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Build-A-Bear Workshop turnaround stalled by COVID-19

Build-A-Bear Workshop lost its growing momentum in the first quarter as it closed its stores, famous for their high-touch and interactive environments, early on in response to the COVID-19 pandemic.

In preliminary results for the first quarter ended May 13, the retailer reported a loss of $21.2 million, or $1.42 per share, after net income of $1.2 million, or $0.8 cents per share, in the year-ago period.

Revenue plunged some 45% to $46.6 million, from $84.4 million last year. The retailer said it e-commerce continue to gain momentum with growth rates increasing to triple-digit levels. It also recorded its  the highest single-day ever of online demand with the initial offering of a stuffed animal based on a character from  Disney+ series “The Mandalorian.”

To support the increased digital demand, Build-A-Bear said it rapidly evolved its order fulfillment processes and expedited a number of new efforts, including adding a chat-bot to help manage consumer inquiries, an online waiting room to support high site traffic and a “buy online, ship from store” program to complete orders from select store locations. 

In comments, Neil Saunders, managing director of GlobalData Retail, said that while e-commerce as an important channel, it is not a full substitute for the in-store Build-A-Bear experience, “which is the company’s main selling tool and point of differentiation.”

“There is a question mark over how confident parents will feel in bringing children to a shop where there are so many things to touch and where the ‘production process’ means they must linger,” Saunders added. For more analysis, click here

Build-A-Bear expects to have 35 locations open by the end of this week, with new safety precautions in place. The retailer said it is “cautiously optimistic” about how consumers will respond, but it  expects to continue actions it took to address the Covid-19 crisis, including  tight inventory management, preserving cash, revised marketing and a reduced workforce. It also noted that 70% of its stores leases come up for review within the next three years, with approximately 120 locations having events before the end of fiscal 2020.

“Separately, our strategic decision to secure a high level of lease optionality given the changing shopping patterns and marketplace uncertainty over the last few years has resulted in over 70% of our store leases having a natural event in the next three years,” said president and CEO Sharon Price John. “As we look to the short and longer-term, this flexibility in our real estate portfolio provides potential benefits including an increased opportunity to more efficiently and quickly evolve our brick and mortar lease structures and footprint, if we choose to do so.”

At the end of the first quarter, Build-A-Bear had $21.9 million in cash and equivalents with no borrowings from its revolving credit facility.

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