Build-A-Bear Workshop 2014 Annual Report Download - page 34

The following table sets forth, for the periods indicated, selected
statement of operations data expressed as a percentage of total
revenues, except where otherwise indicated. Percentages will
not total due to cost of merchandise sold being expressed as
a percentage of net retail sales and commercial revenue and
immaterial rounding:
(1) Cost of merchandise sold is expressed as a percentage of net retail sales and
commercial revenue.
(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 $176.8 million, $153.5 million and $145.7 million in 2014, 2013 and 2012,
respectively. Retail gross margin percentage represents retail gross margin
divided by net retail sales.
Fiscal Year Ended January 3, 2015 (53 weeks) Compared to
Fiscal Year Ended December 28, 2013 (52 weeks)
Total revenues. Net retail sales were $387.7 million for fiscal 2014,
compared to $373.2 million for fiscal 2013, an increase of $14.5
million. The components of this increase are as follows:
Revenue from international franchise fees was $2.5 million for
fiscal 2014 compared to $3.6 million for fiscal 2013. This $1.0 million
decrease was the result of having fewer franchise locations open
throughout the year. Commercial revenue was $2.1 million for fiscal
2014 compared to $2.3 million for fiscal 2013, a decrease of $0.2
million. This decrease was primarily due to an overall decrease in
licensing activity in 2014.
Gross margin. Total gross margin, calculated as net retail sales
and commercial revenues less cost of merchandise sold, was $178.0
million for fiscal 2014 compared to $154.8 million for fiscal 2013, an
increase of $23.2 million, or 15.0%. Retail gross margin increased to
$176.8 million in fiscal 2014 compared to $153.5 million in fiscal 2013,
an increase of $23.4 million, or 15.2%. As a percentage of net retail
sales, retail gross margin increased to 45.6% for fiscal 2014 from 41.1%
for fiscal 2013, an increase of 450 basis points as a percentage of net
retail. This improvement in margin was primarily attributable to 370
points of expansion in merchandise margin and improved eciencies
in the supply chain. The remaining 80 basis points of expansion came
from leverage on fixed occupancy expenses driven by improved
sales performance, including the impact of the 53rd week, and the
deferred revenue adjustment related to our loyalty program.
Selling, general and administrative. Selling, general and
administrative expenses were $164.4 million for fiscal 2014 as
compared to $160.7 million for fiscal 2013, an increase of $3.7 million,
or 2.3%. As a percentage of total revenues, selling, general and
administrative expenses were 41.9% for fiscal 2014, compared to
42.4% in fiscal 2013. Fiscal 2014 included $2.2 million in management
transition, asset impairment and store closing expenses, compared
to $5.3 million in management transition, asset impairment and store
closing expenses in fiscal 2013. Excluding these costs in both periods,
selling, general and administrative expenses increased 30 basis
points to 41.3% of total revenues in fiscal 2014. The increase in dollars
was driven by increased performance-based compensation and
higher investment in elevated brand marketing.
Interest expense (income), net. Interest expense, net of interest
income, was $0.1 million for fiscal 2014 compared to $0.3 million of
income for fiscal 2013.
Provision for income taxes. Income tax expense was $1.7 million in
fiscal 2014 compared to an income tax benefit of $6,000 in fiscal
2013. The eective rate was 10.4% in 2014 and 0.3% in 2013. The
fluctuation in the eective rate was primarily attributable to state
and withholding taxes, return-to-provision adjustments, adjustments
to tax position reserves and tax expense recorded in foreign
jurisdictions, partially oset by the reversal of valuation allowances
in the U.S. and foreign jurisdictions. See Note 8 - Income Taxes to our
Consolidated Financial Statements for information regarding our
valuation allowances and their impact on the eective tax rate in
fiscal 2014.
Results of Operations (continued)
(dollars in millions) Fiscal 2014
Impact of store closures $ (16.6)
Increase in comparable store sales 16.4
Increase in non-comparable stores,
primarily remodels and relocations 5.1
Increase from new stores 4.7
Change in deferred revenue estimate 1.7
Increase from non-traditional locations,
including web sales 1.3
Impact of foreign currency translation 1.9
$ 14.5
Fiscal
2014
Fiscal
2013
Fiscal
2012
Revenues:
Net retail sales 98.8%98.4%98.3%
Franchise fees 0.6 0.9 0.9
Commercial revenues 0.5 0.6 0.7
Total revenues 100.0 100.0 100.0
Costs and expenses:
Cost of merchandise sold (1) 54.3 58.8 61.0
Selling, general, and administrative 41.9 42.4 43.4
Goodwill impairment - - 8.8
Interest expense (income), net 0.0 (0.1) 0.0
Total costs and expenses 95.9 100.6 112.7
Income (loss) before income taxes 4.1 (0.6)(12.7)
Income tax expense (benefit) 0.4 (0.0) 0.2
Net income (loss) 3.7 (0.6)(12.9)
Retail gross margin (%) (2) 45.6%41.1%38.9%
22 BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT