Build-A-Bear Workshop 2014 Annual Report Download - page 19

identify and respond to consumer preferences in a timely manner,
our financial condition and profitability could be adversely aected.
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 stued animal” interactive experience, or for our stued
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, fashion
trends or the demand for licensed products including those that are
associated with new movie releases could have a negative impact on
our business, financial condition and results of operations. Our future
success depends, in part, on the popularity and consumer demand
for brands of partner companies such as Disney, Marvel, Hasbro,
Nickelodeon and Lucasfilm. If we are not able to meet our contractual
commitments or are unable to maintain licensing agreements with
key partner brands, our business would be adversely eected.
There can be no certainty that licensed brands will continue to be
successful or maintain high levels of sales in the future and the timing
of future entertainment projects may not coincide with historical
dates impacting our ability to maintain sales levels. 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 aecting our financial condition and profitability.
Consumer interests change rapidly and our success depends on the
ongoing eectiveness of our marketing and online initiatives to build
consumer anity for our brand, drive consumer demand for key
products and generate trac for our stores.
We continue to update and evaluate our marketing initiatives,
focusing on building our brand, new product news, timely promotions
and rapidly changing consumer preferences. Our future growth and
profitability will depend in large part upon the eectiveness and
eciency of our integrated marketing and advertising programs and
future marketing and advertising eorts that we undertake, including
our ability to:
• create greater awareness of our brand, interactive shopping
experience and products;
• convert consumer awareness into actual store visits and product
purchases;
• identify the most eective and ecient level of marketing spend;
• select the right geographic areas in which to market;
• determine the appropriate creative message and media mix for
marketing expenditures; and;
• eectively manage marketing costs (including creative and media)
in order to maintain acceptable operating margins and return on
marketing investment.
Our planned marketing expenditures may not result in increased total
or comparable store sales or generate sucient levels of product and
brand awareness which could have a material adverse eect on our
financial condition and profitability.
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-ecient
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.
Our business involves the storage and transmission of customers’
personal information, such as consumer preferences and credit card
information. We invest in industry-standard security technology to
protect the Company’s data and business processes against the
risk of data security breaches and cyber-attacks. Our data security
management program includes identity, trust, vulnerability and threat
management business processes, as well as enforcement of standard
data protection policies such as Payment Card Industry compliance.
We measure our data security eectiveness through industry
accepted methods and remediate critical findings. Additionally, we
certify our major technology suppliers and any outsourced services
through accepted security certification measures. We maintain and
routinely test backup systems and disaster recovery, along with
external network security penetration testing by an independent
third party as part of our business continuity preparedness. Internet
privacy is a rapidly changing area and we may be subject to future
requirements and legislation that are costly to implement and
negatively impact our results.
While we believe that our security technology and processes are
adequate in preventing security breaches and in reducing cyber
security risks, given the ever-increasing abilities of those intent on
breaching cyber security measures and given our reliance on the
security and other eorts of third-party vendors, the total security
eort at any point in time may not be completely eective, and any
such security breaches and cyber incidents could adversely aect
our business. Failure of our systems, including failures due to cyber-
attacks that would prevent the ability of systems to function as
intended, could cause transaction errors, loss of customers and sales,
and could have negative consequences to us, our employees,
BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT 7