• Revenue Growth: Increased by 11% to over $119 million.
• Pre-Tax Income Growth: Increased by 26% to $13 million.
• Earnings Per Share (EPS): Increased by almost 38%.
• Capital Returned to Shareholders: $7.5 million in the quarter.
• Net Retail Sales: Increased by 9.1% to $109.5 million.
• Store Traffic: Increased by 3%.
• Commercial Revenue: Increased by 38.8% year over year.
• Gross Margin: 54.1%, an increase of 140 basis points.
• SG&A Expenses: $51.6 million or 43.2% of total revenues.
• Cash Balance: $29 million, a $4.2 million increase year over year.
• Inventory: $70.8 million, an increase of $6.4 million compared to last year.
• Store Locations: Opened 17 new units in the third quarter; expect to open at least 65 net new locations during fiscal 2024.

• Warning! GuruFocus has detected 7 Warning Signs with RGCO.

Release Date: December 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Build-A-Bear Workshop Inc (NYSE:BBW) reported its best-ever third quarter, with revenue growth of 11% to over $119 million and pre-tax income growth of 26% to $13 million.
• The company continues to expand its global footprint, with plans to open more than 110 net new locations over the past three years, bringing the total to almost 600 locations worldwide.
• BBW's strategic initiatives, including the expansion of experience locations and digital transformation, are driving long-term profitability and growth.
• The company has successfully diversified its store types and geographies, reducing risks associated with new locations.
• BBW has returned over $31 million to shareholders through dividends and stock repurchases this year, demonstrating a commitment to shareholder value.

Negative Points

• Web performance continues to be below expectations, impacting overall revenue guidance.
• The company faces ongoing wage and inflation pressures, including higher medical insurance costs.
• There is a noted softness in web demand, particularly impacting the fourth quarter outlook.
• The commercial segment's quarterly revenue can fluctuate due to the timing of shipments, leading to potential revenue variability.
• Lease negotiations remain challenging despite strong brand performance, as landlords recognize BBW's success and may exert pressure.

Q & A Highlights

Q: Could you help us with the inventory number if we take out the impact from the tariffs? How much is China in terms of your value add here and how much is the ability to shift that? A: The inventory increase is largely due to pulling forward products in anticipation of potential tariff changes. Most of the increase is related to items in transit. We have been diversifying geographically for years and have the flexibility to adjust inventory flow due to our strong cash position. (Vojin Todorovic, CFO)

Q: Can you unpack a little bit on the online weakness? How should we be thinking about this? A: The online and in-store consumers are different; online is more adult and gifting-focused. We are integrating systems to create a unified consumer experience, including personalized offers. The online weakness is partly due to consumer requests for in-store availability of exclusive items. (Sharon John, CEO)

Q: Regarding the San Rio collaboration, is this something that makes sense to do on a more permanent basis or in certain locations? A: The collaboration has been successful, and while it opens up opportunities for more locations, these decisions are partnership-based. We will work with San Rio to determine future possibilities. (Sharon John, CEO)

Q: Can you provide more detail on holiday trends, Black Friday, and what you're seeing from the consumer right now in the fourth quarter? A: Black Friday is important but not as critical for us as for other retailers. We saw positive mall traffic and offered online and in-store specials. The holiday season is shorter this year, making predictions challenging, but overall, we were pleased with the performance. (Sharon John, CEO)

Q: On international expansion, will the international landscape operate more like flagship locations or around tourist locations? A: We are far from saturating any market. Stores are spread across countries and often located in tourist areas. Our partners are aware of the metrics that drive sales and base locations on tourism, similar to our standalone stores. (Sharon John, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.