis points in improved leverage on fixed occupancy costs and a
60 basis point improvement in merchandise margin driven primarily
by an increase in average transaction value.
Selling, general and administrative. Selling, general and
administrative expenses were $160.7 million for fiscal 2013 as
compared to $165.5 million for fiscal 2012, a decrease of $4.8 million,
or 2.9%. As a percentage of total revenues, selling, general and
administrative expenses were 42.4% for fiscal 2013, compared to
43.4% in fiscal 2012. Fiscal 2013 included $5.3 million in management
transition, store closing and asset impairment expenses, compared
to $2.7 million in store closing and asset impairment expenses in
fiscal 2012. Excluding these costs in both periods, selling, general and
administrative expenses improved 170 basis points to 41.0% of total
revenues in fiscal 2013. This improvement was driven by reduced
store payroll, other store expenses and corporate overhead, partially
offset by increases in corporate payroll primarily related to bonus.
Interest expense (income), net. Interest income, net of interest
expense, was $0.3 million for fiscal 2013 compared to $3,000 of
expense for fiscal 2012.
Provision for income taxes. Income tax benefit $6,000 in fiscal 2013
compared to expense of $0.9 million in fiscal 2012. The effective
rate was 0.3% in 2013 and (1.8)% in 2012. The fluctuation in the
effective rate was primarily attributable to benefits resulting from
the favorable resolution of tax matters, the expiration of statutes in
various jurisdictions, and favorable adjustments from the filing of
amended tax returns.
Fiscal
2013
Fiscal
2012
Fiscal
2011
Revenues:
Net retail sales 98.4%98.3%98.1%
Franchise fees 0.9 0.9 0.9
Commercial revenues 0.6 0.7 1.0
Total revenues 100.0 100.0 100.0
Costs and expenses:
Cost of merchandise sold (1) 58.8 61.0 59.9
Selling, general, and administrative 42.4 43.4 41.3
Goodwill impairment - 8.8 -
Interest expense (income), net (0.1)0.0 (0.0)
Total costs and expenses 100.6 112.7 100.7
Loss before income taxes (0.6)(12.7)(0.7)
Income tax expense (benefit) (0.0)0.2 3.7
Net loss (0.6)(12.9)(4.3)
Retail gross margin (%) (2) 41.1%38.9%39.9%
(dollars in millions) Fiscal 2013
Impact of store closures $ (21.7)
Increase in comparable store sales 16.3
Increase in non-comparable stores,
primarily remodels and relocations 4.3
Increase from new stores 1.3
Change in deferred revenue estimate (0.7)
Increase from non-traditional locations,
including web sales 0.2
Impact of foreign currency translation (1.1)
$ (1.4)
Results of Operations (continued)
BUILD- A-BEAR WORKSHOP, INC. 2013 FORM 10-K 21