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Build-A-Bear Workshop, Inc. Reports Fiscal 2007 Fourth-Quarter and Full-Year Results

  • Fourth quarter total revenue increased 3% to $147.4 million. Full-year total revenue increased 9% to $474.4 million.


  • Sales from European operations increased 49% to $23.5 million and operating income increased 55% to $5.1 million in fourth quarter 2007 vs. fourth quarter 2006.


  • Fourth quarter diluted EPS are $0.48 including costs associated with an inventory write-off of $0.08 per share and expenses associated with the review of strategic alternatives of $0.01 per share.


  • Full year diluted EPS were $1.10 including costs associated with an inventory write-off of $0.08 per share and expenses associated with the review of strategic alternatives of $0.03 per share.

ST. LOUIS--(BUSINESS WIRE)--Feb. 14, 2008--Build-A-Bear Workshop, Inc. (NYSE: BBW), an interactive entertainment retailer of customized stuffed animals, today reported results for the 2007 fourth quarter and full year. Fiscal 2007 fourth quarter (13 weeks ended Dec. 29, 2007) total revenue increased 3% to $147.4 million, compared to $143.3 million in the fiscal 2006 fourth quarter (13 weeks ended Dec. 30, 2006). Fiscal 2007 full year (52 weeks ended Dec. 29, 2007) total revenue increased 9% to $474.4 million, compared to $437.1 million in the fiscal 2006 full year (52 weeks ended Dec. 30, 2006).

"Our 2007 results reflect the current challenges in the retail environment," said Build-A-Bear Workshop Chairman and Chief Executive Bear, Maxine Clark. "Our 2008 plan balances our long term business goals while recognizing these near term challenges. While our full market potential in North America remains more than 350 stores, we will slow new store growth this year to approximately 20 stores, down from 39 new stores in 2007. This allows us to focus on building our long term brand value with the addition of our virtual world, buildabearville.com. Our strategy has always been to put our brand wherever families and children go to have fun and our investment in buildabearville.com recognizes the emerging trend of kids' interaction and play in the online space. We believe we are strongly positioned to lead in this space with over 60 million stuffed animals sold and over 24 million households in our database. In addition to leveraging buildabearville.com to bring traffic to our stores, our ongoing marketing and merchandise plans balance initiatives to attract new Guests and retain existing Guests. While our near term sales trends reflect the continuing decline in consumer spending, we believe that our business plan, superior store economic model, strong cash flow, and flexible capital structure will deliver long term sales and earnings growth."

As announced in June 2007, the Company retained Lehman Brothers to assist it and the Board of Directors in an analysis and consideration of a broad range of strategic alternatives to enhance long-term shareholder value. This review of potential strategic alternatives is continuing. "While we hoped to have concluded this process by now, its timing has been complicated by a significant tightening of the financing markets and the general weakness in the retail environment," added Clark. However, we currently expect that the Board will conclude its review by the end of the first quarter."

There is no assurance that the conclusion of this process will result in any changes to the Company's current business plans or lead to any specific action or transaction. As before, the Company does not expect to disclose further developments regarding its review of potential strategic alternatives until the review has been completed.

Fiscal 2007 Fourth Quarter Financial Results

Fiscal 2007 fourth quarter total revenue includes net retail sales of $144.8 million, an increase of $3.5 million or 2% compared to last year's fourth quarter. Net retail sales growth benefited from new stores opened during the past 12 months in North America, an increase in sales from European operations of $7.7 million, and an increase in Internet sales of 9% to $5.2 million. Comparable store sales in North America declined 12.6% compared to a decline of 10.4% in the 2006 fourth quarter.

Net retail sales from European operations totaled $23.5 million in the 2007 fourth quarter, compared to $15.8 million in the 2006 fourth quarter, an increase of 49%. Operating income from European operations totaled $5.1 million in the 2007 fourth quarter, compared to $3.3 million in the 2006 fourth quarter, an increase of 55%.

"We are pleased with the growth and improvement delivered by our European operations," said Clark. "We are gaining positive traction in the United Kingdom; our brand building and store operation strategies are delivering results."

Fiscal 2007 fourth quarter net income was $9.9 million, or $0.48 per diluted share. The 2007 fourth quarter net income includes costs associated with an inventory write-off of $1.6 million and costs associated with the review of strategic alternatives of $0.3 million. Fiscal 2006 fourth quarter net income was $15.4 million or $0.75 per diluted share. The 2006 fourth quarter benefited from an adjustment to the Company's loyalty program of $3.1 million.

During the 2007 fourth quarter, the company opened eight new Build-A-Bear Workshop (BABW) retail stores in North America, as planned, compared with opening six new BABW stores and one new friends 2B made(R) store during the 2006 fourth quarter. The company also opened three new stores in the United Kingdom and one new store in France in the 2007 fourth quarter. During 2007 the company opened 50 new stores - 39 in North America, eight in the United Kingdom and three in France ending the year with a total of 272 company-owned stores in North America and 49 in Europe.

Fiscal 2007 Full Year Results

Fiscal 2007 total revenue includes net retail sales of $468.2 million, an increase of $35.6 million, or 8 % compared to fiscal 2006. Net retail sales growth benefited from new stores opened during the past 12 months in North America, an increase in sales from European operations of $26.3 million, and an increase in Internet sales of 13% to $12.2 million. Comparable store sales in North America declined 9.9% compared to a decline of 6.5% in fiscal 2006.

Net retail sales from European operations totaled $59.0 million in the 2007 full year, compared to $32.7 million in the 2006 full year, an increase of 80%. Operating income from European operations totaled $0.7 million in 2007 fiscal year compared to a loss of $1.5 million in 2006 fiscal year.

Fiscal 2007 full year net income was $22.5 million, or $1.10 per diluted share. The 2007 full year net income includes costs associated with an inventory write-off of $1.5 million and costs associated with the review of strategic alternatives of $0.7 million.

Fiscal 2006 full year net income was $29.5 million, or $1.44 per diluted share. The 2006 full year net income included distribution center transition costs of $1.0 million and benefited from an adjustment to the Company's loyalty program of $2.2 million.

On April 2, 2006 the company completed the acquisition of The Bear Factory Limited, a United Kingdom-based stuffed animal retailer, and the acquisition of Amsbra, Ltd., the company's former franchisee in the United Kingdom. Therefore, the Company's results for fiscal 2006 reflect the impact of this acquisition for only a portion of the period. Furthermore, during the 2007 third quarter the Company opened its first company-owned stores in France.

International Franchising

During fiscal 2007 fourth quarter, international franchisees opened seven new stores. For the 2007 full year franchisees opened 22 new stores and closed three stores, ending the year with 53 stores located in 15 countries. The Company currently has franchise agreements covering 21 countries and anticipates franchisees will open 15 to 20 new stores in 2008.

Fiscal 2008 Outlook

The Company's policy is to not provide forward looking guidance until the Board's review of potential strategic alternatives is complete. However, the fiscal 2008 (53 weeks ended Jan. 3, 2009) business plan is based upon the following plans and assumes a continued challenging economic environment with modest improvement expected in the second half of the year.

  • Slower new store growth compared to fiscal 2007 while continuing to grow total revenues through the addition of approximately 25 new company-owned stores - approximately 20 new stores in North America (vs. 39 new stores in 2007) and approximately five new stores in Europe (vs. 11 new stores in 2007) -- and an additional week in fiscal 2008 (53- week year).


  • Opening 15 to 20 new stores by international franchisees.


  • Continued investment of 7.0% to 7.5% of total revenues in marketing programs aimed at increasing brand awareness and store traffic, including programs supporting the Build-A-Bear Workshop retail stores and brand, our Stuff Fur Stuff(R) club loyalty program, and our buildabearville.com virtual world.


  • Investment in development and ongoing support of our buildabearville.com virtual world.


  • Capital expenditures in the range of $25 to $30 million.

Today's Conference Call Webcast

Build-A-Bear Workshop will host a live Internet webcast of its quarterly investor conference call at 9 a.m. EST today. The broadcast may be accessed at our investor relations Web site, http://IR.buildabear.com. The call is expected to conclude by 10 a.m.

A replay of the conference call webcast will be available in the investor relations Web site for one year. A telephone replay will be available beginning at approximately noon EST today until midnight on Feb. 28, 2008. The telephone replay is available by calling (617) 801-6888. The access code is 55848039.

About Build-A-Bear Workshop, Inc.

Build-A-Bear Workshop, Inc. is the only global company that offers an interactive make-your-own stuffed animal retail-entertainment experience. The company currently operates more than 370 Build-A-Bear Workshop stores worldwide, including company-owned stores in the U.S., Puerto Rico, Canada, the United Kingdom, Ireland and France, and franchise stores in Europe, Asia, Australia and Africa. Founded in St. Louis in 1997, Build-A-Bear Workshop is the leader in interactive retail. Brands include make-your-own Major League Baseball(R) mascot in-stadium locations, Build-A-Dino(R) stores and friends 2B made(R) doll locations. In December 2007, Build-A-Bear Workshop extended its in-store interactive experience online with the launch of its virtual world at www.buildabearville.com. Build-A-Bear Workshop (NYSE: BBW) posted total revenue of $474 million in fiscal 2007. For more information, call 888.560.BEAR (2327) or visit the company's award-winning Web sites at www.buildabear.com and www.friends2bmade.com.

Forward-Looking Statements

This press release contains "forward-looking statements" (within the meaning of the federal securities laws) which represent Build-A-Bear Workshop expectations or beliefs with respect to future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Those factors include, without limitation: we may be unable to generate interest in and demand for our interactive retail experience, or to identify and respond to consumer preferences in a timely fashion; we do not know the results of the strategic alternatives evaluation process announced on June 28, 2007 or whether the process will result in any changes to the company's current business plans or lead to any specific action or transaction; our marketing and on-line initiatives may not be effective in generating sufficient levels of brand awareness and guest traffic; we may be unable to generate comparable store sales growth; we may be unable to open new stores or may be unable to effectively manage our growth; we may be unable to effectively manage our international franchises or laws relating to those franchises may change; we may be unable to realize some of the expected benefits of the acquisition of Amsbra and Bear Factory including making these operations profitable; customer traffic may decrease in the shopping malls where we are located, on which we depend to attract guests to our stores; general economic conditions may deteriorate, which could lead to disproportionately reduced consumer demand for our products, which represent relatively discretionary spending; our market share could be adversely affected by a significant, or increased, number of competitors; we may lose key personnel, be unable to hire qualified additional personnel, or experience turnover of our management team; the ability of our principal vendors to deliver merchandise may be disrupted; the availability and costs of our products could be adversely affected by risks associated with international manufacturing and trade; high petroleum products prices could increase our inventory transportation costs and adversely affect our profitability; we may be unable to realize the anticipated benefits from our company-owned distribution center; fluctuations in our quarterly results of operations could cause the price of our common stock to substantially decline; we may fail to renew, register or otherwise protect our trademarks or other intellectual property; we may have disputes with, or be sued by, third parties for infringement or misappropriation of their proprietary rights; we may be unable to renew or replace our store leases, or enter into leases for new stores on favorable terms or in favorable locations, or may violate the terms of our current leases; we may suffer negative publicity or be sued due to violations of labor laws or unethical practices by manufacturers of our merchandise; and we may improperly obtain or be unable to protect information from our guests in violation of privacy or security laws or expectations. These and other applicable risks, cautionary statements and factors that could cause actual results to differ from the Company's forward-looking statements are included in the Company's filings with the SEC, including as described in the Company's annual report on Form 10-K for the fiscal year ended December 30, 2006. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


             BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
      Unaudited Condensed Consolidated Statements of Operations
       (dollars in thousands, except share and per share data)

                     13 Weeks                  13 Weeks
                       Ended                    Ended
                    December 29 % of Total   December 30,  % of Total
                       2007     Revenues (1)    2006      Revenues (1)
                    ----------- ------------ ------------ ------------
Revenues:
 Net retail sales  $   144,826        98.3  $    141,298         98.6
 Franchise fees          1,272         0.9         1,546          1.1
 Licensing revenue       1,302         0.9           421          0.3
                    ----------- -----------  ------------ ------------
   Total revenues      147,400       100.0       143,265        100.0
                    ----------- -----------  ------------ ------------
Costs and expenses:
 Cost of
  merchandise sold      77,900        53.8        67,329         47.7
 Selling, general
  and
  administrative        54,000        36.8        50,405         35.2
 Store preopening          928         0.6           634          0.4
 Interest expense
  (income), net           (241)       (0.2)         (173)        (0.1)
                    ----------- -----------  ------------ ------------
   Total costs and
    expenses           132,587        90.0       118,195         82.5
                    ----------- -----------  ------------ ------------
   Income before
    income taxes        14,813        10.0        25,070         17.5
Income tax expense       4,935         3.3         9,638          6.7
                    ----------- -----------  ------------ ------------
   Net income      $     9,878         6.7  $     15,432         10.8
                    ===========              ============

Earnings per common
 share:
 Basic             $      0.49              $       0.76
                    ===========              ============

 Diluted           $      0.48              $       0.75
                    ===========              ============

Shares used in
 computing common
 per share amounts:
 Basic              20,280,144                20,272,058
 Diluted            20,415,075                20,586,557

(1) Selected statement of operations data expressed as a percentage of
 total revenues, except cost of merchandise sold which is expressed as
 a percentage of net retail sales. Percentages will not total due to
 cost of merchandise sold being expressed as a percentage of net
 retail sales and rounding.

             BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
      Unaudited Condensed Consolidated Statements of Operations
       (dollars in thousands, except share and per share data)

                       52 Weeks                 52 Weeks
                        Ended                    Ended
                     December 29, % of Total  December 30, % of Total
                        2007      Revenue (1)    2006      Revenue (1)
                     ------------------------ ------------------------
Revenues:
 Net retail sales   $    468,168       98.7  $    432,572        99.0
 Franchise fees            3,577        0.8         3,521         0.8
 Licensing revenue         2,616        0.6           979         0.2
                     ------------ ----------  ------------ -----------
   Total revenues        474,361      100.0       437,072       100.0
                     ------------ ----------  ------------ -----------
Costs and expenses:
 Cost of merchandise
  sold                   259,078       55.3       227,509        52.6
 Selling, general
  and administrative     177,375       37.4       158,712        36.3
 Store preopening          4,416        0.9         3,958         0.9
 Interest expense
  (income), net           (1,531)      (0.3)       (1,530)       (0.4)
                     ------------ ----------  ------------ -----------
   Total costs and
    expenses             439,338       92.6       388,649        88.9
                     ------------ ----------  ------------ -----------
   Income before
    income taxes          35,023        7.4        48,423        11.1
Income tax expense        12,514        2.6        18,933         4.3
                     ------------ ----------  ------------ -----------
   Net income       $     22,509        4.7  $     29,490         6.7
                     ============             ============

Earnings per common
 share:
 Basic              $       1.11             $       1.46
                     ============             ============

 Diluted            $       1.10             $       1.44
                     ============             ============

Shares used in
 computing common
 per share amounts:
 Basic                20,256,790               20,169,814
 Diluted              20,449,959               20,468,256

(1) Selected statement of operations data expressed as a percentage of
 total revenues, except cost of merchandise sold which is expressed as
 a percentage of net retail sales. Percentages will not total due to
 cost of merchandise sold being expressed as a percentage of net
 retail sales and rounding.

             BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
           Unaudited Condensed Consolidated Balance Sheets
       (dollars in thousands, except share and per share data)

                                             December 29, December 30,
                                                 2007         2006
                                             ------------ ------------
                   ASSETS
 Current assets:
  Cash and cash equivalents                      $ 66,303     $ 53,109
  Inventories                                      48,638       50,905
  Receivables                                       7,068        7,389
  Prepaid expenses and other current assets        14,624       11,805
  Deferred tax assets                               3,606        2,388
                                             ------------ ------------
    Total current assets                          140,239      125,596

 Property and equipment, net                      139,520      130,347
 Goodwill                                          42,840       42,327
 Investment in affiliate                            4,307          603
 Other intangible assets, net                       5,063        2,873
 Other assets, net                                  7,604        3,424
                                             ------------ ------------
 Total Assets                                    $339,573     $305,170
                                             ============ ============


     LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
  Accounts payable                               $ 45,086     $ 45,982
  Accrued expenses                                 15,439       16,301
  Gift cards and customer deposits                 34,567       28,128
  Deferred revenue                                  8,708        6,454
                                             ------------ ------------
    Total current liabilities                     103,800       96,865
                                             ------------ ------------

 Deferred franchise revenue                         2,511        2,297
 Deferred rent                                     38,046       34,754
 Income taxes payable                               1,098            -
 Other liabilities                                    510          811

 Stockholders' equity:
  Common stock, par value $0.01 per share             207          205
  Additional paid-in capital                       88,388       88,866
  Accumulated other comprehensive income            6,314        5,182
  Retained earnings                                98,699       76,190
                                             ------------ ------------
    Total stockholders' equity                    193,608      170,443
                                             ------------ ------------
 Total Liabilities and Stockholders' Equity      $339,573     $305,170
                                             ============ ============

             BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
             Unaudited Selected Financial and Store Data
           (dollars in thousands, except square foot data)

                     13 Weeks    13 Weeks     52 Weeks      52 Weeks
                      Ended        Ended        Ended        Ended
                    December 29 December 30, December 29, December 30,
                      2007        2006         2007          2006
                    ----------  -----------  -----------  ------------

Other financial
 data:
 Gross margin ($)
  (1)              $  66,926  $    73,969   $  209,090  $    205,063
 Gross Margin (%)
  (1)                   46.2%        52.3%        44.7%         47.4%
 Capital
  expenditures, net$   7,956  $     6,019   $   34,044  $     53,520
 Depreciation and
  amortization     $   7,020  $     6,660   $   26,227  $     22,394
 Sales over the
  Internet         $   5,195  $     4,752   $   12,187  $     10,767

Store data (2):
 Number of stores
  at end of period
  North America                                    272           233
  Europe                                            49            38
                                             -----------  ------------
     Total stores                                  321           271

 Store square
  footage at end of
  period
  North America                                810,208       712,299
  Europe (3)                                    72,188        56,701
                                             -----------  ------------
     Total square
      footage                                  882,396       769,000

 Net retail sales
  per gross square
  foot (4)
  Store Age greater
   than 5 years
   (103 stores in
   2007, 66 stores
   in 2006)                                 $      517  $        577
  Store Age 3-5
   years (65 stores
   in 2007, 80
   stores in 2006)                          $      537  $        556
  Store Age less
   than 3 years (65
   stores in 2007,
   54 stores in
   2006)                                    $      497  $        592
  All comparable
   stores                                   $      516  $        573

 Comparable store
  sales change (%)
  (5)
  Store Age greater
   than 5 years
   (103 stores in
   2007, 66 stores
   in 2006)                                       (8.3)%        (5.2)%
  Store Age 3-5
   years (65 stores
   in 2007, 80
   stores in 2006)                               (10.2)%        (6.3)%
  Store Age less
   than 3 years (65
   stores in 2007,
   54 stores in
   2006)                                         (13.0)%        (9.4)%
  Total comparable
   store sales
   change              (12.6)%      (10.4)%       (9.9)%        (6.5)%


(1)Gross margin represents net retail sales less cost of merchandise
 sold. Gross margin percentage represents gross margin divided by net
 retail sales.
(2)Excludes our webstore and seasonal and event-based locations.
(3)Square footage for stores located in Europe is estimated selling
 square footage and includes stores in the United Kingdom, Ireland and
 France.
(4)Net retail sales per gross square foot represents net retail sales
 from stores open throughout the entire period divided by the total
 gross square footage of such stores. As such, stores in the UK are
 excluded from the calculation. Calculated on an annual basis only.
(5)Comparable store sales percentage changes are based on net retail
 sales and stores are considered comparable beginning in their
 thirteenth full month of operation. As such, stores in the UK are
 excluded from the calculation.

CONTACT: Build-A-Bear Workshop, Inc.
Investors:
Molly Salky, 314-423-8000 x5353
or
Media:
Jill Saunders, 314-423-8000 x5293

SOURCE: Build-A-Bear Workshop , Inc.