Slide 1: The Bear Facts
The Bear Facts Statements in this presentation expressing or indicating the beliefs and expectations of management regarding future performance are forward-looking statements including, without limitation, expected diluted earnings per share in the fiscal 2005 full year, as well as any other plans,
Slide 2: Agenda
Agenda o Build-A-Bear Workshop(R) Overview o Growth Strategies oTechnology o Logistics o Marketing o Questions Page 3
Slide 3: Build-A-Bear Workshop Beginnings
Build-A-Bear Workshop Beginnings Build-A-Bear Workshop was founded on a simple idea that's as real today as it was when Maxine Clark, Founder and Chief Executive Bear, first heard it over 30 years ago... "Retailing is entertainment and the store is a stage, and when the customer has fun they spend m
Slide 4: Company Overview
Company Overview o Build-A-Bear Workshop is a global leader in interactive retail that allows children "from 3 to 103" to build and customize their own stuffed animals. o First store opened in St. Louis, MO in 1997 o An immediate success that has grown to over $300 million in annual revenue o An int
Slide 5: A Unique Retail-Entertainment Experience
A Unique Retail-Entertainment Experience Conventional Retail o Merchandise driven - sell the brand, item, or price o Traditional display techniques o Appeals to a particular demographic o Sales driven through markdowns and promotion vs. o Build-A-Bear Workshop o Sells the brand experience o Highly i
Slide 6: Our Associates ARE the Experience
Our Associates ARE the Experience Approximately 80% of returning Guests plan their visit to our store in advance 90% of Guests rated their overall experience the highest or second highest rating Page 7
Slide 7: Guests are Connected to the Brand
Guests are Connected to the Brand o A GREAT EXPERIENCE creates loyal Guests o Guests have a unique emotional attachment to the brand and stay connected o Over 11 Million unique households in our proprietary database o Build-A-Bear Workshop receives over 7,500 letters and e-mails from customers every
Slide 8: Our Products are the Other Half of the Formula
Our Products are the Other Half of the Formula The Latest Trends and Partnerships with Powerful Brands Fashion LiveStrong Limited Too Skechers Entertainment Sesame Street Disney Bearemy's Kennel Pals Sports NFL NASCAR NBA NHL o Offer a well-coordinated fashion merchandise selection of less than 450
Slide 9: Destination Location With Broad Appeal
Destination Location With Broad Appeal o Primary target is families with children typically age 3 to 12 o Other Guest segments include: o Grandparents, aunts and uncles shopping for kids o Teen girls 13-17 who bring along boyfriends o Child-centric organizations o Leisure travelers o Special interes
Slide 10: For Kids "From 3 to 103"
For Kids "From 3 to 103" Customer Age at Time of Purchase(1) Adults 0-2 3-7 8-12 Teens o We have a broad customer base and universal appeal - attracting both adults and children o BBW appeals to Guests of all ages o Children, Tweens, Teens & Adults o BBW families live a suburban lifestyle revolving
Slide 11: Favorable Demographic And Socio-Economic Trends
Favorable Demographic And Socio-Economic Trends Large and Stable Target Market BBW offers shared interactive creative experiences Teddy Bear: Low Tech, High Touch Product with Nostalgic Appeal BBW is easily accessible - a "theme park" in the mall BBW lets a kid "just be a kid again" Kids can experim
Slide 12: Our Guests Come Back
Our Guests Come Back % of All Transactions Transactions with Stuffed Animals No Bear: Clothing & Accessories Only % of Transactions to Repeat Guests Animals Registered to Repeat Guests No Bear: Clothing & Accessories Only Repeat Guest Factor Over 60% of all transactions are with a Returning Guest Pa
Slide 13: Our Guests Come Back
( @® Our Guests Come Back % of All Transactions % of Transactions to ee caae Repeat Guest Factor with Stuffed ( ( ( ( ( animals ( ( ( ( ( Animals - Registered to Repeat Guests + ) ) ) ) ) Transactions ) ) ) ) ) ) ) J
Slide 14: Numerous Growth Opportunities
Numerous Growth Opportunities Powerful Store Financial Model New Stores New Initiatives Comp Stores/ Expense Leverage Long-Term Growth Strategy Page 15
Slide 15: A Highly Productive Store Model
New Store Growth New Initiatives Comp Store/ Expense Leverage A Highly Productive Store Model Build-A-Bear Workshop: $602 Net sales per fross SF in 2004 Mean = $366 $800 $600 $400 $200 $0 CHS BBW HOTT ARO GYMB URBN ANN GPS AEOS LTD PSUN TLB ANF TOO PLCE Source of other retailers data: Citigroup Page
Slide 16: Superior Store Economic Model Supports Growth
New Store Growth New Initiatives Comp Store/ Expense Leverage Superior Store Economic Model Supports New Store and Comp Store Growth o Substantially all stores are profitable in the first 12 months of operation o In 2004, average store revenues for stores opened for the entire year were $1.9 million
Slide 17: New Store Growth
New Store Growth New Initiatives Comp Store/ Expense Leverage New Store Growth Powerful Store Financial Model New Stores New Comp Stores/ Initiatives Expense Leverage Open 25-30 New Build-A-Bear Workshop Stores Per Year Page 18
Slide 18: New Store Growth: Number of Stores
New Store Growth New Initiatives Comp Store/ Expense Leverage New Store Growth Number of Stores - U.S. and Canada 2000 39 2001 71 2002 108 2003 150 2004 170 2005E 200 o Plan to open 30 stores in 2005; about half in new markets, and half in existing markets o NYC flagship store Grand Opening July 8th
Slide 19: If I Can Make it There...
New Store Growth New Initiatives Comp Store/ Expense Leverage If I Can Make it There... Our flagship store in Manhattan is now open and will expand our geographic reach even more. Build-A-Bear Workshop(R) Where Best Friends Are Made NY(R) Page 20
Slide 20: New Interactive Experiences in NYC Flagship Store
New Store Growth New Initiatives Comp Store/ Expense Leverage New Interactive Experienes in NYC Flagship Store Eat with Your Bear Hands Cafe Make A Fureign Friend! International Wear Below Go Goo-Goo Fur Baby Bear Stuff(R)! Lots of Fun Fur Furry Little Ones! Root Fur Your Home Team! Team Babw Be Fan
Slide 21: Developing New Initiatives
New Store Growth New Initiatives Comp Store/ Expense Leverage Developing New Initiatives Powerful Store Financial Model New Stores New Comp Stores/ Initiatives Expense Leverage Licensed Products, International Expansion, Non-Mall Locations, New Experiential Retail Concepts Page 22
Slide 22: Grow International Franchises
New Store Growth New Initiatives Comp Store/ Expense Leverage Grow International Franchises o Currently have 12 master franchise agreements o 12 stores at year end 2004 o Plan to open 20-25 stores in 2005 o Potential of approx. 350 stores o Strict control of franchisee format and operations o Goal i
Slide 23: Licensed Product Growth
New Store Growth New Initiatives Comp Store/ Expense Leverage Licensed Product Growth o Licensed products will: o Expand brand awareness o Increase customer reach o Agreements with leading manufacturers to use our brand to develop products for retailers including: o Scrapbooking products from Creati
Slide 24: Develop New Experiential Retail Concepts
New Store Growth New Initiatives Comp Store/ Expense Leverage Develop New Experiential Retail Concepts o Leverage core competencies in entertainment and family-oriented retailing 2004 Chain Store Age design competition: Retail Store of the Year: Exterior (Mall) The Mall at Robinson, Pittsburgh, PA P
Slide 25: Grow Comp Store Sales/Expense Leverage
New Store Growth New Initiatives Comp Store/ Expense Leverage Grow Comp Store Sales/Expense Leverage Powerful Store Financial Model New Stores New Comp Stores/ Initiatives Expense Leverage Grow comp store sales; Levarge Corporate and Operating Expenses Over Larger Store Base (1)Stores are considered
Slide 26: Comparable Store Growth
New Store Growth New Initiatives Comp Store/ Expense Leverage Comparable Store Growth Sales Per Square Foot ($) BBW SSF and Opening Year SSF 2004 = $602 $800 $600 $400 $200 $0 1 2 3 4 5 6 7 8 9 Year Since Store Opening o BBW store opening productivity levels exceed the mature rates of most specialty
Slide 27: Flat Comp Store Growth Achieves Growth Targets for 2005
New Store Growth New Initiatives Comp Store/ Expense Leverage Flat Comp Store Growth Achieves Growth Targets for 2005 Revenue Growth 15%-20% o North American store growth o New Initiatives o Comp Store Growth Net Income Growth 26%-32% o Operating Expense Leverage o Powerful Store Economic Model Page
Slide 28: Fiscal 2005 Outlook
Fiscal 2005 Outlook o Continued strong new store performance o Typically perform at or above chain wide average for sales per square foot o 16 new stores so far this year, including NYC flagship store vs. 8 last year o 14 additional new stores to open in 2005 o Continued growth in International fran
Slide 29: Impressive Financial Performance
Impressive Financial Performance Net Retail Sales ($ in millions) 41% CAGR 2001 2002 2003 2004 2001 $106.6 2002 $169.1 2003 $213.4 2004 $300.5 Net Income ($ in millions) 137% CAGR $1.5 $5.4 $7.6 $20.0 2001 $1.5 2002 $5.4 2003 $7.6 2004 $20.0 Build-A-Bear Workshop(R) Where Best Friends Are Made Page
Slide 30: First Half 2005 Results
First Half 2005 Results First Half First Half $ Change Fiscal 05 Fiscal 04 Total Revenue $159.8 $135.7 $24.1 Comp Store Sales -0.6% +13.8% Gross Margin(1) $77.4 $65.4 $12.0 % 48.7% 48.3% Net Income $11.5 $10.2 $1.3 Earnings Per Share (Diluted) $0.57 $0.57 Number of Stores 186 157 (1) Gross margin re
Slide 31: Well Capitalized for Growth
Well Capitalized for Growth o $48 million in cash o No debt ($ in millions) ACTUAL 7/2/05 Cash $48.0 Debt 0.0 Stockholder's Equity $111.4 Total Capitalization $111.4 Build-A-Bear Workshop(R) Where Best Friends Are Made Page 32
Slide 32: Strong Operating Cash Flow
Strong Operating Cash Flow o Strong cash flow from operations o Impressive cash flow, despite growth in new stores ($ in millions) Fiscal Year Ended 2004 2003 2002 Net Income $20.0 $7.6 $5.4 Depreciation and Amortization 14.9 12.8 9.0 Changes in Assets/Liabilities 12.5 9.4 8.2 Other 1.1 1.9 1.4 Cash
Slide 33: In-Bear-Mation Technology
In-Bear-Mation Technology Page 34
Slide 34: Infrastructure is in Place to Support Growth
Infrastructure is in Place to Support Growth Established Centralized Infrastructure Site Selection Model Real Estate and Construction Partnerships Store Support Systems Back Office Systems Operational Systems Employee Training and Development Guest Database Page 35
Slide 35: Technology Supports Growth and Strategic Decisions
Technology Supports Growth and Strategic Decisions, and it all starts with the Bear... or Bunny... or Frog Page 36
Slide 36: Technology is Behind Everything We Do
Technology is Behind Everything We Do POS Name Me Database Data Warehouse Labor Planner Back Office Systems Consumer Research CRM E Commerce Guest Service Product Assortment Guest Communication Consumer Behavior/ Demographics Inventory Planning Real Estate Planning Page 37
Slide 37: High Touch and High Tech
High Touch and High Tech Page 38
Slide 38: Understanding Our Guests
Understanding Our Guests Name Me Kiosk/Guest Database Map Info GIS First Logic Informatica Business Objects Security/ Disaster Recovery Perseus Consumer Surveys Improved Marketing, Real Estate, and Strategy Decisions Page 39
Slide 39: Improving Guest Experience
Improving Guest Experience Operational Support Integrated POS Labor Planner NSB Sales Audit & Merchandising Value Link Gift Card Program Party Scheduling Improved Operations and Guest Experience Page 40
Slide 40: Improving Operations & Efficiencies
Improving Operations & Efficiencies E Commerce Communications Infrastructure Disaster Recovery Bearnet/World Bearnet Lyris Bulk Email Campaign Predictable and Reliable Business Model Page 41
Slide 41: Key Technology Initiatives
Key Technology Initiatives Enhance Technology Infrastructure Lawson Human Resource System NSB Merchandise Planning Lawson Financial System Business Growth and Development Page 42
Slide 42: Bear Logistics
Bear Logistics Page 43
Slide 43: Merchandise Planning & Allocation
Merchandise Planning & Allocation Merchandise Strategy Small # of SKUs Buy to "Sell Out" Essentially No Markdowns Essentially No Returns Continuous Adjustment to Market Trends Strong Profit Model Page 44
Slide 44: Strategically Located Distribution Centers
Strategically Located Distribution Centers Currently operated by third party providers
Slide 45: Efficient Transportation Network
Efficient Transportation Network Distribution Center Pool Point North East Pool Point Midwest Pool Point South o Majority of stores are delivered weekly via regional third party pool points o Gaining efficiencies via every two week deliveries to select stores, full-truck loads and California DC Page
Slide 46: Continuous Improvement: Network Study
Continuous Improvement: Network Study o Potential opportunity to bring overall Logistics process in-house o Potential for enhanced: o Inventory Control and Management o Systems Integration o Leveraging entire supply chain to improve efficiencies and reduce operating costs Page 47
Slide 47: Continuous Improvement: Network Study
LEC SS ees ( © Continuous Improvement: Network Study ( (( & Potential opportunity to bring overall Logistics process in-house (__ @ Potential for enhanced + Inventory Control and Management + Systems Integration + Leveraging entire supply chain to improve efficiencies and reduce ) ) ) ) ) ) operatin
Slide 48: 2003: Was it a Fad?
2003: Was it a Fad? o Growing total sales but experiencing comp store declines Increasing market penetration and building critical mass o Business overview showed positive findings: - High Guest Satisfaction - Transactions (Traffic) drive sales - Strong, highly productive store model - Financial sta
Slide 49: A Strong Business Model with Significant Growth Potential
A Strong Business Model with Significant Growth Potential o Opportunity to grow brand awareness Guests who knew us...loved us. But not enough people knew about BABW Shifted Marketing Strategy to 75% Acquisition Model Tested television advertising in 2003 after reaching critical store mass o National
Slide 50: Marketing Builds the Brand and Drives Sales
Marketing Builds the Brand and Drives Sales National TV Advertising Direct Mail and E-mail www.buildabear.com Public Relations Macy's T'giving Day Parade Tourist Locations Parties & Store Events Mobile Marketing Partners Build-A-Bear Workshop(R) Where Best Friends Are Made(R) Page 51
Slide 51: Television Advertising Cornerstone of Integrated Plan
Television Advertising Cornerstone of Inegrated Plan o Highly sensory "product" - Media must communicate sight, sound, motion, FUN! o Television ads communicate: - Relationship: Mom/child, Friends - In-store experience - Music as a back drop o Acquisition tactics effective for retention as well - Dr
Slide 52: To view our latest TV commercials
To view our latest TV commercials, please visit www.buildabear.com Page 53
Slide 53: Marketing Strategy
Marketing Marketing Strategy Direct Mail & E mail TV Advertising Web Partners Store Events PR Mobile Tourism Improved Sales, Brand Awareness, and Profits Page 54
Slide 54: Highly Profitable Retail-Entertainment Brand
Highly Profitable Retail-Entertainment Brand Build-A-Bear Workshop(R) Where Best Friends Are Made(R) Creative Merchandise Interactive Experience Loyal Customers Great Execution Powerful Marketing Strategic Partnerships Broad Demographic Appeal Great Execution Page 55
Slide 55: www.buildabear.com
www.buildabear.com Build-A-Bear Workshop(R) Where Best Friends Are Made(R)
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