While comparable store sales growth was expected to be in the range of 2% to 3%, the company is now expecting comparable store sales in the second quarter to decline in the mid-single digit range. The company now expects fiscal 2005 (52 weeks ended December 31, 2005) net income in the range of $25.1 million to $26.3 million, representing net income growth of 26% to 32% compared to fiscal 2004. Diluted shares are expected to be in the range of $1.24 to $1.30, and comparable store sales growth is now expected to be flat. Previous guidance provided on January 27 was $26.1 to $27.3 million, which has been updated to net income of $27.3 million to $28.5 million.
After the company released the news that sluggish sales would affect its second-quarter and full fiscal year earnings, shares of Build-a-Bear plummeted 23%.
Chairman and Chief Executive Maxine Clark blamed the below-expected sales in the second quarter on the early Easter holiday and change in school spring break dates. The company also underestimated the impact of appearing on Oprah in late February last year, which resulted in first quarter results coming in ahead of original plans and lagging second quarter results.
"We are confident that our continued commitment to marketing and brand building programs and our expense control initiatives will enable us to show significant net income growth while managing through this short-term sales challenge," Clark said in a prepared statement.
The company hopes to deliver a net income growth of 26% to 32% with its plans to rollout 30 new Build-A-Bear Workshop stores in the United States and Canada, including the flagship store in New York City, and three new friends 2B made stores in fiscal 2005. Twelve of the 15 new Workshop stores planned to open in the first half of the year have opened, along with two new baseball stadium stores.
International franchisees expect to open 20 to 25 new stores this year and the company expects full-year franchisee revenues to reach approximately $2 million. Licensing revenues are anticipated to be approximately $1 million in 2005.
At the end of 2004, the company operated 170 stores in 40 states and Canada. In November 2004, the company opened two friends 2B made stores, its newest concept based on the doll-making experience.
Refusing to comment on the recent speculation of his departure, President and Chief Operating Officer Barry Erdos said, "I want to make it perfectly clear that I am not leaving my position at Build-A-Bear Workshop."
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