Build-A-Bear Workshop v1.3: Earnings Delivered!
$BBW did exactly that.
Q2 Earnings Highlights
I know it’s a day late to the BBW ER bonanza party but it went as well as it could have. If you haven’t read the Q2 press release, here is the link. Some key highlights as enumerated:
Total revenues, pre-tax income, and diluted earnings per share (“EPS”) were all second quarter records and increased 8.5%, 37.1%, and 50.0% respectively
First half total revenues, pre-tax income, and diluted EPS were records and increased 5.0%, 15.5%, and 23.6%, respectively
The Company reiterates fiscal 2023 guidance for 5% to 7% revenue growth and 10% to 15% pre-tax income growth
Through the fiscal first half of 2023, the Company returned $33.3 million to shareholders through dividends and share repurchases
They're executing their strategies meticulously, focusing on strong traffic growth and building around the Build-A-Bear brand with established IPs. For this quarter, EPS was $0.51 vs. the estimated $0.41; revenue beat of $109.23M vs. the estimated $101.89M. It wasn't difficult to gauge that it would easily beat the Wall Street estimates, as BBW isn't widely covered by sell-side analysts. I've alluded to this in my previous post.
Top and bottom line beats are great but what is even more pivotal to its underlying fundamental growth story is its 2023 fiscal guidance:
Total revenues to increase in the range of 5% to 7%, with growth in its three operating segments
Pre-tax income growth of 10% to 15%, surpassing 2022’s record high
To open 20 to 30 experience locations, through a combination of partner-operated and corporately-managed business models
Capital expenditures in the range of $15 million to $20 million
Depreciation and amortization of approximately $13 million to $14 million
Tax rate to approximate 25%, excluding discrete items
Teddy Bear Cash Warchest
Another highlight is that BBW had cash and cash equivalents of $32.6M, compared to $14.4M as of July 30, 2022, and it finished the quarter with no borrowings under its revolving credit facility. Again, this is an important metric for a GARP investor like myself. I can't fathom owning a retail name in this high-interest macro environment burdened by debt.
Jackson Hole Downer
Upon immediate release of the results during pre-market, it spiked cool 20% from $25.50 to $30.50 but the selling pressure was inevitable with Jackson Hole fear percolating the market. The indices suffered but it still closed with 6.52% on the daily.
No Position as of 8/25/23
As for myself, I no longer have the OTM LEAPS position and took profits on the opening IV surge and the volatility was too extreme to hold onto the position. If I had to re-enter, I might have to get closer in the money for a tighter spread and higher delta.
I believe $25 will be retested before creating a solid base around $26. I will re-enter then and will update here.