Build-A-Bear Workshop 2012 Annual Report Download - page 33

BUILD-A-BEAR WORKSHOP, INC. 2012 FORM 10-K
footage of an additional 10 to 15 stores by relocating them
within the same malls. This initiative will allow us to focus on
our business and align all operations around our goals of
improving our comparable stores sales performance and store
productivity, while also building our long term brand value.
We currently expect to transfer, on average, approximately
20% of the sales from the closed stores to other stores in the
same markets. In 2013, through March 8, we have closed
15 stores. Our current plans also include the relocation or
remodel of approximately 25 locations in 2013 with the
complete new design that feature a bold new look and
enhanced experience as we continue to lead in the interactive
experiential retail space.
While Build-A-Bear Workshop in North America will
operate fewer stores that we expect will have higher sales
volumes and profitability, we will continue to grow
internationally, primarily through our franchisees. We also
intend to increase shopping frequency by increasing new
guest traffic to its stores, specifically focusing on families with
children and intensifying digital engagement to increase visits
from our existing guests and by reinforcing our store as a top
destination for gifts. In 2009, we implemented cost reduction
initiatives that resulted in approximately $25 million in pre-tax
savings. We were able to maintain these savings in 2010
and 2011 and saved an additional $3 million in 2011. We
achieved an additional $7.5 million in savings in 2012 that
were used to support sales-driving marketing initiatives and
were partially offset by product cost increases. We ended
fiscal 2012 with no borrowings under our bank loan
agreement and with $45 million in cash and cash equivalents
after investing $17 million in capital projects and $1 million
in share repurchases.
Following is a description and discussion of the major
components of our statement of operations:
REVENUES
Net retail sales: Net retail sales are revenues from retail sales
(including our web store and other non-store locations), are
net of discounts, exclude sales tax, include shipping and
handling costs billed to customers, and are recognized at the
time of sale. Revenues from gift cards are recognized at the
time of redemption. Our guests use cash, checks, gift cards
and third party credit cards to make purchases. We classify
stores as new, non-comparable and comparable stores. Stores
enter the comparable store calculation in their thirteenth full
month of operation. Our web store and temporary, seasonal
and event-based locations are not included in our store count
or in our comparable store calculations. Non-comparable
stores also result from a store relocation or remodel that results
in a significant change in square footage. The net retail sales
for that location are excluded from comparable store sales
calculations until the thirteenth full month of operation after the
date of the change.
We have a loyalty program with a frequent shopper
reward feature, the Stuff Fur Stuff club. Members of the
program receive one point for every dollar spent and receive
awards after reaching certain point thresholds. On a quarterly
basis, an estimate of the obligation related to the program,
based on actual points and awards outstanding and historical
point conversion and award redemption patterns, is recorded
as an adjustment to deferred revenue and net retail sales. At
the time of redemption of the award, the deferred revenue
obligation is reduced, and a corresponding amount is
recognized in net retail sales. As the awards can be earned
or redeemed at any of our store locations, we account for
changes in the deferred revenue account at the total company
level only. Therefore, when we refer to net retail sales by
location, such as comparable stores or new stores, these
amounts do not include any changes in the deferred revenue
amount. See “— Critical Accounting Estimates” for additional
details on the accounting for the deferred revenue under our
customer loyalty program.
We use net retail sales per gross square foot and
comparable store sales as performance measures for our
business. The following table details net retail sales per gross
square foot by age of store for the periods presented:
Fiscal
2012
Fiscal
2011
Fiscal
2010
Net retail sales per gross square foot —
North America(1)(2)
Store Age > 5 years (247 stores in
2012, 220 stores in 2011) $353 $362 $370
Store Age 3-5 years (19 stores in 2012,
56 stores in 2011) $301 $315 $321
Store Age <3 years (3 stores in 2012,
4 stores in 2011) $464 $369 $317
All comparable stores $350 $354 $356
(1) Net retail sales per gross square foot represents net retail sales from
North American stores open throughout the entire period divided by the total
gross square footage of such stores. Calculated on an annual basis only.
(2) Excludes our web store, temporary and seasonal and event-based locations.
The percentage increase (or decrease) in comparable
store sales for the periods presented below is as follows:
Fiscal
2012
Fiscal
2011
Fiscal
2010
Comparable store sales change —
North America (%)(1)(2)
Store Age > 5 years (247 stores in 2012,
220 stores in 2011) (2.0)% (2.1)% (0.4)%
Store Age 3-5 years (19 stores in 2012,
56 stores in 2011) (3.2)% (5.1)% (3.3)%
Store Age <3 years (3 stores in 2012,
4 stores in 2011) 2.6% 1.0% (3.8)%
Total comparable store sales change (2.0)% (2.5)% (1.2)%
Comparable store sales change —
Europe (%)(1)(2) (8.4)% (0.2)% (5.5)%
Comparable store sales change —
Consolidated (%)(1)(2) (3.3)% (2.1)% (2.0)%
(1) Comparable store sales percentage changes are based on net retail sales
and stores are considered comparable beginning in their thirteenth full
month of operation.
(2) Excludes our web store, temporary and seasonal and event-based locations.
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