Build-A-Bear Workshop 2014 Annual Report Download - page 35

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. 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
oset by increases in corporate payroll primarily related to incentive
compensation.
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 was $6,000 in fiscal
2013 compared to expense of $0.9 million in fiscal 2012. The eective
rate was 0.3% in 2013 and (1.8)% in 2012. The fluctuation in the
eective 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.
Non-GAAP Financial Measures
We use the term “store contribution” throughout this Annual Report
on Form 10-K. Store contribution consists of income before income
tax expense, interest, general and administrative expense, excluding
income from franchise and commercial activities and contribution
from our web store, locations not open for the full fiscal year and
deferred revenue adjustments. This term, as we define it, may not
be comparable to similarly titled measures used by other companies
and is not a measure of performance presented in accordance
with U.S. generally accepted accounting principles (GAAP). In 2014,
management made the decision to refine our definition of store
contribution to more accurately present store-level profitability
by including all retail locations open for the full year and including
depreciation and amortization of store specific assets. Store
contribution for 2013 and 2012 and the reconciliations of net loss to
store contribution for those years have been changed to be consistent
with the current year presentation.
We use store contribution as a measure of our stores’ operating
performance. Store contribution should not be considered a
substitute for net income, net income per store, cash flows provided
by operating activities, cash flows provided by operating activities
per store, or other income or cash flow data prepared in accordance
with U.S. GAAP.
We believe store contribution is useful to investors in evaluating our
operating performance because it, along with the number of stores in
operation, directly impacts our profitability.
Results of Operations (continued)
(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)
BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT 23