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Build-a-Bear Workshop Q3 earnings slide; to open in Bass Pro Shops

Build-A-Bear Workshop is planning to add more non-mall locations as it continues to expand beyond its traditional base.

The retailer on Thursday reported that its profit and sales fell in the third quarter, amid soft mall traffic and the relaunch of its website.

Profit came in at $1.4 million profit for the quarter ended Sept. 30, or 9 cents a share, down from $1.8 million, or 11 cents a share, in the year-ago period.

Total revenue fell to $82.4 million, down from $83.7 million a year earlier. Consolidated comparable sales declined 7.4%, with a 7.8% decrease in North America, and a 5.2% decrease in Europe.

Consolidated comparable e-commerce sales decreased 18.2%, and were impacted by the transition to a new Web platform. The new platform is expected to allow for improved performance in the holiday season and lead the way for increased omnichannel capabilities, according to the retailer.

“For the third quarter, we reported total revenue that approached last year’s and pre-tax earnings in line with guidance, despite expected softness in comps, due in part to continued macro traffic challenges and the disruption caused by the planned transition to our new Web platform," said Sharon Price John, president and CEO. "Normalizing for the Web transition and unexpected weather impacts, we estimate our total revenue would have been slightly positive."

Build-A-Bear has been diversifying its portfolio beyond traditional stores, including a partnership with Carnival Cruise Line to bring its retail-entertainment experience to the line's fleet. In a new initiative, the retailer will open holiday shops in five Bass Pro Shops this season. It also is opening a flagship in Manhattan, next to the Empire State Building, on Oct. 26.

In the third quarter, the retailer, building on a successful test in fall 2016, expanded its small-format "concourse shop" model with three new locations, ending the period with 23 concourse shops. At approximately 200 sq. ft., the format requires less capital, has shorter term leases and offers flexibility for a wide range of locations.

"Build-A-Bear's decision to broaden its portfolio beyond malls and to try and test new formats is encouraging," commented Carter Harrison, analyst at GlobalData Retail. "The new concourse format, which has a much smaller footplate than standard stores, is proving successful with higher productivity, a faster return on investment, lower occupancy costs, and more flexible lease terms." (Click here for more commentary.)

On the international front, the company has signed a new franchise agreement granting territory rights in China, Hong Kong and Macau with plans to open the first store in Beijing this December.

As of September 30, 2017, Build-a-Bear operated 353 company-owned stores, including 100 in its updated "discovery" format, with 292 locations in North America, 60 in Europe and 1 in China. The company’s international franchisees ended the period with 90 stores in 11 countries.
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