BUILD-A-BEAR WORKSHOP INC Q1 FY2025 earnings call

• The company achieved the best first quarter results in its history with double-digit top-line growth, record revenue, margin expansion, and strong performance across all segments. - Key strategic initiatives include the evolution and expansion of the experiential retail footprint, advancement of digital transformation, and leveraging the Build-A-Bear brand strength while returning capital to shareholders. - In the first quarter, 15 net new experience locations were opened, and the company's international presence now covers 30% of countries. - The Mini Beans line expanded by 30% year-over-year, with 50 new styles released in the inaugural year and 15 new ones already this year. - The company is decommissioning legacy inventory management systems and implementing a new system for better real-time inventory visibility and data-driven decision-making. - Returned over $7 million in capital to shareholders, and has a clean balance sheet, strong cash flow, and vertical flexible retail model.

Total revenues for Build-A-Bear Workshop's first quarter 2025 increased by 11.9% to more than $128 million. Net retail sales saw an increase of 10.9% to $119.6 million. Commercial revenue, which includes wholesale sales to partner operators and international franchise revenue, rose by a combined 28.3%. Pre-tax income grew by 30.6% to nearly $20 million, and EPS increased by 42.7% to $1.17. Gross margin was 56.8%, an improvement of 260 basis points compared to the previous year, driven by both retail and commercial segments.

• Maintained revenue guidance for 2025 and continues to expect at least 50 net new experience locations, mostly operated by international partners. - Commercial segment revenue is expected to grow at least 20% for the year. - Updated pre-tax income guidance to a range of $61 million to $67 million inclusive of current tariff rates, with tariffs having a relatively modest impact on second quarter results and a greater effect starting in the third quarter.

• Tariffs pose a potential impact on merchandise costs, although the company has an organic hedge due to its global footprint. - Economic and geopolitical headwinds that have historically challenged the company but could still affect future performance.

Q: Good morning. Congratulations on the quarter. When we look at the continuing evolution with movies...

A: Sharon Price John stated that they have strong relationships with major creators, Stitch is an example of their long-term partnership with Disney, and they are prepared to participate in cultural moments though not relying solely on them.

Q: When we look at the inventory management system enabling better response to trends...

A: Sharon Price John mentioned that they are more flexible now compared to previous situations, and the new inventory system will enhance their ability to anticipate trends.

Q: Good morning, congrats on the quarter. Strong growth in all segments, color on company-operated stores vs expectations...

A: Voin Todorovic said all four levers (traffic, conversion, average unit retail, units per transaction) were positive for stores, with domestic store traffic up 3% while national traffic was down 3%, and Sharon Price John noted people plan trips to Build-A-Bear for celebrations.

Q: Good morning, Sharon and Voin. Congrats on record results. Color on Mini Beans placement and expansion...

A: Sharon Price John said Mini Beans are placed in partners' toy stores outside the US and tested in the US, and Chris Hurt added they've placed them in Hudson airports, Applegreen locations, and with partners in Italy and the Nordics.

Q: Good morning, Sharon and Voin. Congrats on record results. Dive into incremental impact of tariffs on updated outlook...

A: Voin Todorovic explained that the new pre-tax range reflects less than $10 million net of mitigation impact of tariffs and $5 million related to medical and labor costs, with teams working on mitigations.

Q: Great. Good morning, Sharon and Voin. Congrats on record results. Color on expansion in new countries and decision-making...

A: Sharon Price John said they work with experts in markets, have high criteria for partners, and the enthusiasm in new markets is a sign of success.

Q: Good morning, Sharon and Voin. Congrats on record results. Attribute retail traffic to organic demand or consumer action ahead of pricing...

A: Sharon Price John said people can't hoard the experience, so it's likely not due to pull forward for the majority of sales.