Good day ladies and gentlemen, and welcome to the Build-A-Bear Workshop, Inc. first quarter 2011 conference call. (Operator Instructions). As a reminder, today’s conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Allison Malkin of ICR. Please proceed.

Thank you. Good morning. Thank you for joining us. With me today are Maxine Clark, Chairman and Chief Executive Bear; John Haugh, our President Bear and Tina Klocke, Chief Operations and Financial Bear. Before I turn the call over to management, I want to remind members of the media who may be on our call today to contact us after this conference call with their questions. We ask that you limit your questions to one question and one follow-up at a time. This way we can get to everyone’s questions during this one-hour call. Feel free to re-queue if you have further questions. Please note that our call is being recorded and broadcast live via the internet. The earnings release is available on our Investor Relations portion of our corporate website and a replay of our phone call and our webcast will be available later today on the IR site. Before we get started, I will 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 Factors section in our Annual Report on Form 10-K, and we undertake no obligation to update or revise any forward-looking statements. And now, I would like to turn the call over to Maxine Clark. Maxine?

Thank you, Allison and good morning, everyone. Thank you for joining us to discuss our first quarter fiscal 2011 results. For our call today, I’ll begin with comments from our first quarter performance and update you on our progress in the second quarter. John Haugh, our President, will provide additional insight into our product and marketing strategy and then Tina Klocke, our Chief Operating and Financial Bear, will review our financial results and outlook. Following our prepared remarks, we’ll open the call to take your questions. In the first quarter, total revenue declined 6.1%, excluding the impact of foreign currency. On a consolidated basis, comparable store sales declined 8.5%, including a decline of 9.3% in North America and a decline of 4.1% in our European operations. The shift in Easter impacted our first quarter by approximately 5.3 in consolidated comp performance. In the quarter our eCommerce business was solid, increasing 1.5% on a consolidated basis, even with the Easter shift. We had a net loss of $2.3 million or $0.12 per share in the first quarter, compared to net income of $1.7 million or $0.09 per diluted share in the first quarter of 2010. As previously announced, our 2011 first quarter results included costs of $0.05 per share associated with our consulting project to improve our efficiencies and reduce expenses. I will review our progress on this project in more detail in just a moment. As indicated in our press release, consolidated comparable store sales are -3.2% year-to-date through April, which includes a 3.3% decline in North America and a 2.7% decline in Europe. In order to give you the best understanding of our business and because of the sizable impact that the shift in Easter had on our first quarter, I’m going to review our performance in two time…

Thank you, Maxine. I’m going to highlight two areas of our first quarter product and marketing and then I will focus on the key initiatives for the second quarter. In the first quarter, we continue to focus on product innovation and the introduction of limited edition products supported by our fully integrated approach to marketing and promotion. We’ve had several successes, including our Valentine’s Day animals, the second release of our proprietary SmallFrys product line and a good overall reaction to Easter products, particularly E.B., the bunny featured in the highly-successful Universal Studios movie, Hop. Our tie-ins with theatrical releases have been consistently strong and we’re excited about our lineup in this category for the remainder of 2011. While we are happy with these parts of our business, we did have one launch under-performance comp with Wizards of Waverly not matching last year’s iCarly. In addition, the fourth quarter short fall of SpeakerStarz led to a price reduction on these animals, but we moved through the inventory profitably, keeping our assortment quality in place. On the marketing side, we matched closely to last year, but we did reduce our North American television spending in quarter 1 to hold dollars for a later Easter. We introduced Victoria Justice who stars on the hit show, Victorious on Nickelodeon, as our brand ambassador in our advertising and marketing programs. Build-A-Bear has always been known for our fashion, so partnering with Victoria is a great step. She is all about the latest trends and hot looks, particularly with our core demographic. She is featured in our TV ads, online and coming soon will be Victoria Justice exclusive products in Build-A-Bear Workshop. The addition of an Easter gift card up sell program put over 200,000 incremental gift cards into the market and will drive business,…

Thanks, John and hello everyone. For the first quarter, total revenue was $96 million, compared to $101.4 million last year, a decrease of 5.4%. Consolidated net retail sales were $94.2 million, a decrease of $5.6 million, or 5.6% compared to last year’s first quarter. Excluding the impact of foreign exchange, net retail sales decreased 6.4%. Consolidated comparable store sales for the first quarter declined 8.5%, primarily driven by the decrease in trend actions which were adversely impacted by the Easter shift. The net retail sales from European operations were $16.1 million in the first quarter which compares to $15.8 million last year. Excluding the impact of foreign exchange, European net retail sales declined 1/1%. Our eCommerce business was up 1.5% in the quarter, excluding the impact of foreign exchange with solid performance in both North America and the U.K. Commercial revenue was $1.1 million, up 14.4% compared to last year. International franchise revenue was $726,000 in the quarter, up 6.3%. We ended the quarter with 63 international franchise stores. We expect our franchisees to open approximately 5 to 10 stores in 2011 net of closures, including our first store in Brazil. Our retail gross margin rate in the first quarter was 38.8% compared to 41.1% last year. The decline was primarily due to the deleverage of fixed occupancy costs resulting from lower net retail sales in the quarter. SG&A was $41.3 million or 43% of revenues, Compared to 39% in the first quarter last year. Included in this are $1.5 million in costs associated with our ongoing consulting project. Excluding the consulting project costs, SG&A, as a percent of sales was 41.4% in the first quarter. The income tax benefit was $1.4 million for the first quarter to compare to the income tax expense of $1.1 million last year. For…

(Operator Instructions.) Today’s first question comes from the line of Tom Filandro of SIT. Please proceed. Tom Filandro – SIT: Hi, thank you. I actually had two quick questions. First is can you guys really give a little more detail on where the $10 to $15 million in savings is coming from? And then my second question is, John, you alluded to testing some new categories, I think you said over the next few months. Can you give us a sense of exactly what that is that you’re talking about? Is that similar to like a SmallFrys™ or is this maybe a toy experience type product? What are you thinking about? Thank you.

Tom, on the consulting project, we’re looking at just every phase of our business, from our product sourcing to our distribution to ocean freight to store supplies – it’s really across the board – our IT, just everything that we look at from a perspective of indirect and direct expenses. And, again, we just started phase 2 so we’re really diving into that to see where the potential savings are, so it will be really across the board.

Hi, Tom. With respect to some of the things we’re trying for some new products, talked to you last year about small price. And we spent a lot of energy and thought putting it into market and it’s worked pretty well for us. There’s a little bit of cannibalization, but by and large it’s an incremental purchase, it’s helped us with the tween customer, it’s skewed even a little bit more girl; it’s got a good proprietary Build-A-Bear margin; we feel great about it. So with that as a backdrop, we’ve got several things in tests and I’m going to kind of put them in some groups. Some are some open-market products. For instance, we’re going to have Angry Birds in our stores next week – 50ish stores and then the rest of the chain about two weeks after that. We’re going to start with some product that we just bought in the open market, but we want it to be out there quickly and if it makes sense, we could turn that into a Build Your Own if we thought that was logical. We also, though, more importantly believe we’ve got some proprietary opportunities where we take a look at some other pre-stuffed, plush in some cases, again incremental pick-ups, a product that plays off of our heritage, again it’s done with our proprietary margin. We are also going to go in to test with a craft shop product line in some stores. We’re going to take the product that we’ve developed for some of our other licensed partners. We get asked for it on a regular basis so we’re going to put that on a fixture in the store and see if we can drive some business. We also have something that’s going to come out this summer that we think could expand our demo a little bit. We’ve always talked to you about kind of 3 to 103, but 3 to 12 is really our core. We’re going to put a product in the market this summer that we think can capture some business from 0 to 3. I say this summer, kind of June-July-ish. And a couple more. And we’re going to put these ideas across the country in some different markets and in one market we’re going to kind of put them all in there and see if we can really drive the business. But we believe the core of what we do is a make your own experience. We’re going to continue to be strong there, but we believe we can drive incremental visits and incremental baskets with some of these new ideas. And so we’re going to stay on it pretty aggressively and you’re going to continue to see us trying new things. We’re going to miss some; we’re going to make some. But we think if we continue saying this it’ll drive the four-wall productivity of our business. Tom Filandro – SIT: Thanks very much and best of luck.

Our next question comes from the line of Sean McGowan with Needham. Please proceed. Sean McGowan – Needham: Hi, first I just wanted to ask you to repeat something that you die earlier in the call. What was the European January to February increase?

It was an increase of 5.4%. Sean McGowan – Needham: Okay, thanks. And then in terms of a question, I’m following up on something you said earlier, John, regarding keeping some animals after the promotion period. Just wanted to get your thoughts on – is that a SKU management problem or an inventory management problem? How big could that be over time if you plan to keep them in indefinitely or just a little bit longer than the promotional period?

I think more that latter than the former. I’m going to use last year’s Ice Cream Bear as an example. We brought out 4 animals. Obviously there’s a best seller and there’s a No. 4 seller in any of those. That collection literally came in and out of the store in 3, 3½ weeks. We were still getting emails at Christmas saying, “Can I get the Bubble Gum?” “Can I get the Mint Chocolate Chip?” What we will do is we look at somebody’s collections, we talk to kids ahead of time. We are usually pretty accurate as to what’s going to be the best seller so instead of that line being kind of in-store for 6 weeks, the majority of the line will be in for 5 weeks, we’ll plan to keep around for a few months because we can then still get maximum volume out of it. So we talked about Hot Dogs and Cool Cats this summer. Our lead guy is this great little wiener dog and he will debut in about 2 Fridays, but we will keep him around longer because we know we can get several months of traction out of that. With respect to SKU management, two things will happen. We will plan for that so we won’t get ourselves kind of over-assorted. The second thing well do, we mentioned briefly. In 2010, while we’re happy with our launches, a lot of times our apparel would be really specific to the launch. So think of ice cream again, and we had things that were really – our Mint Chocolate Chip Bear had a little dress that was all about mint chocolate chip ice cream. In ‘11 we’re going to have fashions that match back to the look and to the color of the animal but that fashion will be able to go against more animals and we’ll be able to live with it a little bit longer as well. So we think we can get more mileage out of some of this great fashion emphasis that we mentioned earlier. So we are acutely aware of managing the inventory but we think this is actually a win-win because we’ll have the strength of the launches and those good animals will stay around even longer. And if you remember one of the things we learned last year, we talked about it in our last call was our core was not quite- Our launches were good but our core was not as strong as we wanted it to be and we think this kind of hits both sides.

And one thing about the SJ you mentioned, we only have 36 bins in every store in the United States and about 30 in the UK, so that’s all the animals you could have at any one time. So last year the core animals and outfits that John just referred to weren’t changing out as much because we didn’t let these launch animals become part of the core which they did in prior years. So even though we may not have had four animals in a launch in 2009, we might have had one, that animal after it launched stayed in our line unless it was a seasonal animal like St. Patrick’s Day or something like that, and that allowed our core to be fresher. So this is I think the perfect balance between where we might have been prior to 2010 and where we’ll be going in the future. So the customer doesn’t visit us every single month, so the customer who comes to visit and wants the ice cream, sees the ice cream bear- So they go to Bearville and they visit our website all the time, but they’re a child and mom’s not going to bring them to the store until they come to town or until they go to grandma’s house and they miss some of those things. And we really listen to those comments and I think that many of these items can become stronger parts of our assortment, and while they’re planned to be shorter if the sales are warranted we’ll keep them longer. Like we had Peace Bear, our Peace Bear continues to be a really, really strong seller no matter which way we bring it in and it was meant to be part of a trend in 2009 that was playing off peace symbols that were a lot in fashion. But we have a Peace Bear that we’ve had since then and we just launched one as part of our Rainbow collection, the Rainbow Peace Bear which is very strong and we’re reevaluating whether we want to keep that longer than just a few months because it’s such a good bear. So I think those are the kinds of things that we like to be flexible about but we have already done it in some way, shape, or form. But the 36-bin contain us and make us very SKU aware.

Our next question comes from the line of Gerrick Johnson with BMO Capital Markets. Please proceed. Gerrick Johnson – BMO Capital Markets: Hi, good morning. I was wondering how was your merchandise margin compared to last year excluding the fixed occupancy.

Yeah, Gerrick it’s John. Our retail margin which is what we talk about to kind of keep wholesale and some things isolated, our retail margin for Q1 was actually down 0.2%, so 20 basis points, and it was a mix issue – that was not an escalating price issue. So we feel pretty good about that. As we’ve talked about and as you’re well aware, the whole world is seeing price pressure but we have spent a lot of energy trying to really manage our margins. We have looked at our product and how we build it and have seen where there might be opportunities to reengineer it a little bit. We have looked at our supplier base – this is again, all part of this larger consulting project that Tina and Maxine have mentioned. So we’ve also looked at our supplier base and said “Is there probably a day out of supplier or two in some of our different categories to continue to keep our pricing in line and keep everybody kind of honest?” We have made good progress on our logistics expense so we’ve taken some money out of what it costs us to get product out of Asia over to the West Coast and then from the West Coast out to our stores. And then finally as mentioned we have looked at some pricing opportunities where we think it makes sense where we think we can deliver value to the consumer and charge just a little bit more. So when we put all that together, while we were off a little bit in Q1 we believe we will keep our retail margins in line with our plan for 2011. Gerrick Johnson – BMO Capital Markets: Okay, there’s been a lot of discussion about rising cotton costs but how does that impact polyester and what are you seeing in those other inputs that you use?

Well I think what happened, the guys who do polyester – remember it’s an oil-based product so and oil’s up kind of 2X. I think in the past when one commodity went up the other guys would say “Hey, I’m going to capture a bunch of market share.” What we saw with polyester and acrylic and some of the things right now is when cotton went up they said “Why don’t we get in on it too?” and they just started raising the prices right along with it, not quite to the 2X level that cotton saw but all of those raw materials have gone up. And labor has gone up in Asia as you’re probably aware, so I don’t think it’s gone up quite to the same level as cotton but it has gone up. Rubber has gone up – obviously rubber goes into our shoes. So we’ve got material cost pressure across the board no different than probably anybody else you cover or anybody else in our industry. Gerrick Johnson – BMO Capital Markets: Okay. And then on the stores, you talked about leases coming up for renewal or subject to kick out. What percentage or portion of your US store base would be coming up for renewal or kick out in the next 12 to 18 months? And then kind of related, any plans on reformatting stores, the existing store base and when was the last time these stores were kind of refreshed?

Hi Gerrick, it’s Maxine. We have in the next 18 to 24 months about 45% of our stores will come under review for a kick out, either a first or second kick out – we often put two in there – or lease renewal. So that gives us a great opportunity to really look at market-by-market, store-by-store in that market. And then the refresh of the stores- We constantly refresh our stores. As we put something new in the stores, a new fixture or a new category then all the stores get it – like last year when we launched Small Fries and we put in a new fixture for Small Fries, every single store got that fixture. And last year we also did a couple of experiments in a new kind of format that we have several stores that are in that look, and it’s still the Build-A-Bear process and procedure but a slightly fresher look if you will, not necessarily seeing any more sales from those stores that have that look but we are working on a much more engaged, maybe back a little bit more to our roots magical experience that pulls back some of the things we put in the store originally that we took out actually for space, and first just to make room for customers; and then actually taking out as part of value engineering that we’re going to be looking to add back into our stores, especially some of our larger volume stores like Disney, New York, Myrtle Beach, where they truly are tourist and vacation and long experiences, longer than the average which is 45 minutes in a store longer when they come to a tourist attraction like Disneyland or Myrtle Beach, or New York City for that matter. Gerrick Johnson – BMO Capital Markets: Okay, I’ll just throw one more in there. You touched on sort of the tourist attractions – how about the Orlando Airport store and your Children’s Hospital store, the status of those and you know, your initial reads on how those are performing?

The Orlando Airport store opens next Friday, or Thursday, so it isn’t open yet; we don’t have any sales to report but we’re excited about that because obviously lots of kids come through Orlando Airport. And while May is not the biggest month in Disney’s schedule we’ll have a good start to just see how the traffic goes and then obviously it heats up pretty dramatically for the summer and beyond. In the Children’s Hospital, that opened up last month and is doing well so far. It was a quiet opening and they’re going through their experience because not only did they open up, expand and open up a Build-A-Bear store but they opened up a Starbucks, in a sense almost like a mini-mall in a hospital. So they’re managing that and all reports are that it’s going as planned and very, very smoothly. Gerrick Johnson – BMO Capital Markets: Alright, thank you very much.

(Operator instructions). And our next question is a follow-up from the line of Tom Filandro. Please proceed. Tom Filandro – Susquehanna Financial Group: Okay, thank you. I want to go back to the comment, originally you talked about the gift card trend in Q4. Tina, can you maybe tell us precisely what happened to the gift card trend in Q4, like how much was it down? I hear you stated I think you had a negative impact of 1.6% so I have two questions related to that: one is any initiatives in place to reverse that trend during the holiday season as we approach it this year? And then the second one is what impact are you anticipating the Easter gift card redemption to have on the Q2 results? Thank you.

Sure. Tom, I think that again some of the decline was the decline in the overall Q4 sales in North America, and I think that one way to stem some of that offset was to put in the upsell gift card program we had in Easter in the US which we had not done in the past year; and continue our upsell gift card program at Valentine’s Day which we had last year. So that put about 200,000 more cards in the marketplace. And I think on a go-forward basis in holiday again this year we’ll continue to work, we’ll continue to have our upsell gift card program. At Easter time and Valentine’s Day we actually lowered our limit from a perspective of it used to be a $30 purchase you could get the $10 card and we lowered that to $20 to help stem and put more cards in the marketplace. And again, I think we’ll probably do that at holiday time to help put more cards in the marketplace. But again, our gift card program is very successful and we are going to continue to look at outside places to sell our gift cards, whether it’s Walgreen’s stores or Cosco’s or what have you. As you walk into the grocery stores most everywhere carries gift cards now so we’ll continue to enhance that program as we go forward.

Tom, one of the other things, this is Maxine. One of the other things that we are doing and one of the things that Build-A-Bear’s known for is our packaging, and as we go into the holiday season we’re going to put back some really fun packaging for our gift card that we had actually- It was available but people had to ask for it more so than we just sort of went to this fast mode of “Let’s just sell a lot of cards and put them in an envelope and sell them out the door.” And we’re going to put back some fun packaging for them to make them as giftable. But we do have a lot of outlets now in the United States. It’s a pretty mature market, the United States, selling gift cards in grocery and drug stores, but the UK, one of the reasons why the UK had a positive year is that we just opened up secondary outlets for them last year, not as many as we would have even liked but that opportunity is still out there strongly for the UK to have expanded places to buy a Build-A-Bear card. And as our awareness grows, too, that’s just perfect timing. So we think that with all those things- We look at every single piece of marketing. It wasn’t so much that gift cards were less a (inaudible) set of our business, it’s just that overall the business was less. So and we did have the strong upsell program so it could have been some tradeoff of customers, instead of buying a $35 or a $50 card were buying the upsell card. But it’s such a successful program and has over time put a lot more cards in the hands of our customers that we thought it was a valuable and worthwhile tradeoff. Tom Filandro – Susquehanna Financial Group: Thank you.

Our next question is a follow-up from the line of Gerrick Johnson with BMO Capital Markets. Please proceed. Gerrick Johnson – BMO Capital Markets: Hey, you had Hop for Easter this year. Was there a comparable sort of licensing event last year? I can’t really recall.

Yeah, if you remember Gerrick, we brought out Alvin and his friends for Q4 ‘09, and it was so successful we scrambled and brought Alvin back and Brittany in full size, make your own. We had them for about three weeks kind of right in the middle of March, so Hop was really kind of a comp to Alvin and Brittany last year – both $22 price points. Hop was supported by kind of the first introduction of the movie, or excuse me, EB was the first introduction of the movie and Alvin and Brittany were riding on the DVD release in Q1 ‘10. But yeah, those were pretty much a comp. Gerrick Johnson – BMO Capital Markets: Okay, and ever since the Shrek debacle several years ago your licensing initiatives, at least on the skin side, have seemed to perform pretty well – things like Hello Kitty and Hop and Alvin. What percent of your skins these days are licensed and how does that compare, and how do you think that’ll look through 2011 with the addition of Smurfs and whatever other licensed skins you’re going to bring on?

Yeah, I think you have to kind of put it in a couple categories. You’re right – Hello Kitty is licensed and she has done very, very well for us since- She came in in ‘04 in apparel and into full size in ‘06 and she’s been a star for us ever since. We have on 6/10 or June 10th we’re breaking a pink Hello Kitty, first time ever, and we are really, really excited about it. We’ve got Smurfs and then we do have some things with the holidays which we’re not going to get into here today but we will next time we talk to you guys. When we look at our licensed skins, and then you’ve also got to think about licensed products throughout the store, right? So whether that is sports uniforms, whether that is tie-ins with iCarly or with Wizards of Waverly, when we look at all the license business overall kind of 20%-ish, a little bit more, somewhere in that range though – some skins, some apparel. We want to be there, we want to be contemporary. We want to certainly trade on these large (inaudible) releases and the budgets they bring and the energy they put in the market, but we don’t want to get over licensed so we’re always trying to find that balance. So you do have some evergreen properties like in HK and then you have some of the movies that we kind of have for the period of time, and then we’ll do something like a Victoria Justice who will be our brand ambassador this year and into next year, and we’ll do some product with her, both apparel and animal. So that’s how we look at that business overall and again, kind of 20%-ish, a little bit more. Gerrick Johnson – BMO Capital Markets: Okay. And on your existing stores I guess 2800 sq. ft. was kind of the average and then you talked about shrinking down to 2200 with some new stores and new formats and new locations. Is that still kind of the goal – 2200 sq. ft. or maybe are we shooting for something lower? What kind of square footage are you looking at for relocations or new stores?

No, they’re in the 2200 to 2600 range so it just depends on the shape of the store. We’re not lower than 2000 sq. ft. anywhere. I mean the selling square feet might be below 2000 but the store itself, the gross square footage is usually 2200 to 2600. Gerrick Johnson – BMO Capital Markets: Right, but stores that you relocate.

What we’re relocating are stores that are 3000 sq. ft. We’re relocating them to the current, what we believe is the current optimum size of 2200 to 2600, somewhere in that range. So they were bigger, much bigger stores and in some cases they were even over 3000 sq. ft. One of the stores that’ll open this week, I believe it’s this Friday is International Plaza, which when it opened in 2001 in Tampa, right after 9/11 actually, it had a party room in it. So it was over 4000 sq. ft. and now it’s being downsized to a 2500-ish sq. ft. store. So a significant reduction but in the same mall and in the same general location, and so it’ll be a good store for us and much more cost effective. Gerrick Johnson – BMO Capital Markets: And is the birthday party concept, is that a significant part of your business anymore or has that kind of gone by the wayside? How’s the party business?

The part business is not insignificant. It’s never been as big as a lot of people think it is, it’s under 10% of our business but it still is a healthy business and a very important part of our business. Gerrick Johnson – BMO Capital Markets: Okay, thank you.

That concludes our question-and-answer session. I would like to turn the call back to Maxine Clark for closing comments.

Thank you again for joining us. We look forward to speaking to you when we report our Q2 results. Have a great day.

Ladies and gentlemen, that concludes today’s conference. Thank you so much for your participation, you may now disconnect.