Build-A-Bear Workshop Inc. (NYSE:BBW) Q2 2020 Earnings Conference Call - Final Transcript

Sep 01, 2020 • 09:00 am ET

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Build-A-Bear Workshop Inc. (NYSE:BBW) Q2 2020 Earnings Conference Call - Final Transcript

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Executive
Sharon Price John

our stated strategic objective. These initiatives are to accelerate the digital transformation of the Company to not only rapidly grow e-commerce, but to more effectively use technology and digital capabilities throughout our entire organization, inclusive of marketing and leveraging digital content to utilize the strategic positioning and high optionality of our real estate portfolio, to revise the terms of our leases and overall operations to reflect the huge shifts in brick and mortar shopping patterns and evolution of the consumer shopping behaviors; and to maintain a solid financial position with the liquidity needed to support our business, including assertive cash management and meaningful cost reductions. To that end, we made progress in each of these areas in our fiscal second quarter.

Let me highlight you on a select detail. In the digital area, consolidated e-commerce revenue increased by nearly 300% over the prior year's quarter. We saw strong consumer demand for key licensed products such as the furry friend based on "the child" from the LucasFilm series Star Wars, The Mandalorian on Disney+. Notably, even excluding sales of "the child" product, e-commerce showed a triple-digit increase.

Other key affinity products and gifting options were also popular online, reflective of the merchandise mix, we have seen, increased demand from our team and older consumer segments during this time. We expanded our omnichannel capabilities leveraging store locations to supplement e-commerce fulfillment through buy online, ship from store program and we completed the initial phase of our expanded engagement with Salesforce, which is designed to enhance our CRM capabilities and drive sales by creating meaningful consumer journey, managing multiple touch points with a 360 degree view with the goal of ultimately increasing our guests' lifetime value.

From a real estate and store perspective, even though our retail locations were closed approximately 60% of the quarter, we were able to modify our bear-building experience to meet COVID safety recommendations with the well-being of our associates and guests foremost in our approach, and initiate a staggered reopening plan as local restrictions were lifted. At this time, we now have reopened approximately 90% of our stores, many however with shortened hours of operations. Notably, much of the California market still remains closed due to governmental restrictions in place in that area.

While traffic levels have been below the prior year, we are seeing higher conversion and spend per transaction. As I've mentioned previously, recognized in the trend of declining mall traffic several years ago, we made the strategic decision and took action to infuse a high level of flexibility and optionality into the management of our store leases. We've been able to leverage that position and renegotiate contractual terms that include rent reduction, deferral and abatement for approximately 95% of our locations. Importantly, we have maintained much of our optionality with over 70% of locations continuing to have a lease event in the next three years. This allows us to remain responsive to future movement in consumer traffic patterns in brick and mortar stores.

As it