Good day, ladies and gentlemen and welcome to the fourth quarter 2007 Build-A-Bear Workshop earnings conference call. My name is Michelle and I’ll be your audio coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today’s conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Ms. Molly Salky, Director of Investor Relations. Please proceed, ma’am.

Good morning, everyone, and thank you for joining us for a review of our results for the 2007 fiscal fourth quarter and full year. With me this morning are Maxine Clark, Chairman and Chief Executive Bear, Scott Seay, President and Chief Operating Bear, and Tina Klocke, Chief Financial Bear. In a moment I’ll turn the call over to Maxine to provide her comments on our financial results and 2008 business plan. Scott will update you on our store operations, distribution center, and logistics initiatives along with international franchising. Tina will follow with additional details on our financial results. At the end of our remarks we’ll open the call up for your questions. Members of the media who may be on our call today should contact us after this call with their questions. We ask that you limit your questions to one question and one follow up. This way we’ll get to everyone’s questions during this one hour call. Do feel free to re-queue if you have further questions. Please know that our call is being recorded and broadcast live via the internet. The earnings release is available on our Investor Relations website and a replay of both our call and webcast will be available later today at the IR website. I need to remind everyone that forward-looking statements are inherently subject to risks and uncertainties. Our actual results could differ materially from those currently anticipated due to a number of factors, including those set forth in the risk factor section of our 2006 annual report on form10-K filed with the SEC and we undertake no obligation to update or revise any forward-looking statements. In our earnings announcement this morning we announced that in June 2007 the company retained Lehman Brothers to assist it and the Board of Directors in an analysis in consideration of a broad range of strategic alternatives to enhance long term shareholder value. This review of potential strategic alternatives is continuing. While we hoped to have concluded this process by now, its timing has been complicated by a significant tightening of the financing markets and the general weakness in the retail environment. We currently expect that the Board will conclude its review by the end of the first quarter. There is no assurance that the conclusion of this process will result in any changes to the company’s current business plans or lead to any specific action or transaction. As before, the company does not expect to disclose further developments regarding its review of potential strategic alternatives until the review has been completed. Additionally, our policy is not to provide forward-looking guidance until the Board’s review of potential strategic alternatives is complete. We will not discuss the strategic alternatives process or earnings guidance further on the call today. Now I’d like to turn the call over to Maxine Clark for her comments.

Thanks Molly and good morning, everyone. Happy Valentine’s Day and thank you for joining us to review our fiscal 2007 fourth quarter and full year results. The 2007 results for Build-A-Bear Workshop and for many retailers illustrates the very difficult retail environment we face. The impacts of slowing economic growth, declining mall traffic, and slower consumer spending are evident industry wide. These impacts could be even more dramatic for Build-A-Bear Workshop given the discretionary nature of our products and our experience. Our disappointing comp store sales performance and full year revenue growth of 9% reflect this retain environment. Full year GAAP results also include the impact of $2.4 million in inventory write off and $1 million in costs associated with the strategic alternatives review. Importantly, the inventory write off positions us with a very clean and balanced inventory position as we enter 2008. Our plan for 2008 combines new initiatives with our fundamental brand strength to address our biggest opportunity, attracting new guests to our stores. As we think about our business and priorities for the future, we consider how to maximize our core assets, our exceptional real estate, network of highly productive stores, our large and loyal customer base that includes our Stuff For Stuff members, and our extensive international franchise business. We are optimistic about our plan which addresses opportunities for growth in each of these areas and we see 2008 as an important rebuilding year. Our 2008 plan includes a slow down in new store openings. This will help us refocus our business and align all operations around our goals of new guest acquisition and guest retention aimed at improving our comp stores sales performance. While we’ve never believed our concept to be a high comp store model, we know comp store sales are an important metric…

Thanks, Maxine, and good morning, everyone. Let me start with a store update. During the fourth quarter, we opened 8 new Build-A-Bear Workshop stores in North America, 3 new stores in the United Kingdom, and 1 additional store, our third, in France. As Maxine discussed, our plan in 2008 is to slow our store opening pace. Opening fewer stores this year will allow our store operations team to focus on comp store performance and spend more time in the field visiting our existing stores. This plan also maximizes sales cannibalization. Most of these new stores are smaller format stores. From our UK experience we learned that we could successfully operate stores in a smaller footprint without sacrificing the brand experience. We re-engineered our store design and developed a format that works in about 2,200 square feet compared to about 2,800 square feet in the past. A couple of important points: first, these stores incorporate all elements of the Build-A-Bear Workshop concept, so we are not limiting our product our experience in any way. Second, the store economics are in line with our regular mall stores so we’ve lowered the capital required while still maintaining a large tenant allowance. Third, we can operate the store, keeping payroll costs in line with our corporate goals. The result is a very strong model that continues to be the backbone of our business. One additional comment with regard to our 2008 store growth plan. With this lower store growth, we also see an opportunity to integrate our international franchise team with our domestic team to better provide overall consistent training and support for our franchisees. Last year we strengthened our international focus by aligning our US based functional departments with the respective contacts within our international franchise organizations. This more fluid organization allows us…

Thanks, Scott. I’ll add some additional details regarding our fourth quarter and full year performance. Our fourth quarter total revenue increase of $4.1 million was fueled by new North American stores opened in the last 12 months, an increase in European sales of $7.7 million, and higher combined revenues from franchise fees and licensing. These increases were partially offset by a decline in North American comp store sales. Also, our 2006 fourth quarter revenues included a loyalty program adjustment, benefiting sales by $5.2 million. Consolidated net income in the quarter of $9.9 million included operating income from European operations of $5.1 million compared to $3.3 million in the year ago quarter. Our GAAP gross margin rate in the fourth quarter was 46.2%. Within this gross margin rate was continued strong and improved merchandise margin driven by the stronger margin we received on our European sales. Cost of goods sold in the fourth quarter includes the $2.4 million pretax, $1.6 million net of tax inventory write off. This write off of inventory included excess Shriek inventory. You’ll recall that the 2006 fourth quarter gross margin benefited from two adjustments. The first was an adjustment to our loyalty program deferred revenue totaling $5.2 million. The second was an inventory cost adjustment that reduced cost of goods sold in the UK by $1.2 million. Adjusting for these special items, the decline in gross margin was primarily attributable to the lack of leverage on our fixed occupancy costs in the North American operations. During the fourth quarter the SG&A expense margin increased to 36.8% compared to 35.2% last year. The margin reflects higher costs associated with a review of strategic alternatives totaling $400,000 pretax or $300,00 net of tax, an increase of store payroll as a percent of revenue, and higher stock based comp…

Thank you, Tina, and before we open the call up for your questions, I’ll just repeat that our review of strategic alternatives is continuing ad we currently expect that the Board will conclude it’s review by the end of the first quarter. During the review we are not providing forward-looking guidance and we do not intend to discuss these matters further on the conference call today. So please focus your questions on our financial results and business initiatives that we have reviewed on the call today. Now I will open up the call for your questions. Operator, we are ready to take your questions.

Thank you. (Operator Instructions) Our first question comes from the line of Tom Filandro of SIG. Please Proceed.

Thanks. My question actually is related to the strategic review. It’s not specific, but I have to understand this. You noted that you wanted to conclude the review by year end and then you highlighted that the credit market tightening and the environment were the two reasons why you were unable to do that. So sort of a two part question. I see the first part is given the credit market tightening remains a factor in here and you clearly identified that the market is challenging, why would we now conclude that by first quarter you’d be able to complete this strategic review and then second part o this question, it sounds like the credit markets are tightening, it seems to me that you guys are suggesting there was some sort of a deal on the table, either private equity or strategic. The final piece here is why are you not buying back stock? The stock is down 15% today. What are you guys doing with your cash? Thank you.

Hey Tom, it’s Molly, and thanks for that question but we’re really not able to respond to any questions related to the strategic alternatives review. Can we have the next question please, Operator?

Our next question comes from the line of Paul Lejuez of Credit Suisse. Please proceed.

Hey guys. Can you provide the comp breakdown before traffic and ticket? I’m not sure if you did that.

Paul, it’s Tina. It’s all transaction based.

Okay and can you talk about the $25 million to $30 million of CapEx? How does that break down, new stores versus maintenance versus whatever IT projects or anything else you have going on?

The majority of it is going to be in the new stores and then there will be some investment in some IT and then just some general capital.

Our next question comes from the line of Michael Corelli of Barry Vogel &Associates. Please proceed. Michael Corelli – Barry Vogel & Associates : Hi, good morning. I got two questions for you. One about the store growth. Considering the economic environment and the fact that you’ve had pretty materially negative comp store sales here, obviously we would like the company to focus on getting the maximum return and maximum improvement out of their existing stores, although I’m encouraged to see you pulling back on the store growth, why not pull back even further?

Well, we look at every store location appropriately and some of these have been in the plans for quite some time and are important to our location and to our customer strategy and the majority of them, I believe it’s like 75%, are in markets where we don’t even have a Build-A-Bear Workshop store, and we have been working towards building a store there. So I think this is a minimal amount of stores for us. The last time we opened up around the same number was in 2004 and that was really a major watershed year for us that allowed us to balance the store growth with also a whole change in our marketing strategy and we think similarly this is very manageable for us and opportunity for us to expand our reach in important markets for our guests and not cannibalizing existing stores. Michael Corelli – Barry Vogel & Associates : Okay, and then I just had a question about the inventory. Obviously it was a pretty dramatic reduction which was good to see in this environment. Did you do it because of the economic environment, did you end up selling out of certain products, or what was the reason for such a substantial decline there in the inventory?

This is Scott. We’ve really been watching it throughout the year and we’ve taken a look at our core product by store and made adjustments each month based on what we saw in the forecast of our sales and in the current trends so we’ve pretty much been doing it all year in a very systematic method and we feel like this is the right place for us to be given the current economic situation and where our store sales are.

Our next question comes from the line of Evan Wilson of Pacific Crest. Please proceed.

Good morning, thanks for taking the question. I was wondering if you’re prepared at this time to provide any other metrics on BuildABearVille.com other than the 1 million registrants that you disclosed a couple weeks ago. Particularly I would be interested in the number of repeat users, the stickiness of the site, average concurrent users, or anything else you can provide. Thanks.

We haven’t really... we just look at those internally but we will eventually be putting those together as we can start to see comparability between months because it’s all on such a zero base but we are really encouraged, there’s a lot of repeat visits, there’s people with multiple animals and very high point scores and condos decorated as you could see if you went on there and we’re very, very positive about it. The goal, as I said, the really important part, it looks great, it is great, kids are having a lot of fun. Now how do we use it to drive sales and traffic back and forth to our real world stores? That’s our main focus.

Let me jump in with a follow up then. You said in your prepared remarks that the site is aimed at driving both in store and in game revenue. Right now it appears to be mostly in store. Do you think that in game revenue is something that is a possibility in calendar 2008?

I don’t think I mentioned that we were meaning revenue on the website. Children really can’t buy online. In BuildABearVille.com we expect that people will be excited about products and want to buy them and then their parents will go to BuildABear.com to buy new animals and things as they always have, that’s an important part of our business, but there probably are some revenue opportunities in co-branding and co-marketing, some things that we are working on that you might see down the road in late 2008 but probably more likely in 2009 as the technology allows us to do that. We have a lot of developmental things that are about Build-A-Bear Workshop that we want to make sure are there and functioning and there’s constantly every week new things coming out, so we don’t think that they’re actually going to buy online in BuildABearVille.com but they will go to BuildABear.com and make purchases as well as go back to the store because everything’s about the animal and there are other things that you’ll be getting in our store like, this past Valentine’s Day we had Valentine’s cards and included in the Valentine’s card for everyone that you would give a Valentine to is an online gift so when you go online and you have a registered avatar online, you can in fact pick up the gift and have one for you and have one for all your Valentines, and you’ll see that happening also as we expand in our licensed products, products sold with the Build-A-Bear Workshop name on them like our Nintendo DS game and other products. They’ll also feature an attribute that could take you back to BuildABearVille.com and then hopefully drive you to sales to buy things in our stores and online.

Our next question comes from the line of Brad Leonard of DML Capital Management. Please proceed.

Hi, thanks for taking my call. I’ve got a question and follow up. How much do you think it hurt you guys in Q4 to run out of the Rudolph and Clarisse so early?

Well we had it into the early part of the second week of December and we bought more than double what we bought of Mumble the prior year. It was well over double. So I don’t know that we could have been much more aggressive in light of the economic situation. I think what the good news for us was what really happened was that people were early on, I think we bought enough quantity, but what we didn’t anticipate was that people were going to be buying both of them, so our average transaction in the early weeks of November when it launched and into December were double their normal levels because people were buying Rudolph and Clarisse and actually, because we have this data on our customers, we looked at our existing customers from 2004 when we had Rudolph before and we figured a certain amount of them that were still our customers, a lot of them, but that they wouldn’t buy it again, but surprisingly, they also bought it again and that was a good thing but also it didn’t help us in our projections towards unit transactions so I think that where the opportunity was in this case was that we can sell two animals to a customer in the right time frame that go together as a key holiday story and we’re working on some of that as we go into 2008 holiday. That was really the miss there. We sold very well our polar bear and our winter bear and all of those things were online and then we launched our Valentine’s Hearts For You Puppy 12.26 as we always do and it was a huge success so I think that it hurts you because it’s what people wanted and it was really cute and successful and if we had it we would have sold more things but I don’t know that anybody would have suggested that we buy more than 50% more than what we sold of Mumble and it was significantly more of course than what we sold of Rudolph the first time that we had it out a few years ago.

Okay and then my other question, you know, we didn’t really talk about this, and I didn’t hear anything about the sales per square foot. It looks like the stores that are younger than 3 years had the biggest percentage decline in sales per square foot. Is there something I’m missing in there or is that just that new stores are opening up weaker or does it have to do with them being smaller or?

It actually has for the fact that there’s two really large stores in there and those are the New York City store and the [Santa Mall Hall] store which are both significantly larger. New York is about 20,000 square feet and [Santa Mall Hall] is almost 7.000 square feet. So those are in there and not necessarily performing at the Build-A-Bear $600 a foot that you we’ve done in the past but some of the smaller stores... there’s a real good cross section in there because we have stores at $1000 a foot and more too but it did weigh us down.

Our next question comes from the line of Brian Tunick of J.P. Morgan. Please proceed.

Hi, it’s [Evron Copeland] for Brian. A couple of questions. First, can you give us your thoughts on your competitive positioning online given the success of some of the already established players like Webkinz?

Well, we think that obviously we have a... They’ve been very successful at this project of creating a brand that sells online, sells in stores, and then has kids take it online. There’s no doubt about it, and along with Club Penguin, which also has been successful but doesn’t really sell any products yet. So I think that they opened the door for lots of us to have a new platform and I think that our 60 million animals that have been sold to customers, not that we’ll be able to awaken all of those customers, because many of them now are much older and starting to have kids of their own after 10 years of being in business, but that there is a strong hold there with those customers. They like their Build A Bear stuffed animals. They still have them, but the play pattern with the Webkinz or the play pattern online at Club Penguin is different and we think we’ve combined the best of those. For our first month out, a very, very significant growth rate, more significant, took them much longer to get there to 1 million than it took us, so I think we’ll really be seeing that ramping up as we do every day and especially as we drive more marketing around it, you’ll start to see every single piece of marketing that Build-A-Bear Workshop has adding the BuildABearVille.com marquee as well and kids getting more and more and more familiar with it and also the idea of the Stuff For Stuff so I think we have opportunities because we control our four walls in the real world to really drive this differently than competition. We’ve also done a lot of survey work on this and we know what kids think about BuildABearVille.com vis a vi the others and we are doing quite well in all of those metrics.

Great, and then a follow up to that is you said you’re going to make some changes to your marketing plans. Can you give us any details I guess can especially on what kinds of things maybe to drive traffic to the stores and the relationship between BuildABearVille.com and your stores?

A few things, as they’re unfolding. Last year we realized that we spent significant dollars in marketing and we’d like to remind everybody that that is our version of markdowns, that we don’t offer markdowns to our customers, so if you could put a big sign in the window that says “25 off” or “buy one get one free” although those are techniques that we could employ in the future, and so our marketing has to really build our brand. We conducted quite a bit of ongoing research, especially to the end of the year, and found that our customers really do, the people that know Build-A-Bear Workshop love it, and there’s still lots of people who haven’t yet to come, so we have to make sure that we’re rally driving the brand, so we’re going to continue to refresh our commercials. You’ll see a new series of commercials coming out in the second quarter that reflect a much more modern approach, kind of the way kids are. They are changing rapidly but the way they’re thinking today and the way they’re playing today and instead of having product 15 seconds in the first half of they year like we had last year, there will be less of those and we’ll be focusing on part of those will be dedicated to BuildABearVille.com but also to some events that we have that drive traffic so next weekend we have our Leap Day weekend which comes once every 4 years. The last time we had it, it was a huge success, and we will be having a special gift with purchase, and it’ll be the first time we’ve ever promoted a gift with purchase on television, so we’re excited about that. It’ll start on Monday of next week and sort of build…

Our next question is a follow up from the line of Paul Lejuez. Please proceed.

Thanks. Tina, I just wanted to go through what it costs to build a store, just going back to that CapEx question. I was under the impression that it cost under half a million from a CapEx perspective to open a store.

It costs between $450,000 and $500,000 net of tenant allowance.

So more than half the CapEx sounds like it’s going to things other than new stores.

As we had said on the call, we’re going to have some investment in the virtual world. We’re also going to invest in some additional IT systems such as our time and attendance system with work that will go in mid year this year, and some other just initiatives that from a maintenance perspective on our IT such as new planning abilities in our merchandising systems.

And then just one clarification on the inventory write down. What happened to those units? Did you sell those units or did you get rid of them or are they still in stores and you just took a write down on them? Where are those units?

A sizable portion of them were donated to the Marine Toys for Tots and the remaining portion was destroyed.

Our next question is a follow up question from the line of Brad Leonard. Please proceed.

Hi. Could you tell me, did you say the merchandise margin was stronger and that the Q4 gross margin looks like it really came down. Was that just all of deleveraging on the occupancy?

Well, it’s deleveraging on the occupancy in the North American stores plus it includes the $2.3 million write off and so the initial merchandise markup still remains strong on our products.

So the merchandise margin’s the same? Or was it higher?

It was slightly higher.

Okay, thanks.

Our next question is a follow up question from the line of Michael Corelli. Please proceed. Michael Corelli – Barry Vogel & Associates : I had a question, kind of a follow up to the question. Are you allowed to buy stock at all during this strategic alternative review?

No. Michael Corelli – Barry Vogel & Associates : Okay, and has the company considered, obviously you talked about the economic environment and the credit environment, and I know you haven’t commented that a sale, the company is the focus, but obviously it’s one of the options. If the company is not able to accomplish that, I would hope that they are considering maybe a major share repurchase program because you could probably take out 25% of the current shares outstanding with the cash balance and I think that’s something that should be considered with your stock down at these levels if you can’t accomplish something else.

Thank you, Michael. It is a broad review of strategic alternatives. Michael Corelli – Barry Vogel & Associates : Okay, thank you.

Ladies and gentlemen, this does conclude the question and answer portion of today’s conference call. I’d like to turn the presentation back over to Ms. Molly Salky for any closing remarks.

Just to say thank you, everyone, for your participation today. Feel free to give me a call if you have any follow up questions. Have a great day. Thanks.

Ladies and gentlemen, thank you for your participation in today’s conference call. This does conclude your presentation and you may now disconnect.