Another retailer to explore strategic alternatives

Build-A-Bear Workshop on Tuesday said it has hired financial and legal advisers to help it explore strategic alternatives. The news came the day after General Nutrition Corp. (GNC) said it was doing the same.



“The disciplined execution of our strategy has led to three consecutive years of positive consolidated comparable sales and profit growth fueled by margin expansion and improved operational metrics, such as the highest average transaction value in our history while consistently generating strong cash flow,” said CEO Sharon Price. “The authorization to explore strategic alternatives by our board will enable us to evaluate the various opportunities to potentially accelerate our key growth initiatives while enhancing total shareholder value.”



The retailer said that it has not set a timetable for the review process, and there is no assurance the review will result in any new deals or initiatives.



Build-A-Bear on Tuesday also reported net income of $3.5 million for the first quarter of 2016, down from the $6.8 million in the year-ago period and less than analysts had expected. The company said its profitability was impacted by expenses related to the rollout of its new “Discovery” format stores, costs related to international expansion and a 33.3% increase in its tax rate.



“As expected, the expenses associated with these initiatives had a negative impact on our profitability in the quarter,” John said. “However, we have strategically elected to make these key investments during the first half of the year to maximize the number of Discovery locations open during our historically strongest season, the fourth quarter. Our confidence in this strategy is reflected in the reiteration of our annual guidance, which includes an expectation of a 15% to 25% increase in pre-tax income in fiscal 2016 while delivering our fourth consecutive year of increased consolidated comparable sales and improved profitability.”



Total revenue for the quarter was also less than expected, coming in at $95 million, compared with $93.4 million last year. Same-store sales rose 2.2%.



Sales from Build-A-Bear's Discovery format stores, which included 15 stores as of the end of the quarter, increased 14%.



As of April 2, 2016, the retailer operated 321 company-owned stores, including 15 in its new Discovery format, with 264 locations in North America and 57 in Europe. The company’s international franchisees ended the period with 76 stores in 11 countries.