Build-A-Bear Workshop Inc (BBW) Reports Modest Revenue and Earnings Growth in Q3 Fiscal 2023
Build-A-Bear Workshop Inc (NYSE:BBW) sees a 2.9% increase in total revenues for the third quarter of fiscal 2023.
Diluted EPS rose by 3.9% year-over-year, with pre-tax income up by 4.7%.
Company revises full-year guidance, anticipating slower revenue growth and pre-tax income growth due to macroeconomic headwinds.
On November 30, 2023, Build-A-Bear Workshop Inc (NYSE:BBW) released its 8-K filing, detailing its financial performance for the third quarter and the first nine months of fiscal 2023. The company reported a slight increase in total revenues and diluted earnings per share (EPS) for the quarter, while also revising its full-year guidance due to recent business softness and macroeconomic pressures.
Financial Highlights
For the 13 weeks ended October 28, 2023, BBW's total revenues reached $107.6 million, marking a 2.9% increase compared to the same period last year. Net retail sales saw a modest rise of 1.2%, while consolidated e-commerce demand grew by 7.1%. Notably, commercial and international franchise revenues surged by 36.2%, contributing to the overall revenue growth.
Pre-tax income for the quarter grew by 4.7% to $10.3 million, representing 9.6% of total revenues. This improvement was primarily driven by a 70-basis point increase in gross margin, largely due to lower freight expenses and expansion in the Commercial and Franchise segments. However, this was partially offset by higher Selling, General and Administrative (SG&A) expenses, which were influenced by inflationary pressures on store-level wages and investments in talent and marketing.
Diluted EPS for the quarter was $0.53, a 3.9% increase from the previous year, influenced by pre-tax margin expansion and a reduction in share count, despite an uptick in the tax rate. EBITDA also grew by 3.0% to $13.3 million, or 12.4% of total revenues.
Year-to-Date Performance and Shareholder Returns
Looking at the nine-month period, BBW's total revenues increased by 4.3% to $336.8 million, with pre-tax income rising by 12.5% to $40.2 million. Diluted EPS saw a significant jump of 18.0% year-over-year, reaching $2.10. The company has been proactive in returning value to shareholders, with $37 million returned through dividends and share repurchases over the nine months.
Store Expansion and Balance Sheet Strength
During the quarter, BBW expanded its global footprint, adding 14 new locations, bringing the total to 511 stores. The balance sheet remains strong, with $24.8 million in cash and cash equivalents and no borrowings under the revolving credit facility. Inventory levels decreased by 27.0% from the previous year, with the company expressing comfort in the level and composition of its inventory.
Revised 2023 Outlook
In light of recent business softness and macroeconomic challenges, BBW has revised its fiscal 2023 guidance. The company now expects total revenue growth of 3% to 5% and pre-tax income growth of 5% to 10%, down from the previously forecasted ranges of 5% to 7% and 10% to 15%, respectively. Despite these adjustments, BBW remains confident in its ability to deliver record revenue and profitability for the third consecutive year.
Management Commentary
Sharon Price John, President and CEO, acknowledged the unexpected softness in the business but remained optimistic about the brand's evolution and the upcoming holiday sales period.
The first nine months of strong performance brings us one step closer to our third consecutive year of record results,"
she commented. CFO Voin Todorovic also expressed confidence in the company's positioning and its ability to navigate the current economic landscape.
For a detailed analysis of BBW's financials and management's outlook, investors and interested parties can access the webcast and conference call hosted by the company on their Investor Relations website.
Build-A-Bear Workshop Inc (NYSE:BBW) continues to adapt to the dynamic retail environment, leveraging its brand appeal and strategic initiatives to maintain growth trajectories, even as it faces macroeconomic headwinds. The company's revised outlook reflects a cautious but still positive view of its future performance.
Explore the complete 8-K earnings release (here) from Build-A-Bear Workshop Inc for further details.
This article first appeared on GuruFocus.
