Build-A-Bear Workshop, Inc. (BBW) Q4 2015 Earnings Report, Transcript and Summary

Greetings, and welcome to the Build-A-Bear Workshop Fourth Quarter 2015 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allison Malkin of ICR. Thank you. You may begin.

Good morning. Thank you for joining us. With me today are Sharon Price John, CEO, and Voin Todorovic, CFO. For today's call, Sharon will begin with a discussion of our fourth quarter and fiscal year results and highlight our priority as we begin fiscal 2016. Voin will review the financials and guidance and then we will take your questions. We ask that you limit your questions to one question and one follow-up. This way, we can get to everyone's questions during this one-hour call. Feel free to re-queue if you have further questions. Members of the media who maybe on our call today should contact us after this conference call with your questions. Please note, the call is being recorded and broadcast live via the Internet. The earnings release is available on the Investor Relations portion of our corporate website and a replay of both our call and webcast will be available later today on the IR site. Before I turn the call over to management, 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 the Annual Report on Form 10-K, and we undertake no obligation to revise any forward-looking statements. And now I would like to turn the call over to Sharon Price John.

Thanks, Allison. Good morning, everyone and thanks for joining us today. The fourth quarter represented a solid finish to another productive year. Since my rival in 2013, the company has been keenly focused on achieving and sustaining profitability by driving operational improvement across a number of functional areas. We are pleased to note that fiscal 2015 marks our third consecutive year of margin growth, profit expansion and positive consolidated comparable sales. Furthermore as our recent guidance suggests, given the impact of the fundamental changes we have made from infrastructure to talent. We expect to report our fourth consecutive year of consolidated comparable sales and profit improvement in fiscal 2016. We believe this consistent performance demonstrates our ability and potential to increasingly monetize our powerful Build-A-Bear brand to the evolution of our business model. The objective of this evolve model is to diversify and developed More Consumers categories and locations by leveraging a number of additive revenues streams that takes Build-A-Bear beyond its traditional mall retail focus. Internally, we simply refer to this effort as our More strategy, as it reflects our goal to systematically and profitably build the business by appealing to More People with More Products made available through more places. As noted, over the past few years we've been in the process of improving both the effectiveness and efficiency of our infrastructure while securing a talented leadership team to execute our plans. With many of these important initiatives behind us we believe our company is well positioned to begin generating sustained profitable growth. Many thanks to our thousands of employees across multiple countries for their valued contributions through this transition period. As we previously reported our fiscal 2015 fourth quarter results include a decline in consolidated comparable sales of 5.6% which follows a 9.8% increase in the fourth quarter of 2014 delivering a positive consolidated comp on a two year basis. Merchandize margin expansion of 50 basis points and pretax income of $9.9 million as compared to $12.6 million in the fourth quarter of fiscal 2014. The majority of the year-over-year decrease was due to widened less weaker sales compared to fiscal 2014 which included a 53 week that was reported in the last year's fourth quarter. In the quarter and in a difficult macro retail environment, our sales started slowly but gained momentum throughout the period culminating with our best sales occurring during the weeks of Christmas and New Year. Top Stories included our proprietary Merry Mission offering which appealed to our broad consumer base during its limited eight weeks holiday periods. As you may recall, we had strong sales when we originally introduced Merry Mission in the fourth quarter 2014 as the first development of our own intellectual property that was supported with a downloadable app and game. To build on an initial success, we enhanced the story in 2015 adding our new snowy white Glisten character and launched the story with a fully integrated marketing program including in-store, TV and direct mail similarly to our successful 2014 campaign. This approach propelled Glisten to this particularly popular with girls to our number one selling items for the fourth quarter in both units and dollar volume. And on the whitening theme front, we successfully introduce our new Frozen Fever collection to continue to leverage the strength of the property to support our young girls business and to help offset the high impact in the initial Frozen launch in the fourth quarter of 2014. To drive the boys business, we introduce our Star Wars line, we significantly gain momentum as the quarter progressed, especially as excitement heightened for the December 18, movies release of the Force Awaken. Star wars was our number one boy business and significantly contributed to our teen plush consumer sales as expected. Ecommerce revenue including mobile grew double-digits in the quarter driven by an upgraded platform, improvement in our online marketing precision and exclusive product offerings. For example, we developed merchandize to drive our teens plus gift giving infinity consumers including an online only gift box in a Pikachu bundle that including our own exclusive Pokémon collector card, which launched in mid December and sold out in 10 days. As a part of our real estate evolution, we benefitted from the introduction of our new discovery store format that I will expand on in a moment, and we also added sales to the continue diversification away from traditional mall by successfully opening six stores in our first ever value driven outlet concept in both the U.S. and the UK. Separately, we once again extended our holiday presents with seven shop-in shops with key [90] (Ph) flagship doors. As we established it, we also established a relationship with Gaylord Hotel by opening our first seasonal store in their popular Ice Exhibition in Orlando. As in 2014, these incremental revenues streams broaden our reach to a wide variety of holiday shoppers in large urban markets at this critical high traffic time period. For the year, we achieved consolidated comparable sales of 1% growth on top of 1.7% increase to prior year. Merchandize margin improvement of 150 basis points, which drove our gross margin to 47.1% our highest rate since 2006, and pre-tax income of $17.9 million up 11.7% from 2014. From a strategic perspective in 2015, we successfully extended our for consumer engagement with a roster of relevant licenses and new intellectual properties such as Honey Girls and Promise Pets, enhanced by Play Beyond The Plush related apps, games, music and videos, drove ecommerce sales by expanding our teen plush segment by leveraging gifting, licenses and collectable to appeal to this generally less price sensitive demographics. That is more likely to purchase online and launched a number of outbound Build-a-Bear license program across a variety of categories, while signing new agreements with partners like Spin Master, a top-five global toy company and Frankford Candy the largest licensed candy manufacturers in the United States. Additionally, we deployed capital to further diversify our real estate portfolio with our compelling discovery format. Opened new value outlet stores and increased shop-in shop presence with seasonal pop-up location to evolve our international strategy including the conversion of the franchise store in Denmark at Copenhagen popular Tivoli Garden’s tourist location to an owned and operated location. To invest in updated and adding critical new IT systems including TST retail and end-to-end merchandise planning tools design to improve our ability to manage inventory, which we expect to result in continued margin expansion and to repurchase 1.7 million shares of our common stock for an aggregate amount of $26 million. All while posting our highest units per transaction since 2008 at almost four units and achieving the highest dollars per transaction in our history slightly over $44. Overall, we are pleased with this year’s accomplishment and believe that the disciplined approached to executing our More strategy has been instrumental to our delivery of three consecutive years of consolidating comparable sales and profit improvement and believe that the investments we have made will enable us to transition to sustain profitable growth. With that in mind, we intend to continue to focus on our More strategy in 2016 with specific objectives designed to deliver against our More Places, More People and More Product platforms. Including More Places, the keystones to this initiative is the diversification, expansion and upgrade of our real estate portfolio. Since 2013, we have been in an active process of evolving our presence beyond traditional malls by closing unproductive stores and opening new permanent stores in a variety of locations as well as adding shop-in shops and pop-ups in high traffic seasonal and/or tourist site. One of the most important efforts to-date in this comprehensive multiyear initiative has been the introduction of our new format called the Discovery Store. If you may know, we recently launched this new format in one of flagship doors in the Mall of America a highly popular tourist destination. We ended the year with 11 locations representing a combination of in-place remodels, remodels within the same mall, but with an improved position and completely new stores. In addition to refreshing our aging brand look, our objective for the new design is to drive both overall sales and sales per square foot. To do this, we rethought practically aspects of the store from a consumer centric and business building perspective, including the creation of a focal point using our most unique selling proposition, the stuffing process and Heart Ceremony. In fact the front and center placement of our new high impact stuffer versus the previous back of the store position at the low profile stuffer is creating least line theater and drawing in traffic, while opening up valuable wall space for merchandize without the need for additional square footage. As we have noted, we're pleased with the performance of the remodeled doors, which have delivered double-digit growth versus the norm driven by a substantial increase in traffic, combined with above average dollars per transaction and unit for transaction. Based on this initial positive result, we have now aggressively value engineered the new format to create standardized build out models for a variety of store types and sizes including allowing us to accelerate our plans to open new Discovery Stores in 2016 and beyond. With that in mind, we plan to end the year with 45 to 55 newer remodeled discovery stores including flagships at Myrtle Beach, Navy Pier in Chicago and the previously mentioned Denmark Store in Tivoli Garden all of which generate several million dollars in annual sales. We also expect to open a new flagship stores in China this June in Disney Town at the Shanghai Disney Resort. Importantly, we expect to pay back for this new format to be less than two years and we have a four-wall contribution margin goal of over 20%. This goal was above our current contribution margin, which has already more than doubled the average of the fleet when our real estate initiative kicked off in 2013. Consistent with our retail diversification strategy, we expect to open additional stores in our outlet format in the year and offer a brand experience with Carnival Cruise Lines and the number of their ships starting in the second half of 2016 using a wholesale model. Finally, on the international front, during 2015, we focused on evolving the overall franchise model while updating critical processes in system including the initiation of a new global product ordering tool. As a result of these efforts and the initial results of the discovery format we expect the franchises to open an estimated 20 to 25 new royalty generating stores by the end of the year. On the More People front, we are focused on further enhancing our business with our key consumers segments including girls, boys and our teens plush consumer. Important efforts to deliver this goal in 2016 include, driving our younger girls business with a continuation of important license property like Frozen while attracting older girls with the launches new concept tied to some exciting films that will be premiering later this year. We will also build on our existing proprietary properties such as Honey Girls with a refreshed story line and new characters. Strengthening our boys business by driving our key properties including Power Patrol and the Star Wars line, with a introduction of new characters, as well as launching a number of products associated with a variety of movie releases throughout the year and continuing to attract new teen plush consumers with our roster of best-in-class affinity and multi-generation license properties, while appealing to the large gift market during the traditional high traffic seasonal timeframe of Valentines, Easter and Christmas with our own proprietary product. For example, our recent Share Your Heart Valentines program offered a number of add-on for the gift giver, including Build-A-Bear branded conversation heart candies with our licensed partner NECCO, premium branded chocolates from PRAIM, plush roses and our reported down stuffer that enabled consumers of all ages to create a one of a kind Valentine's gift with a personalized message straight from the hearts. Concerning on More Products strategy, we continue to expect to offer new and different ways for our consumers to engage with our brand through our Play Beyond the Plush program offered for existing intellectual properties such as Promise Pets, Honey Girls and Merry Mission. With the generation of approximately 10 million digital interfaces from these supporting apps, games and music videos, we clearly extended the lions share and consumer engagement with these popular collection and with our brand overall. Separately as mentioned, our outbound licensing program is in the marketplace across a number of categories and we are pleased to be working with Spin Master to make market and distribute a line of Build-A-Bear branded toys. The new toy line is schedule to launch in mass-market retailers this fall and is expected to be both top line and margin accretive while significantly increasing our brand. As it relates to our use of capital and align with our overall strategy, we expect to focus on the following areas. The continued the pacification and expansion of our real estate portfolio, they continue to upgrade in addition of infrastructure and opportunistic repurchase of our stock. Thus far, in the first quarter we are posting positive consolidated comparable sales. Significant contributors include the continued success of our key license products our slumber party offering which was introduced post Christmas and designed to appeal to the large number of girls that received gift cards in their holiday stocking, as well as our previously mentioned valentine’s Share Your Heart campaign, which include a successful cross marketing partnerships with Save The Children. Separately, we are excited about our new proprietary Easter offering that has an innovated advertiseable feature products fall Hide & Go Beep. Note that Easter falls on March 27 and will again be reported in our first quarter results. Overall, we now have a proven strategy in place that is driving results and the right team to execute our plans and deliver our revenue and profit goals in 2016. Now I would like to turn the call over to Voin to review our fourth quarter and full-year financials in more detail.

Thanks, Sharon. And good morning to everyone. We were pleased with our performance in the fiscal 2015. While our fourth quarter results were impacted by headwinds including last year's additional week and the strong performance of our initial Frozen product line. We advance our progress towards our strategic goals. This is demonstrated by our positive early results of the new discovery format stores, which so far delivered 10% higher comps than our heritage stores. Contributing to our decision to accelerate the pace of openings and remodels in fiscal 2016. Our 150 basis points gross margin expansion primarily generated from value engineering work and strategic pricing actions and with the increase in average four-wall contribution margins for our North American stores to 19.5%. We remain confident in our strategy that has now delivered three consecutive years of positive comparable sales and profit improvement, and expect to report our fourth consecutive year of comp sales and profit growth in fiscal 2016. This morning's press release includes the details of our fourth quarter and full year financial performance. So I'm just going to touch on a few highlights. Consolidated comparable sales stores and ecommerce declined 5.6% following the 9.8% decrease in the fourth quarter last year. Our comparable sales included a decrease of 11.6% in transactions partially offset by an increase in average transaction value. Net retail sales declined $13.5 million or $11.6 million excluding the impact of foreign exchange. This decline was driven by a decrease in comparable sales, the benefit of the 53rd week last year permanent store closures and 1.3 million adjustment to differed revenue related to our loyalty program in 2014 that did not repeat in 2015. Retail gross margin contracted 100 basis points to 51.2% as the 50 basis points expansion in merchandize margin was more than offset by the leverage of fixed occupancy cost due to the reduction in comparable sales as well as the benefit of the 53rd week in last year’s fourth quarter. SG&A was $50.6 million or 43% of total revenue compared to $56.4 million or 42.5% of total revenue last year. The majority of the $5.7 million reduction in SG&A was related to variable expenses including the 53rd week in the 2014 fourth quarter and management transition costs that did not repeated in 2015. Fourth quarter pre-tax income was $9.9 million versus $12.6 million last year. Adjusted pretax income for the quarter was $10.7 million compare to $14.6 million last year. The tax benefit of $10.2 million in the fourth quarter reflects the final reversal of our tax valuation allowance. Adjusted net income per diluted share was $0.62 compared to $0.74 per diluted share. As a reminder, adjusted net income per diluted share excludes currency, management transition cost, asset impairment charges and the reversal of the remaining valuation allowance on our U.S. differed tax per asset. After the adjustment, our effective tax rate for the quarter was 1.3%. Turning to fiscal year highlights. Net retail sales were $372.7 million compared to $387.7 million last year. A decrease of 1.9% excluding the impact of foreign exchange. Again, the 53rd week in fiscal 2014 impacted the comparison. Our consolidated comparable sales rose 1% including an 11.8% increase in ecommerce sales. This follows 1.7% consolidated comp increase in 2014. Full-year gross margin of 47.1% represents an expansion of 150 basis points as we continue to benefit from our value engineering and strategic pricing actions. SG&A was $161.5 million or 42.7% of total revenues compared to $164.4 million or 41.89% last year. The $3 million decrease was primarily attributable to lower variable costs related to the 53rd week in management transition expenses, partially offset by investments to advance the company's stated long-term strategy. Pre-tax income improved 11.7% to $17.9 million versus $16 million in the 53 weeks fiscal 2014. Adjusted pre-tax income, which excludes foreign exchange loses management transition cost and assets impairment charges rose to $21.1 million from $19.9 million in fiscal 2014. Our tax benefit was $9.4 million driven by the reversal of the remaining U.S. tax valuation allowance that I mentioned earlier. Excluding the adjustments, our fiscal 2015 effective tax rate was 4.7% driven by the impact of foreign and state taxes. The tax benefit brought net income to $27.9 million or $1.59 per diluted share compared to $14.4 million or $.081 per diluted share last year. Adjusted net income improved to $19.6 million or $1.14 per diluted share compared to last year's adjusted net income of $17.4 million or $0.98 per diluted share. In 2016, with no tax valuation allowance remaining, we anticipate returning to our normalized tax rate of approximately 30%, derived from the expected mix of taxable income in different jurisdictions. As a point of reference, with a 30% tax rate 2015 net income per diluted share would have been $0.86. At year-end, cash and cash equivalent was $45.2 million and we had no borrowings under our revolving credit facility in 2015. During the year we repurchased 1.7 million shares of our common stock for $25.9 million leaving $9.1 million of availability under the current stock repurchase program at year-end. We finished the year with $53.9 million of consolidated inventories representing a 3.7% increase over prior year. The inventory composition is in line with our expectations and we believe we are well positioned at the start of 2016. For the 2015 fiscal year, capital expenditures total $24.4 million primarily related to the re-price and opening of stores and IT infrastructure. Depreciation and amortization was $16.4 million. Our strong cash flow generation continues to enable us to invest in growth while keeping in mind our goals of ensuring flexibility in capital spending and maintaining a strong balance sheet. Aligned with our strategy for fiscal 2016, we expect capital expenditures to be in the range of $25 million to $30 million. Approximately 75% of the 2016 capital expenditures is expected to be invested in further diversifying our real estate footprint with new stores and remodels. As I mentioned, we remain very excited about our new Discovery Store format with a targeted payback period of less than two years and four-wall contribution margins growth of over 20%. We expect to invest the remaining 25% of our capital budget in IT and system upgrades as well as platforms for new revenue streams. Included in our plans are an update to our POS system, implementation of enterprise selling system, enhancing TXT planning functionality and upgrading consumer facing store technology. As a result of the increase in capital expenditures fiscal 2016, depreciation and amortization is expected to be between $17 million and $19 million. Finally, as we shared at the ICR conference in January, our objective for 2016 is to transition from sustained profitability to sustained profitable growth. With that in mind, as you model 2016, for the full-year we expect to deliver, total revenue growth in the low to mid single-digit range which assumes a low single-digit positive comp. As it's relates to quarterly comparable sales, for Q1 we expect positive comparable sales in the low single-digits, for Q2 we expect comp sales to be down given the strength of the Minions product last year, which helped us achieve a positive 9% comps into second quarter 2015. And for both Q3 and Q4 we are currently planning positive comparable sales. As it relates to expenses beginning with Q1, we will break our store preopening costs which are currently part of SG&A, we expect those costs to increase predominately in the first half of the year as we accelerate the remodels and openings of our Discovery Stores. These expenses will likely have a greater impact as the forgone revenue, from the temporary closures, during the remodel period will decrease sales in our smallest revenue quarters. We expect pre-tax income to grow 15% to 25% from our GAAP pre-tax income of $17.9 million in fiscal 2015. We are forecasting an annual tax rate of approximately 30%. Further, we anticipate ending the year with 340 to 345 stores, 45 to 55 of which are planned to be in our new Discovery format. Thanks for your time this morning; we'll now turn the call back over to the operator to take some questions, operator.

Thank you, we will now be conducting a question-and-answer session. Due to time constraints, we ask that all callers limit themselves to one question and one follow-up, if you have additional questions, if you may re-queue and those questions will be addressed if time permitting [Operator Instructions] Thank you, our first question comes from the line of Rick Patel with Stephens. Please proceed with your question.

Sharon, can you talk to us about the health of your consumer and competition for wallet share as you think about 2016. For much of last year there was a big tailwind from gas prices and a deflationary apparel environment which could have helped spending in your category. So schematically speaking I'm curious did you expected those same drivers to be in place for this year?

Thank you, Rick and I appreciate the kind words as well. The health of our consumers that's an interesting question, I think there has been some overall positive economic impact to some degree. However, you have to remember that our consumers are 50,000 and plus on average, college educated and not as impacted by fluctuating GAAP prices for example, but sometimes more macro things. So although we reached our highest dollars per transaction of $44.10 this year, we do expect to see some ability for consumers to continue to come to Build-A-Bear and that $44.10 is an average of people coming in for birthday parties, which is that's a big ticket. Your everyday sort of Bear which is available for any consumers. We start at $12, you can come in and buy Build-A-Bear. But with some of our big licensed properties and all the add-on will get $1 per transaction of stuffing towards to $77, $80 a piece. So we are available and have options for a wide variety of consumers, so I can't say that - I think that it would be that negative.

That's great Sharon and can you also perhaps provide some details around your product pipeline. I guess which product lines are you mostly excited about in 2016. You mentioned in the remarks that 2Q is going to be tough given the success of Minions, but as you think about this year, do you see more opportunity on the proprietary product side, on the license side and when should we expect those launches to be in the market?

Yes, we have a nice line up of licensed property for this year, a balance between boy and girl some can't share. The ones that I can, is our continued relationship with Marvel for example, we'll have our Civil War product out starting in second quarter, which is exciting and we're also launching a new proprietary property for girls called Horses & Hearts that will available in second quarter through the year. So these are first time you have ever really other than some Unicorns where you've had a realistic opportunity to bring to the girls now.

Our next question comes from the line of Alex Fuhrman from Craig Hallum. Please proceed with your question

Just with everything that's going on, on the real estate fund with the different types of stores that you're opening and some high profile recent closers as well as the remodel, what type of same- store sales rate looking at 2016 and beyond will be a decent leverage to your occupancy cost?

So, Alex, as we talked in the past, like we just expect we'll have low single-digit comps in order for us to leverage our occupancy cost. But as also we talked in the past, as we continue to remodel these stores and touch them in 2016, we are going to have some downtime as it relates to these story models. And as we've mentioned previously, we would expect to touch those stores during our lower volume quarters in particular Q2 and Q3. So there is going to be some noise in those numbers and that's what we were trying to share with you guys in the guidance that I provided.

And then thinking about your entry in the time, can you talk a little bit about how that investment will restructured and are there any other big market internationally where your franchisees don’t currently have a present that you have your sights on over the next couple of years.

Yes. Entry into China is actually not a franchise relationship Alex, it's an owned and operated store as its in a Disney location. So that’s structured anything like our Denmark store. We own it, we operate it, we do have the partnership - we have a relationship with William Fung who is helping us through some of that complexities of China, but that’s a standard relationship, standard store. The other opportunity though we believe are there for us to look for the right types of relationship to expand our franchise footprint on a global basis. From a strategic perspective, the first thing that we've been doing on the international front is putting our processes in place, getting our systems in place to work, so that we can scale. As part of that process, we've also been as we've mentioned calling some of the relationships where we didn’t believe perhaps that this juncture that the operator was the partner that we wanted to move forward with. Which is why for example, we took ownership of the franchise store as a key flagship and Tivoli Garden. So now that we have our side of the work done, we believe that we do have some opportunities of scale and that scale doesn’t comes from just signing new franchises in different markets. Although clearly that's a part of the overarching strategy on the horizon, but first is to make sure that we have the health of our own and existing franchises like our big partners in Australia or Germany and you are starting to see that with the just mentioned 20 to 25 expected new royalty generating stores. It's been a while since you have seen that kind of sort of dramatic increase in stores from our franchise partners and that's on a scaled back number of franchises. So it's a two prong strategy that's first started with correcting our own issues, which we've now done, calling to get the best partners and in some cases upgrading the partners, you might recall we upgraded our German partner two years ago and now we are ready to start moving forward at an accelerated pace.

Great, thank you very much.

Our next question comes from the line of Jeremy Hamblin with Dougherty. Please proceed with your question.

Good morning and congratulations, and thanks for taking my question. I was wondering to just ask a follow-up on the Q1 same-store sales. I think you said Voin that they were tracking up low single-digit at this point in timed quarter to-date. Is that correct?

Yes. Sharon said that yes.

Okay. And then just in terms of the store remodels in Q2, Q3 can you provide us with a little bit more detail in terms of the total sales impact that you expect to have by quarter? Do you have a better sense or a range on what we can expect from that?

No. We don’t have this specifics because we are working through some of this things Jeremy. As you may think about, we are trying to be very proactive and try to manage our top line as well as the bottom line. In some of those instances depending on availability as a particular model we are remodeling the stores, some of the temp store locations may or may not be available so that is going to impact us. As well as when we talked about the downtime related to those remodels. We are going to have some of those activities in every quarter of the year, but we expect the biggest impact as you are going to see from the bottom line perspective is going to be in Q2 and Q3 as those are generally our smaller quarters of the year. As we've shared before about from the capital perspective we are going to spend 75% of our capital on the stores about 60% of that capital is going to be related to the new stores and relocations. In those particular cases, you won't have as much downtime an impacts on the sales perspective, and the remaining 40% that we are going to spend in capital and remodels that's going to be throughout the year, but again Q2 and Q3 is going to be a bigger chunk.

Yes. Jeremy and a little more color on our temporary stores, when we are able to secure a temporary store within eye shot of our existing stores, like we did but now Mall of America. It can have quite an impact on preserving sales, in fact it preservatives about 80% of our top line in that temporary store. But recall even though that’s [indiscernible] is the right choice to make that actually adds expense in the quarter, because I have to build and break down the temp store as well as building the which is more capital of building the permanent, but of course there is expense related to that as well. As we master this remodeling process, we also believe that we can start to decreased our downtime and limit by learning the build factor, learning to manage, assist the process better. So those two dynamics is what is keeping us from giving you a specific, because sometime we don’t know we are going to get the temp store location until weeks before we actually shut that store down.

Okay, so follow-up to that then do you have a sense for what in terms of what's possible in terms of temporary store locations for the total amount of remodels. Do you think is that something that maybe 50% this year or do you have a kind of a sense on the range of how many you think, are even possible, because I would imagine with some it’s just not even a consideration?

You are right, and with thumb not only is not a consideration is not worth it. in some cases particularity these bigger tourist location doors where 50% of our sales come from people 50 miles away or more like Myrtle Beach or the a Mall of America. Having that temp store location preserves us from just lost sales. In some of these more localized mall environment it’s just a delayed sales. So we think through it that way as well. But that’s Jeremy we don’t have the answer to that today, but I think that’s a good challenge to try to provide to guys as we get closer to it with some sort of range.

But also Jeremy as a remainder, for the year we are still expecting revenue to be up low to mid single-digit range. So still you know…

It's just a noise in the quarter that we have tried to help you manage.

Okay great. And then one more item related to that, in terms of Easter and the Easter shift this year, can you give us a sense maybe a range on, would that been pulled forward into Q1, what type of impact it would have Q1 versus Q2 just being an earlier date this year?

Yes it's actually still in our Q1, because there are basically a calendar year. We are not a normal -- I mean not an average retail year.

Right, but last year was in Q2, correct?

No it was Q1 as well.

No it was in Q1 as well.

Okay.

Yes.

Alright, thanks I’ll hop back into the queue.

Our next question comes from the line of Howard Tubin with Guggenheim. Please proceed with your question.

Hi, yes this is actually Paula calling in for Howard. We are just wondering if you could just please elaborate a little bit on your outlook strategy just with regard to location and assortment.

Sure thanks. Our outlook as we mentioned, we started opening them 2015 we opened them in both the UK and the U.S. and the strategy involved not only taking advantage of the fact that outlet as a category are tending to outperform traditional malls right now. But that there are many outlets located in “terrific” destinations which is where we tend to over perform. On top of that we saw this is an opportunity to create the first value focus model in the history of Build-a-Bear that at the end of the day should allow us to manage our inventory in a more profitable manner by flushing different product line to the system without taking up valuable stores space and slop space base in our hire-in location. So we can hold it at the warehouse and move it to the outlet. Some examples of those types of locations that we put and the outlets and are Hilton Head and Williamsburg and what we've seen because we are working through the first year of this experience, and we are learning a lot about it by certainly over performing in the summers. And we were actually pleasantly surprised how much they over performed during the holiday time period. We didn’t really realize that some of the beach locations would do as well as they did like Delaware and Hilton Head doing that. So we are getting a lot of learning under a belt but the process is a little bit different and it's simplified process, it’s a bit of a service model like, I’ll call it and the product is merchandized in collections, so it's an easier faster shop. The consumer move through the system in a little bit of different way, but it's not as if its unfamiliar for them. They can still in most of our outlets get our primary products that’s available and advertised at a time that will be at the very front of the store. But if they choose to move through the back of the store they can find some pretty good values. And thus far, particularly in the UK, it's been working very well.

Okay great and then I guess just one more question regarding promotion. In this past fourth quarter, did you stick to your plans with regards to your promotional cadence? And looking forward to the first quarter, could you give us a little bit color in terms of what you are planning?

Yes so, when we move into every quarter in every year we have a solid plan that is also inclusive of a number of different options that we can pull triggers on given what might be going on in the environment or what we think to trend or whether a property is working. In this past fourth quarter, as we have mentioned before even on the last call, we did get out of the gate pretty slowly with Star Wars and actually I think a lot of people did. There wasn’t as much advertising for this film and I understand that because ultimately clearly with the Box-Office it was going to be necessary, but at the end of the day that kept it from being introduce to some of the younger consumers. So once the film hit, we saw double-digit comping on Star Wars but up until that point, we felt that we wanted to pull the trigger on some of our tried and true approaches to driving sales particularly one that is when you buy multiple units of a product, it tends to drive our DPTs up in the 70s and 80s. So you get the discount on the skin, but you don't get the discount on the all accessories, so we tend to try to create those promotions around product where you really wanted to have the add-ons whether it's the outfit or the music or any other element of it that might be helping you tell the story. So all of this is really enabled by the fact that we now have some clear promotional process and cadence where we already have tested which we did this time as well in specific markets, how the promotions going to respond, ultimately we focus telling the stories, which then drives the DPTs and the UPTs and at end of the day even with some promotions that we had in our back pocket that we wouldn't have used it, we did need to preserve our profitability.

Okay so then for Star Wars promotion that you had used would have included by two units for a set price, sorry I'm just unclear as to what?

Yes, that’s usually the way, those are the types of promotions that we have done in the past that have worked well for us and as I said, we tested that in some markets and saw the type of reaction that we would get and how you preserve the profit, because ultimately they still would buy all of the same [Indiscernible] for example they would still get a forecaster and it sound.

Okay, great.

But also the pricing that we have on those particular products is much higher than our typical pricing. So from the initial margin perspective, we're commanding higher price points in those and we do have more flexibility if we chose to run some of those promotions that Sharon is talking about.

Right and that feeds into being more conscious at a very front of the process of value engineering, building in the margin, thinking of things through a product lifecycle perspective, which feeds right into your first question about what you are doing with outlets what's the strategy with outlet. These are sort of macro long horizon constructs which is inclusive of the fact that occasionally you need to pull a promotion out of your back pocket. The question on whether you are profitable or not is what promotion do you pull.

Okay, great. Thank you.

Our next question comes from the line of Stephanie Wissink with Piper Jaffray. Please proceed with your question.

Hi, sorry about that, this is actually Lauren Wolff going in for Step, just a couple of questions I thought there was. Just do you have any color to provide any additional color regarding your owned brand plan for Promise or Honey Girls or anything else in particular I know you mentioned a couple of items that with the Easter launch that may also be impactful? And then secondarily any partnership plan just around anybody like UBS content or [indiscernible] slated?

Yes, thanks and so for our owned and operated brands our proprietary brands our Play Beyond the Plush construct that we introduced in fall of 2014 has been working for us, it creates a balanced offering for the consumers and we've also been able to successfully develop products and concepts against key consumer groups, where we look at for example out on the horizon of our license properties. Where there might be a whole in the offering Honey Girls was a great example of that. We also want to create things that not only are long-term that have legs under them where we can take them into different directions, if they get traction with our consumers, but things that create more predictability in key timeframe like Merry Mission that's repeatable. So that just decreases risk for us because I have a place to go back to each year by attempting up Glisten this year on top of sort of known entity at that juncture with Merry Mission. Just we've started out in a great place, because the consumer was already familiar with the basic concept and adding Glisten helped bowie that business as we mentioned Glisten became our number one units in dollars per transaction SKU for the year or for the fourth quarter rather. So we will continue this and I did speak about that we have 10 million digital interfaces which it's hard that’s part of the challenge with some of these avenues. But it's hard to directly link those to sales, but when you look at it in macro that’s the three properties that we delivered thus far which is Merry Mission, Honey Girls and Promise Pets has actually contributed the over $60 million of sales during their life time. You have to believe that there is some correlation there. Independently when we launched these products like a Promise Pets that we launched second quarter of last year, it popped up to 10% of sales within a number of weeks and then they bowie back down, but you can see that with these types of approaches we really are making it impact with the consumers in they are coming in to see what we're doing. So we will continue to upgrade the play, the Honey Girls will be out with a new character as well as a new music video and they are going to Paris now, they are on tour, it's exciting. We will be out launching new characters for Merry Mission in the fourth quarter of next year and as I mentioned earlier and I'm very excited about this, we are launching a property called Horses & Hearts for our slightly older girl or equestrian girl, which is a well more realistic than some of the things that we've had in the past that are horse like. And we think that just given that overlap and interest for little girls with horses and just Build-A-Bear all of that but should have excused upon a lot of lags.

Okay, thanks.

[Operator Instructions] Our next question comes from the line of Greg Pendy with Sidoti. Please proceed with your question.

Hi. Thanks for taking my call. My question just wondering on Spin Master if it’s fitting in the ball how we should think about 2016 and when that revenue will be hit, because I believe it should be coming on a lagging basis so that can be more about 2017 of that. Thank you.

It does lag, you are exactly right it lagged. And this is a holiday offering, fourth quarter offering it's a classics fourth quarter set for the majors and the revenue will be lagging into the first quarter 2017. Royalty fixed revenue yes.

Okay, thank you.

Ms. Sharon we have no further at this time. I would now like to turn the floor back over to you for closing comments.

Thanks again for joining us today. And we look we look forward to speaking to you when we have our first quarter results in May.