Build-A-Bear Workshop 2014 Annual Report Download - page 20

and those with whom we do business. Any security breach involving
the misappropriation, loss, or other unauthorized disclosure of
confidential information by us could also severely damage our
reputation, expose us to the risks of litigation and liability, and harm
our business. While we carry insurance that would mitigate the losses
to an extent, such insurance may be insucient to compensate us for
potentially significant losses.
Our Web sites, including those for children, allow social interaction
between users. We currently obtain and retain personal information
about our Web site users, store shoppers and loyalty program
members. In addition, we obtain personal information about our
guests as part of their registration in our Find-A-Bear® identification
system. Federal, state and foreign governments have enacted or
may enact laws or regulations regarding the collection and use of
personal information, with particular emphasis on the collection
of information regarding minors. Such regulation may also include
enforcement and redress provisions.
We have a stringent, comprehensive privacy policy covering the
information we collect from our guests and have established security
features to protect our guest database and Web sites. While we
have implemented programs and procedures designed to protect
the privacy of people, including children, from whom we collect
information, and our Web sites are designed to be fully compliant
with the Federal Children’s Online Privacy Protection Act, there can
be no assurance that such programs will conform to all applicable
laws or regulations. If we fail to fully comply, we may be subjected
to liability and damage to our reputation. In addition, because our
guest database primarily includes personal information of young
children and young children frequently interact with our Web sites,
we are potentially vulnerable to charges from parents, children’s
organizations, governmental entities, and the media of engaging in
inappropriate collection, distribution or other use of data collected
from children. Additionally, while we have security features and chat
monitoring, our security measures may not protect users’ identities
and our online safety measures may be questioned which may result
in negative publicity or a decrease in visitors to our site. If site users
act inappropriately or seek unauthorized contact with other users of
the site, it could harm our reputation and, therefore, our business and
we could be subject to liability.
If we are unable to increase our total and comparable store sales,
our results of operations and financial condition could be adversely
aected.
Our consolidated comparable store sales increased by 1.6% in 2014
and 5.1% in 2013 following a multi-year decline. We believe the
principal factors that will aect comparable store results include the
following:
• the continuing appeal of our concept;
• the eectiveness of our marketing eorts 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;
• our ability to anticipate and to respond, in a timely manner, to
consumer trends;
• the continued introduction and expansion of our merchandise
oerings;
• mall trac;
• competition for product oerings including in the online space;
• the impact of updates to our brand appearance and our store
design;
• 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 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 may not be able to evolve our store locations to align with market
trends or to eectively manage our overall portfolio of stores which
could adversely aect our ability to grow and could significantly
harm our profitability.
Our future results will largely depend on our ability to optimize store
productivity and profitability by strategically evolving our real estate
portfolio to align with market trends while selectively opening new
locations and systematically refreshing our store base. In 2012, we
announced a plan to reduce our store count in North America and
substantially completed this plan in 2014. From 2012 through 2014, we
closed 61 stores in North America. Our ability to manage our portfolio
of stores in future years and position stores in desirable locations
and operate stores profitably, particularly in multi-store markets, is
a key factor in our ability to achieve sustained profitable growth. We
cannot be certain when or whether desirable locations will become
available, the number of Build-A-Bear Workshop stores that we can
or will ultimately open, or whether any such new or relocated stores
can be profitably operated. We may decide to close other stores in
the future.
In July 2005, we opened a flagship store in New York City. Because
this store has much larger annual sales than our typical mall-based
stores, closing this store could have an adverse impact on our
revenues.
8 BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT