Build-A-Bear Workshop 2014 Annual Report Download - page 16

PART I
ITEM 1. BUSINESS
Overview
Build-A-Bear Workshop, Inc., a Delaware corporation, was formed
in 1997 and is primarily a specialty retailer oering a “make your own
stued animal” interactive retail-entertainment experience. As of
January 3, 2015, we operated 324 company-owned retail stores in the
United States, Canada, the United Kingdom and Ireland, including
245 traditional and 20 non-traditional Build-A-Bear Workshop®
stores in the United States and Canada and 57 traditional and two
non-traditional Build-A-Bear Workshop stores in the United Kingdom
and Ireland. In addition, franchisees operated 71 Build-A-Bear
Workshop stores in other international locations.
Segments and Geographic Areas
We conduct our operations through three reportable segments
consisting of retail, international franchising, and commercial.
Our reportable segments are primarily determined by the types
of customers they serve and the types of products and services
that they oer. Each reportable segment may operate in many
geographic areas. Financial information related to our segments
and the geographic areas in which we operate is contained in “Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” See Note 16 – Segment Information to the
Consolidated Financial Statements for information regarding sales,
results of operations and identifiable assets of the Company by
business segment and geographic area.
Description of Operations
Currently, we primarily operate specialty retail stores that provide
a “make your own stued animal” interactive entertainment
experience in which our guests visit a variety of stations in order to
make and customize a stued animal. Our retail concept is a unique
combination of experience and product and we are focused on
enhancing our brand equity while meeting the needs of consumers
by oering premium products that meet high quality standards,
oer a relevant selection and are trend-right. We seek to provide
outstanding guest service and experiences across all channels and
touch points including our stores, our Web sites, our mobile sites and
apps as well as traditional and social media. Our store experience
appeals to a broad range of age groups and demographics,
including children, as well as their parents and grandparents, teens,
and adult collector and anity consumers. We have relatively
balanced seasonality on a quarterly basis and guests visit our
stores for multiple reasons including interactive family experiences,
birthdays, parties and other milestone occasion celebrations and
to purchase gifts including the “gift of experience” that comes with
a Bear Bucks® gift card. We believe the hands-on and interactive
nature of our store and high touch service model result in guests
forming an emotional connection with our brand.
We believe there are opportunities in the future to leverage the
strength of the Build-A-Bear brand and generate incremental
revenue and profits given the high consumer recognition and strong
positioning as a trusted, high quality brand that is emotionally
connected with both kids and their parents.
Operating Strategies
Our company is in the midst of a multi-year turnaround plan that
builds on a strong base of profitable stores. To increase shareholder
value, in 2015, we will begin to evolve from our stated goal of
sustained profitability to sustained profitable growth. Through
a combination of continuous improvement of current eorts and
strategic expansion into additive opportunities for each of the key
initiatives outlined below, we expect to deliver both incremental
revenue and profit. The four key initiatives are:
1. Expanding into more places: We intend to continuously improve
our real estate model by strategically evolving our store
portfolio to align with market trends while selectively opening
new locations and systematically refreshing our store base.
To this end, we plan to open additional stores in high potential
destinations such as tourist locations, outlet malls and shop-
in-shops, which have proven more productive than traditional
mall stores. We expect to strategically expand our international
presence by leveraging the improving strength in our company-
owned stores to restructure and extend our international
footprint. We expect to develop new market expansion through
both franchise and company-owned store models.
2. Targeting more people: We intend to continuously grow our
business with our core three to twelve year-old consumer
segment which represents a majority of current revenue. We will
focus on initiatives that drive trial and increase repeat visits with
an evolved segmentation, product development and marketing
strategy. We expect to strategically grow sales to consumers
over twelve years-old with a focus on key categories including
gift-giving, anity and collectibles. The over-twelve consumer
segment currently represents approximately 20% of sales and
has a tendency to over-index on less price-sensitive gift-able
and on-line purchases. Therefore, we intend to leverage our
e-commerce business to eciently target these consumers.
3. Developing more products: We intend to continuously improve
and extend our eorts to successfully develop high impact
product stories coupled with integrated marketing programs
that tend to garner higher price points, drive add-on purchases
and create play beyond the plush. We also plan to strategically
expand our presence and create new sales and profit streams
by re-launching an out-bound licensing program to leverage
our strong brand equity. We expect licensing to enable Build-A-
Bear to extend our brand reach with new oerings in relevant
categories and will provide consumers with products beyond the
plush.
4 BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT