BBW Jan 2016 Investor Presentation

8/20/2019 BBW Jan 2016 Investor Presentation

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Sharon Price JohnCEO


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Store counts are as of end of fiscal year 2015 (January 2, 2016),includes traditional and non-traditional stores

BUILD-A-BEAR 2016

Background: BBW

• Founded in 1997, as a specialtyretailer to “ make-your-own stuffedanimals”

• 2004 IPO

- Post IPO 22% CAGR and double-digit EBITDA thru 2007

- 2007 saw highest revenue:$474M

- 2008 was the beginning of amulti-year contraction

• Currently in ~400 locations in 15countries including:

• 330 owned and operated

• 70+ international franchisestores

• Over 3,500 employees

2013

Marked the Beginning of a

Corporate Turnaround


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Background: Struggling retail business

Eight consecutiveyears

of comp store declines

80% of doors notupdated since opening

2012 revenue down$93M from 2007 peak

22% of NA storesunprofitable in 2012

Declining Retail

Tired productdevelopment

Marketing had become“couponing”

Brand refresh overdue

Not optimizing licensedrelationships

Aged processes and

systems

Failing Strategy

Pre-2013: Multi-Year Negative Trend

BUILD-A-BEAR 2016

~ 110 bpsGross Margin decline

(2005-2012)

Cumulative Net Loss of$78M

(2009-2012)

2012 largest loss incompany’s history(Net and Adjusted Net)

2013 mid-year loss of

($6M)

Trend of Unprof itablity


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1. Return to

Profitability

BUILD-A-BEAR 2016

Objectives

2. Sustain

Profitability


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CUMULATIVE RESULTS 2013-2015:

*Adjusted Net Income/Loss excludes mngmt transition and store closing costs, asset & store impairment, goodwillimpairment & deferred tax asset valuation allowance; 2015 results are preliminary and may change; $17.25M is the


Revenue $381M $379M $392M $378M(on a similar topline)

Total

Stores # 351 323 324 334(with 5% fewer stores &

11% less square footage)

~720bps(based on adjusted net income as a percent of revenue)

BBWProfit

Improvement

BUILD-A-BEAR 2016

($10M)

~$17M

2012* 2013* 2014* 2015*

Adjusted Net Income (Loss)*

53 wks Prelim


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BUILD-A-BEAR 2016


BBW 2015Retail Gross Margin

47%*

(highest since 2006)

*Retail Gross Margin % reflects the mid-point of expected range**

(820 bps pointimprovement versus 2012)

2015NA dollars

per transaction**

$44.10HIGHEST EVER

2015NA units

per transaction**

HIGHESTsince 2008

3.95


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BUILD-A-BEAR 2016


19.6%

2015North American

4-wall contribution*

(only 3 unprofitable NAstore versus 61 in 2012)

*2015 results are preliminary and may change

980bpsimprovement

since 2012


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BUILD-A-BEAR 2016


ThreeConsecutive

Years ofImprovement

• ImprovedProfitability

• PositiveConsolidatedSame Store Sales

• Margin Expansion

• Increases in

AverageTransaction Value


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BUILD-A-BEAR 2016

All While Fundamentally Changing the Company

• Re-orged with new leadershipteam including:CFO, COO, CMO, CPO

• Evolved 50% of the Board

• Updated circa pre-2008 IT, Digitaland POS infrastructure

• Instituted more efficient, data-driven processes

• Launched new brand look

• Elevated and expanded powerfulpartner relationships

FORTUNE

“ 100 Best Companies to Work For”

7th consecutive year

Developed New Strategy


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1. Return to

Profitability

BUILD-A-BEAR 2016

Objectives

2. Sustain

Profitability


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MAINTAIN THE BRAND

FIX THE RETAIL BUSINESS

BUILD-A-BEAR 2016

Strategy?


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1. Return to

Profitability

BUILD-A-BEAR 2016

Objectives

2. Sustain

Profitability

3. Drive ProfitableGrowth


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MONETIZE THE BRAND

DIVERSIFY

THE BUSINESS MODEL

BUILD-A-BEAR 2016

Strategy

Profitably Extend Build-A-Bear across multipleRevenue Streams to access business via new

Locations, Categories & Consumers


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• Global• Multi-generational• Emotional• Trusted

• Extendable• Updated

BUILD-A-BEAR 2016

Our most valuable asset

BRAND“ to maximize our potential,

we must pivot from a retailerthat built a powerful brandto a BRAND company that’s

more than a retailer”

Build-A-Bear is a


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BUILD-A-BEAR 2016

12%22%

Strong Brand:Balanced Appeal and Seasonality*

* Source: Build-A-Bear Workshop Internal Data** 3 years rolling data

Consumer Age Distribution Revenue by Quarter**Consumer Gender Distribution

12%

22%

25%

15%

26%

0-2 3-5 6-8 9-12 Teen +

23%

21%

25%

31%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr


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BUILD-A-BEAR 2016

Strong Brand:

Build-A-Bear

Aided Brand Awareness

High Awareness and Appeal

Since new branding launch,

appeal ratings have increased2007 Rating – 85%2015 Rating – 87%

Source (Awareness): C&R Research, Fall 2012, US Market Report

Source (Consumer Appeal): E-Poll Market Research


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BUILD-A-BEAR 2016

Strong Brand:

Build-A-Bear Workshop’s ADVOCACY

number is equal to or higher than

other retail brands including

American Girl, LEGO, Toys “ R” Us

and Disney

“ Advocacy” is based on a variety ofmeasures including awareness, trust,

quality, uniqueness andlikelihood to recommend

Build-A-Bear

BRAND ADVOCACY

Similar to larger Brands

Source: Burke Research 2013


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BBW experiential retail process is*:- Unique (lacks direct competition)- Engaging- Understood in many cultures

BBW high touch service model is*:- “Special”- Personalized- Memorable

BUILD-A-BEAR 2016

Strong Concept

Aligned with Millennial values- Value “experiences” over “things”- Want to “ make memories with kids”- Value brands that “ give back”

Aligned with macro-trends:

- Do-it-yourself - Crafting- Personalization/Customization- Rise in the power of entertainment &

sports brands

*Source: Envirosell, a leading consumer behavior research andconsulting firm, in 2011


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MONETIZE THE BRAND

BUILD-A-BEAR 2016

Strategy

OverhaulGlobal Owned &

Operated Retail+ EnterpriseSelling

Operations

ImplementWholesale and

CorporateSales Systems& Processes

Build Scalable

InternationalFranchisingModel/Systems

Develop NewOutbound

BrandLicensing &EntertainmentCapabilities

DIVERSIFY THE BUSINESS MODEL



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MONETIZE THE BRAND

BUILD-A-BEAR 2016

Strategy

Strategic Investment





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BUILD-A-BEAR 2016

Strategy

Global Owned& Operated

Retail +Enterprise

Selling

Wholesale& Corporate

InternationalFranchising

OutboundBrand

Licensing &Entertainment


Diversify and Add Locations

MONETIZE THE BRAND

Diversify and Add Categories

Diversify and Add Consumers

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BUILD-A-BEAR 2016

Strategy

Wholesale

and CorporateSales

InternationalFranchising

OutboundBrand



MORE PLACES

MORE PEOPLE

MORE PRODUCT

MONETIZE THE BRAND

Global Owned& Operated

Retail +Enterprise

Selling

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BUILD-A-BEAR 2016

EXPANSION: 2016 and Beyond

MORE PLACESBeyond updating the look, weresearched and created the new

store design with an objective to:• optimize spatial planning• improve productivity

“ Discovery Store” is a HIT!The 11 new & remodeled locationsopened in the US and the UK in 2015are over-indexing on key metrics:

• Double-Digit comp vs norm• Increased Traffic• Higher Dollars per transaction• Higher Units per transaction

“ Discovery Store”


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BUILD-A-BEAR 2016

MORE PLACES

Discovery Store

We expect to have45-55 new and/or remodeled

Discovery Storesby the end of 2016

including 4 flagshipsin multiple countries


“ Secret Weapon” – the STUFFER- Lease line “theater”- Front/center position opens up

merchandising wall space- Faster fill rate and extra nozzle

has increased our peakcapacity by 60%


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MORE PLACES


• A Discovery Store flagship inCopenhagen, Demark at TivoliGardens (remodel)

New Franchise Stores

• Additional International Openingsexpected in 2016 include 20-25New Franchise Stores

A Special Project in Shanghaiwill be announced in the

coming weeks

(Expected to open mid 2016)

金泰迪工作室

• New Discovery Store flagship inShanghai, China

BUILD-A-BEAR 2016


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MORE PLACESNon-Traditional


OUTLETS- First value-based format

- Successful openings in UK and US- Improves product life-cycle management- Leveraging “Tourist Locations” where

BBW over-indexes on key metrics

ENTERPRISE SELLING- Starting in 1st half 2016- In-store, On-line, Mobile visibility

Opened 6 BBW Outlets in 2015Expect to open 5 more in 2016

BUILD-A-BEAR 2016

EXPERIENTIAL “ Wholesale”

- Re-building Rainforest Café and T-RexCafé relationship with Landry’s- New Carnival Cruise lines relationship- BBW expected to be “on-board” in 2016


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BUILD-A-BEAR 2016


MORE PRODUCTDrove additional Wholesalebusiness with:

• COSTCO holiday gift set palletprogram was successful, plans toexpand in 2016

75% of our best guest surveyedare interested in Build-A-Bear

branded consumer products*

Secured 10 out-bound brandedlicensed agreements in a widevariety of consumer categories,mostly launching in 2016

including:

• Spin Master toys• Frankford novelty candies

* Source: Build-A-Bear Workshop Internal Dat


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BUILD-A-BEAR 2016


MORE PRODUCTThe “classic” product offeringgenerates our highest unitvolume of any segment atfavorable margins and is:

• Critical for our coreconsumer base and partybusiness

• Now updated more

frequently to maintain in-store freshness for ourbest guests


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BUILD-A-BEAR 2016


MORE PRODUCT

Since 4Q 2014, we have beenintroducing Intellectual Propertiesthat include back stories, apps,music, videos and games to drive“Play beyond the Plush” with:

- Honey Girls

- Merry Mission- Promise Pets

Contributed to almost $60M inlifetime revenue and ~10M total

digital interfaces

Merry Mission’s Glisten reindeerwas our #1 item for Q4 2015


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BUILD-A-BEAR 2016


MORE PEOPLEOur Traditional Licensing

approach drivesCore Consumer sales

Plus, we have improved ability to “ chase”hot properties


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BUILD-A-BEAR 2016


Affinity

Collectibles

Entertainment

Sports

Fashion

Gifts

Fresh Licensing strategy is attracting new ConsumersMORE PEOPLE


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BUILD-A-BEAR 2016


MORE PEOPLE

MinionsStar WarsPikachuToothless

The Collectible, Gifting and Teen+Consumer is generally less price

sensitive, more likely to shop on-line and over-indexes with keylicenses like:

The #1 item sold on-line in 2015?Our new GIFT BOX


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BUILD-A-BEAR 2016

2016: Projected Revenue

2016Quarter

1st 2nd 3rd 4th Full Year

ExpectedComp

Driven by:• Organic comp growth in existing stores• Accelerated comp in remodeled stores

• Volume from ~10 new permanent stores* net of closures• Double-digit growth in Digital (Mobile + Ecomm)• Enterprise Selling opportunity• Benefit from continued strategy of dr iving IP and Licensing via

a consumer segmentation strategy coupled with elevatedproduct/marketing integration

Projected 2016 Comparable Store Performance by Quarter Consolidated Comp Store Growth Expected to be low to mid-single digits

Total Revenue Growth in Mid-Single Digits

*Permanent stores are defined as traditional and outlet locations anddo not include:Seasonal, Shop in shop or pop-up locations


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BUILD-A-BEAR 2016

2016: Projected Profit

Store counts do not include Carnival Cruise ships, Landry’s orinternational franchise locations

Planning Continued Profit Growth

• 2015 Pre-tax income projectedin the range of $16.5M-$18M

• 2016 Pre-tax income expectedto increase by 15%-25%

BUILD-A-BEAR 2016


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75%

25%

Goal is to assure flexibility in capital spending to maintain our

solid cash flow, strong balance sheet and lack of debt

2016: Intended use of Capital

$25-$30M

Capital Plan

• Estimated 18-24 month payback on new and remodeled stores• Expected 4-wall contribution of over 20% for new and remodeled stores• Remodels REQUIRE store downtime and will impact total revenue• Store openings & remodels require both “capital” & “expense” investment• Remodel downtimes are generally planned for lowest revenue quarters

• Puts and takes will disrupt average store sales & sales/sq ft data comparisons

BUILD-A-BEAR 2016

New StoresRemodels

Update Store Systems

IT/Systems Upgrades“Play beyond the Plush”/IP

ImprovedRetailOperations

Infrastructure &Platforms for newrevenue streams

2016 I d d f C i l


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BUILD-A-BEAR 2016

2016: Intended use of Capital

Store counts do not include Carnival Cruise ships, Landry’s orinternational franchise locations

Share Repurchase Plan

• In fiscal 2015, the company spent $25.9M onshare repurchases• $9M remains under the current share

repurchase plan• The company intends to continue to

opportunistically assess additional sharerepurchase plans

BUILD-A-BEAR 2016

2016: Investments support Strategy


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BUILD-A-BEAR 2016

2016: Investments support Strategy

OverhaulGlobal Owned

& Operated

Retail +Enterprise

SellingOperations

ImplementWholesale and

Corporatesales Systems& Processes

Build ScalableInternational

FranchisingModel/Systems

Develop NewOutbound

Brand


Capabilities

Diversify the Business Model

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• POS Complianceand Enterpriseselling upgrades

• TXT Planningenhancements

• PLM upgrades• New stores/remodels

and tech upgrades• Traffic Counters

• “Play beyond thePlush” apps,music, video anddigital

development• (Licensingcurrently out-sourced)

< Capital Tracking System ----- Warehouse System upgrade ----- Talent >

• Global OrderingCapability

• Reporting andcompliance

processes &systems

• Wholesaleprocessingsystems

• UPC capability


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Thank you

Build-A-Bear

1954 Innerbelt Business Center Dr.

St. Louis, MO 63114

www.buildabear.com

Documents

BBW Jan 2016 Investor Presentation