BUILD-A-BEAR WORKSHOP INC Q4 FY2024 earnings call

• Brand expansion: The Build-A-Bear brand remained strong with successful expansion across consumer segments, categories, channels, and countries. Fiscal 2024 was the fourth consecutive year of record results.
• Retail footprint expansion: Added 24 net new locations in 2024 across corporately operated, partner-operated, and franchise models. Plan to open at least 50 new net locations in 2025, mostly partner-operated. Announced a new retail experience in ICON Park, Orlando, opening in H1 2026.
• Digital transformation: Made progress in omnichannel capabilities, including improved order fulfillment, same-day shipping initiative with Uber, and digitization of the record-your-voice offering, driving double-digit online sales growth.
• Product initiatives: Expanding audience with new offerings, leveraging multi-generational appeal. Mini Beans collection sold over 1.25 million units and plans to extend to other retail locations in 2025.
• Return of capital to shareholders: Returned $42 million in 2024 through dividends and share repurchases, and board increased quarterly dividend by 10%.

For the fourth quarter, total revenues were $150.4 million, increasing 5.7%. Net retail sales were $139.5 million, up 4.7%. Commercial revenue (wholesale and international franchise) rose 20.5% year over year. Gross margin was 56.6%, an improvement of 20 basis points. SG&A expenses were 38.4% of total revenues, a 80 basis point improvement from the prior year. For full-year 2024, total revenues were $496.4 million, up 3.6%, pretax income was $67.1 million, up 5.1%, and adjusted EPS was $3.77, up 10.2%.

• Total revenue expected to grow on a mid-single-digit basis, partially driven by addition of at least 50 net new experiential locations.
• Commercial segment revenue expected to grow at least 20% for the year, back-half weighted.
• Pretax income expected to range from low single-digit decline to low single-digit growth, impacted by tariff concerns and other inflationary pressures, with an estimated $10 million negative impact from expenses.
• Inventory investment increased due to accelerated purchase of 2025 core products to mitigate tariff impact, with China expected to be source of less than 50% of inventory shipped to North America in 2025.

• Tariff concerns: Potential negative impact on pretax income due to tariffs, with estimated $10 million expense headwind from tariff-related costs.
• Macroeconomic uncertainties: Impact of broader economic conditions on consumer spending and business operations.

Q: View on overall consumer environment and e-commerce progress.

A: Sharon noted positive quarter-to-date results with traffic outpacing national levels, and emphasized ongoing work on omnichannel integration including bringing on Dave Henderson to integrate brick-and-mortar and e-commerce.

Q: Tariffs and reduction of dependence on China.

A: Voin stated proactive inventory purchases to mitigate tariff impact, reduced dependency on China with China expected to be source of less than 50% of inventory to North America in 2025, and need for stability in tariff rates to manage business.

Q: Inventory levels and 2025 expansion.

A: Voin mentioned inventory growth due to store expansion support, with spikes expected but not significantly higher than current levels, and consideration of inventory timing and tariff impact on costs.

Q: Offsets to revenue guidance.

A: Voin noted revenue guidance in mid-single digits accounts for macro headwinds and tariff impacts, but sees positives in commercial segment growth, store performance, and consumer trends, while Sharon highlighted consumer return to physical retail and personalization trends benefiting the business