Q4 2024 Build-A-Bear Workshop Inc Earnings Call

Participants

Gary Schnierow; Vice President, Investor Relations and Corporate Finance; Build-A-Bear Workshop Inc

Sharon John; Chief Executive Officer; Build-A-Bear Workshop Inc

Vojin Todorovic; Chief Financial Officer; Build-A-Bear Workshop Inc

Eric Beder; Analyst; Small Cap Consumer Research

Michael Baker; Analyst; D.A. Davidson & Company

Greg Gibas; Analyst; Northland Securities

Steve Silver; Analyst; Argus Research

David Kanen; Analyst; Kanen Wealth Management, LLC

Presentation

Operator

Greetings. Welcome to the Build-A-Bear Workshop fourth-quarter 2023 earnings call. (Operator Instructions) Please note this conference is being recorded. I will now turn the conference over to your host, Gary Schnierow, Vice President of Investor Relations and Corporate Finance. You may begin.

Gary Schnierow

Good morning. Thank you for joining us. With me today are Sharon Price, John CEO, and Voin Dorval, CFO, for today's call. Sharon will begin with a discussion of our fourth quarter and full year performance and update the progress we have made on our key priorities after Voin will review the financials in more detail and provide our guidance. We will then open the call to take your questions. Members of the media who may be 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 and the earnings release is available on the Investor Relations portion of our corporate website. A replay of both our call and webcast will be available later today on the IR site. I will remind everyone that forward-looking statements are inherently subject to risks and uncertainties. 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 Company's annual report on Form 10 K. We undertake no obligation to revise any forward-looking statements unless required by law.
Also, during this call, we may discuss non-GAAP financial measures, which adjust our GAAP results to eliminate the impact of certain items, which management believes can be useful in evaluating the Company's performance. The presentation of non-GAAP financial measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and non-GAAP measures are presented. You'll find information regarding these non-GAAP financial measures and a reconciliation in the Company's earnings release.
And now I would like to turn the call over to Sharon.

Sharon John

Thank you, Gary. Good morning and thanks for joining us for Build-a-Bear Fourth Quarter and Fiscal 2023 earnings call. We are pleased to again report record results as we continue to execute against our strategy, which is focused on the evolution of our business model to profitably leverage the power of the Build-A-Bear brand. Fiscal 2023 represents the 3rd year in a row of record results for Build-A-Bear. In keeping with this trend and as reflected in our guidance in this morning's press release, we expect to deliver a fourth consecutive record-breaking year in fiscal 2024.
Now to recap 2023, specifically for the fourth quarter, revenues increased nearly 3% to over 149 million and we delivered pretax income of more than 26 million. While these numbers were within the previously provided guidance range, we would like to note that the results were softer than originally planned due to a combination of e-commerce disruption and some overall fourth quarter economic challenges accentuated by severe January weather. Voin will provide some more insights on that impact in his remarks.
Turning the page to full year fiscal 2023 results. Revenues increased nearly 4% to a record 486 million and pretax income increased 7% to over 66 million, also a record for the Company. As noted, we attribute these 2023 results as well as build a very meaningful expansion and profitable growth over the past few years to the ongoing successful execution of our strategy and the evolution of our business model, which I will highlight in a moment. But first, to better understand the progress we have made as a comparison, fiscal 2020 three's 486 million in total revenue is up 44% from the $338 million generated in fiscal 2019 the last pre-pandemic year. Additionally, this revenue has delivered a significantly improved level of profitability, 148 million revenue increase over the past four years generated an incremental 65 million in pretax income, and we have driven this financial improvement across all three of our business segments. As a reminder, our approach our strategy is to deliver long-term profitable growth and is grounded in our most valuable asset, the power of the Build-A-Bear brand.
In summary, the Company's strategic initiatives are one, the global expansion of unique experience location. This includes the evolution of store types and business model to the acceleration of a comprehensive digital transformation. This ranges from systems upgrade to e-commerce, integration to content creation and three, the continuation of investment to support initiatives that leverage Build-a-Bear now multi-generational brand to drive incremental profitable growth.
Some of the recent progress that we've made in each of these initiatives include first, our workshops are a critical part of what creates a valuable point of difference in the marketplace. Guests come to Build-A-Bear Workshop for an experience in creating their own unique furry friend. This is why up to 80% of visiting guests create plans in advance to go to their local Build-a-Bear Workshop, often in celebration of birthdays holidays or special occasions. We cultivate these memorable and shareable one to one moments with guests through our exclusive bear voting process after building their unique furry friend guest visits conclude with us collecting first party and loyalty club data for more than 80% of our customers, which enables us to directly communicate more meaningfully with them to drive further engagement and repeat purchase, whether it be on the Build-a-Bear website, flushing content, sending a guest or coming back to a store, perhaps at one of our many tourist locations during their next family vacation, given a store visit is the most common first step in the customer's Build-A-Bear experience, plus our top tier store economics and the independent research showing a clear market opportunity for additional workshops. We focused on the expansion of our store fleet post the COVID pandemic. You might recall on our fourth quarter 2021 earnings conference call, we stated that we expected to add between 15 and 20 new partner operated and corporately managed retail experienced locations over the next two to three years. Today, we are pleased to share that we opened 44 new locations in just the past two years, more than doubling the previously stated expectation and existing international franchise partners have also started their post-COVID expansion, adding a net six stores in 2023.
In summary, between our three global experienced location business model, net new unit growth was nine stores for 2022 and 37 stores for this past year. Today, we are guiding to net new unit growth of at least 50 additional retail locations in 2024 on a global basis, which would bring the three year net new unit growth to nearly 100 stores by the end of this year.
Our second strategic initiative has been an ongoing comprehensive digital transformation that touches nearly every aspect of Build-a-Bear and is designed to elevate business efficiency, integrate customer communications and accelerate incremental opportunities like gifting and personalization program. The ultimate goal is to create a cohesive digital store and marketing ecosystem that expand Build-a-Bear addressable customer base and the lifetime value of our guests in-store online or otherwise, to drive overall sales and profitability.
One of the first steps in the evolution to becoming a more integrated omnichannel organization was to replatform and upgrade Build-a-Bear e-commerce business. This helped to drive a tripling of total e-commerce sales since 2018, inclusive of the 2023 softness that said, as we have noted in the past, we have much greater aspirations for our e-commerce business as we believe the Build-A-Bear brand has a unique opportunity to expand into gifting more meaningfully gifting alone is a multibillion-dollar category. Therefore, after a multi year, digital transformation effort ranging from a new warehouse management system to the implementation of buy online ship from store abilities. The goal is to accelerate the move to the next step of the company's digital strategy. With that in mind, we have recently created the new role of Chief Customer and Digital Officer with a single oversight of both website and customer marketing. The physician touches all points from digital to in-store, including loyalty and CRM, plus creative and guest services. And it's designed to unleash the power of a much more integrated approach to driving the business. We expect this first-of-its-kind structure for us to elevate and connect our messaging while providing an appropriately personalized experience wherever whenever and however our guests choose to engage with Build-A-Bear.
Our third strategic initiative is the increased investment to support profitable growth as corporate store operating margins remained above 25% for the third consecutive year. And we have continued to shift to an asset-light partner operated store model. We have meaningfully improved the Company's cash flows. Build-a-bear is more consistent cash flow has allowed us to make longer-term marketing investments and entertainment initiatives that we expect to be evergreen. The expansion of our annual Merry Mission marketing campaign in the fourth quarter is just the latest example of this opportunity. In conjunction with overall multifaceted holiday effort, we released build a Bear's first ever animated theatrical film glycerin and the Merry Mission based on the characters and story line of the multiyear top-selling holiday plus collection. And while we're excited about the film as a pure entertainment vehicle, we primarily look at it as another piece of a comprehensive content strategy. We are utilizing content and entertainment related efforts such as the movie and in this case, as well as Merry Mission music videos, Merry Mission gaming app, the Merry Mission section of our robots, Build-a-Bear Tycoon game and the transformation of Build-A-Bear Workshop into temporary standards workshops during the holiday season as a comprehensive marketing effort to bring the company's entire customer facing communications to life through characters and compelling stories to drive awareness, engagement, affinity and ultimately sale.
With that in mind, although as we mentioned, Q4 was lighter than expected. This marketing effort drove Merry Mission product sales up more than 65% year over year. With this multiple touch point marketing model in place, we split listen in the Merry Mission to become a part of our annual holiday tradition. It is important to understand that none of this could happen without the power of the Build-A-Bear brand, but what do I mean, when I say the power of the Build-A-Bear brand, well, now that almost 250 million furry friends have been made over the past 25 years, around the world. Our guests have no doubt enjoyed untold members, especially met of special moments, Miles' stories, laughter and fuzzy hugs with their Build-a-Bear animals. These memories translate not just into the 93% aided brand awareness in North America that we enjoy, but more importantly into trust, affinity and preference over the past quarter century, these special memories have made Build-a-Bear in a word beloved. In fact, just recently WPP's brand analytics platform, BAZ. recognized Build-a-Bear for many of these attributes on their list of the 20 most influential retailers across North America BIV. Note that strong brands have deep emotional, meaning for customers, and this is what gives a brand influence. We are pleased that by adding a little more heart to life. Build-a-bear is recognized alongside with such iconic brands as Disney, Apple and Nike. With the continued opportunity to leverage that brand power, I will turn our outlook to 2024 quarter to date following softer February sales that were reflective of some of the challenges we had experienced in the fourth quarter. We entered March with a little bit of a positive change in trends. Although we are balancing this with the reported consumer spending concerns and some toy industry reports with downward expectations for 2024, we remain confident in providing guidance with the expectation of continued growth as we execute on three key pillars of one store expansion, with the expectation of net new unit growth of at least 50 stores globally to digital transformation, including our recent actions to advance the Company's e-commerce business and three, investment to support further growth, Build-a-Bear, a new phase of sustainable free cash flow, combined with the business model shift to more asset-light partner and franchise stores has allowed us to increase investment to support growth while also returning cash to shareholders. Over the past three years, we have returned more than 90 million to shareholders through stock repurchases and two special dividends, while remaining debt-free, reflecting management's and the Board's confidence in Build-a-Bear continued financial performance. We are now initiating a regular quarterly dividend of $0.2 per share while continuing to buy back our stock. Overall, we remain pleased with Build-a-Bear record-breaking results in 2023 as well as the many accomplishments of this year. We are also thoroughly excited about the opportunities across nearly every aspect of our business for 2024 and beyond.
Finally, one of the most exciting efforts to watch for is the rollout of a comprehensive new brand campaign. This campaign is designed to further expand the appeal of Build-A-Bear while simultaneously connecting multiple generations to a universal message designed to put our beloved brand right in the middle of the collective conversation. Again, the multidimensional campaign will be launched across all consumer touch points and it called the stuff. You love beyond the obvious double meaning of the word stuff. The big idea relates to Build-a-Bear, not only as one of the things that is loved, but the Build-A-Bear both enables and indeed is often woven into the memories about all the stuff we love in closing after over a decade of service to this brand and company, I can truly say that I'm sincerely appreciative to Build-a-Bear associates, guests and partners as we continue to work toward our mission of adding a little more heart to life.
And now I'd like to turn the call over to Voin.

Vojin Todorovic

Thank you, Sharon, and good morning, everyone. It's good to speak with you again today to share our results for our fiscal fourth quarter and full year of 2023.
Before I touch on our financials from the past year, I want to recap a few highlights. First, we are pleased that we delivered our third consecutive year of record results as we grew across all segments, expanded gross profit margin and increased pretax income versus last year. In addition, earlier today, we announced our 2024 outlook, reflecting expectations for another record year. Also as the result of our solid business performance and strong cash flow generation over the past three years, we have paid two special dividends and repurchased more than 1 million shares of common stock, returning over $90 million to shareholders. To put this in perspective, this return of capital to shareholders represents approximately 30% of our current enterprise value. On top of this, our Board has approved the initiation of a $0.2 per share quarterly dividend, showing confidence in the Company's ability to sustain profitable growth based on our long-term strategic plan.
Now moving to our financial results, starting with a more detailed review of the fourth quarter that reflects one extra week compared to the prior year. Total revenues were $149.3 million, up 2.9% year over year. Net retail sales increased 1.5% year over year with a positive contribution from stores due to the extra week and that 8.8% decline in e-commerce demand. Store sales were particularly impacted by a two week stretch of bad weather in January, when we experienced over 250 days of store closures, our traffic was up, but we saw a decline in dollars per transactions for the quarter. Commercial revenue which primarily reflects represents wholesale sales to our partner operators and International franchise revenue rose a combined 31.1% versus the prior year. Gross margin was 56.4%, an improvement of 140 basis points compared to last year, benefiting from merchandise margin expansion, reflective of lower freight costs and leverage of distribution costs.
Sg&a expenses were 58.5 million or 39.2% of total revenues compared to 36.9% of total revenues in the 2022 fourth quarter the 230 basis point increase in SG&A was driven by an increase in marketing expenses, higher wages due to inflation, the addition of talent and other investments to support future growth, even though SG&A was higher with growth in gross profit dollars, we delivered 26.2 million of pretax income, nearly flat to last year. Eps increased 12.9%. On an adjusted basis, EPS decreased 3.6% as our tax rate increased from 22% to over 27% as we remove the benefit of the release of a tax valuation allowance.
Now moving to highlight a few of our full-year results. For fiscal 2023. Total revenues were $486.1 million, up 3.9% year over year, which included the extra week in the fourth quarter. Net retail sales increased 2.2% year over year and were up close to 70 basis points excluding the extra week for the year, our store traffic again outpaced reported national retail traffic. Our transaction growth was positive for the year, while dollars per transactions were down low single digits. E-commerce demand was down 5.8% for the year. And our commercial and international revenue rose a combined 37.7% pretax income grew 7.1% to $66.3 million for the year. Higher gross profit dollars more than offset the increase in SG&A and lead to pretax margin expansion of 40 basis points to 30% to 13.6% of total revenues. Excluding the benefit of the 53rd week, pretax income grew approximately 3%. Earnings per share was $3 and $0.65 per diluted share, a 15.9% increase, aided by a lower share share count in a decrease in the tax rate due to the release of valuation allowance. On an adjusted basis, EPS was $3.42, an increase of 8.6%.
With respect to the balance sheet at year end, we had cash and cash equivalents of $44.3 million, an increase of $2.1 million compared to year end 2022. This was after returning $42.4 million to shareholders through a special dividend payment and share repurchase. So during the year, inventory at year end was $63.5 million declining $7 million or 9.9% from the end of the last year. We remain comfortable with the level and composition of our inventory.
Turning to the outlook, the full details of our guidance are included in our press release, but I will highlight a few key metrics compared to fiscal 2023. Excluding the impact of the 53rd week, we currently expect total revenue to grow on a mid single digit basis. This growth is partially driven by the addition of at least 50 net new experienced locations with the majority coming from partner-operated expansion, both internationally and domestically. Our revenue growth will be back-half weighted as we add locations as well as due to a more favorable fourth quarter fourth quarter comparison. In addition, the timing of shipments and the opening of partner-operated locations may create some differences compared to last year. We note that commercial revenue has a particularly difficult difficult first quarter comparison. But with our expectation that partner-operated stores will be the majority of new store openings this year, we still expect strong growth in this segment on a full year basis pretax income to grow in the mid single digit range on a full year basis, but we expect to have unfavorable timing of marketing expenses in the first quarter of the year. As we launch our new comprehensive brand campaign, the stuff you love and continued the integration and evolution of our digital transformation strategies to optimize customer lifetime value. Our outlook also reflects increased freight costs caused by conflict in the Middle East and ongoing wage and inflationary pressures and increased depreciation expense.
In closing, I would like to thank all our store and warehouse associates as well as well as corporate team members for contributing to our record results, which has positioned us for our fourth consecutive record-breaking year in 2024.
This concludes our prepared remarks, and we will now turn the call back over to the operator for questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Eric Beder, SCC Research.

Eric Beder

Good morning. Learning on a few quickies here. Could you talk about on what we should be thinking about in inventories going forward. You guys did an outstanding job of managing inventories last year. I mean, how should we thinking about it now with slightly rising shipping costs and some other pieces going forward here?

Sharon John

Thanks for the question, Eric. Definitely, inventory management has been one of our focus areas over the last several years as we have managed through COVID as well as we came out of it, trying to mitigate some of the challenges as it relates to increased freight costs and due to COVID-related challenges, some of those things are behind us from the COVID perspective. But at the same time, due to the nature of some of the conflicts and impact on the shipping lead, the costs are starting to creep back up again. So we do expect to have some headwinds as it relates to freight that will also impact our inventory by the end of the year, assuming those freight costs there that same level.
In addition to that, as we continue to grow our partner-operated business and expand store location, there is probably going to be some additional need for working capital and some more inventory, and we will continue to manage that. So that is creating some timing. As again as a reminder, for everybody on the call, our shipments to our partner operated locations are on a wholesale basis, though, depending on the fulfillment and opening of the stores and the replenishment to the stores, there is some timing that may be a little bit different than timing in our retail locations.
Great.

Eric Beder

And could you provide us kind of a thought process here in terms of how we should be thinking about the returns on these commercial and international where these partners were going through. I know that the gross margin is a little bit lower, but what should we be thinking about in terms of the operating margin for these kind of businesses? And on an unrelated note, how do you look at expansion into potentially new our areas for franchising and for commercial? And how are we thinking about that beyond the 50 or so, which we have here.

Sharon John

I mean a great question. You know, this is one of those areas of growth for the Company. We believe, especially as we think on a global basis, that there is more opportunities for us and to grow our international footprint. And actually, yesterday, we opened our second store in Italy in Rome so we continue on this journey. That's part of our expectation to continue to grow these partner operated locations and expand in new markets and more to come in the future as we continue to work with different part partners across the globe. Also, this particular model is one that we like from the capital perspective, and it's very asset-light. Our partners are making the investments in stores in inventory we sell to them on a wholesale basis. As you think about the margins that we are getting, this is one of the areas where we don't get the full top-line sales. So when you are thinking even about the growth that we are guiding to that reflecting our wholesale sales these partners, but we are getting the high margins on that business. And you know, that's helping our overall profitability. And we continue to leverage our fixed overhead with some of the investments that we are making there. So we believe that this is going to be very accretive for us as we go into the future. And as we have said in the past, you know, like we expect that this to be a big opportunity for us for many US-based companies. It's common to think that we could have as many stores outside of US as we have in our domestic markets.

Eric Beder

Great. Thank you.

Operator

Michael Baker, D.A. Davidson.

Michael Baker

Hi, thank you. Couple a just a follow-up I wanted to start by following up on that these 50 partner locations. Any color on like where they are, they our experiential type places like vacation destinations or just adjusted you know, I presume a lot of them are outside of malls. Just sort of wondering what kind of locations we can think about for where those will be.

Sharon John

Hi, and thanks for being on the call. I'm going to start now hand it over to Voin for some more color. And as first, I just wanted to be clear, we haven't specified exactly which business model. All of these 50 new locations are.
And just to be clear, and I know this can be a little bit confusing that can be a corporately managed store, a commercial store or a franchise store. We're speaking strictly in the construct of where we're going to have retail locations. And the reason that's important is because those are three different segments of our business model and they all have different and different economics that are associated with them. And so some of those 50 stores are going to be corporately managed stores, which require more capital and some of them will be partner operated in the ones that are partner operated or they can also be corporately operated. They we do actively look for tourist locations. We shared that with you guys some years ago, we had done that cohort analysis of when we were still about 20% of our stores were unprofitable, trying to triangulate where we were successful. And in one of the big insights there was that we over-indexed on almost every key metric in an area where we calculated that 50% or more of the sales were to people 50 or more miles away, and they didn't really matter if that was a mall if it was Mall of America over a standing location at a beach. So it they have an interesting dynamic, but we have since focused on those types of locations. And again, sometimes we operate those and sometimes they are partner operated, but that will be our focus on areas that we think clearly hurdle easily and to some degree, the metrics that we have in place to decide whether we open that location or not. I think it's important to note Voin comment about the international opportunity that we have and to reiterate some of the comments that I made in my script about that we did have some independent research about the concept of how many additional locations we believe are up. There's an opportunity, an opportunity for Build-a-Bear to grow even domestically.

Vojin Todorovic

And as we continue to look at some of these locations. Clearly, what we have said in the past that we over-indexed in tourist locations and as we grow definitely around the world, especially as we have a couple of these stores that reopened in Continental Europe. There are going to be some more of these tourist destinations in malls. And you know, we as we are working with our partners that are going to be opening majority of these locations. You know, we want to be in best places that are going to drive traffic and really present our brand in the best possible way and you know so and hundreds of these 100% of the sales are going to be profitable for us. So we are very happy that we can do some of these things in an asset-light model as we continue on the journey to and expand our brand globally.

Michael Baker

Yes, that makes sense. A clearly a positive have a positive ideas are two follow-ups. One, I was just curious, can you talk about bear case type sales versus, you know, birthday parties or those types of products? And then you had said a ticket per transaction down. Is that do you think that's an economic issue? People sort of spending a little bit less each time they come in or just wondering if there's any color as to why ticket, what go our ticket per transaction?
Thank you.

Sharon John

And the barricade comment, we don't break down the sales of the specific areas, particularly on our website. So their cave is a micro site inside of buildabearville.com that has an age gate that's focused on the older consumer. And as you might some of you might have noticed we get a lot of press about some of the products that we offer and barricade. We were actually on the cover of the Wall Street Journal around Valentine's Day with one of our one of our double theirs, but they're very cute and miss him and we do a robust business. And most importantly about that businesses is the consumer that outside the core, our core consumer base, these are adult purchases often adult to adult gifting, and it fits right into our broader strategy of appealing to a multigenerational audience on the birthday business, we've often shared that sales associated with birthdays, whether it's a Birthday Treat Bear all the way to a party inside of one of our stores is about a third of our total business that we love the birthday business and we created that Birthday Treat Bear, which is there where you can come in and Pay Your Age for the month of your birthday, and we use that as our number one acquisition tool for our core consumer. You have to be in the loyalty program to participate in the Birthday Treat program. And so that really builds our first-party data and allows us to communicate again, as I noted in the creation of this ecosystem to drive lifetime value, it gives us that direct communication to that consumer. And we reengage with them for other opportunities inclusive of the first day that their child may be hopefully wanting to participate at Build-A-Bear or if they come in on the Birthday Treat Bear. We would thought clearly encouraged maybe a party the next year. So it's a great acquisition tool for us on and we still have although we've done a great job, I think we have a tremendous opportunity to keep striking asset lifetime value with that strong acquisition tool.

Vojin Todorovic

And to add a little bit more color on your question about changes in dollars per transaction. I'll start first, as I mentioned in our prepared remarks that our traffic was up on a full year basis. So we continued to execute and on our initiatives to continue to drive traffic to stores. And we are very pleased that we continue to outpace national traffic quarter after quarter year after year, as our as customers are coming to our stores. There is some softness than we are and we said that our data transactions down there are a couple of things that are impacted definitely, we believe there is some impact that external from the macro environment, as you guys are reading about the reports from the overall auto industry and how it's been challenging in Q4, in particular, our performance and some of those changes are probably better and less impacted compared to the rest of the industry. But at the same time, there are couple of other internal things that are shifting. And one of those things is what Sharon just talked about, the birthday bearing news like our number one acquisition program. And as we are getting new guests into the program that the transaction value of those particular guests when they come in and interact for side with the brand, it's lower than our average transactions. And that has been the increasing component of our business. So that's also impacting our overall. It declined in dollars per transaction, but we are still pleased that we continue to drive traffic that people are coming to our stores and that they're spending their money and their discretionary income in our locations. And so we will continue to work on areas too, create excellent experiences for them and continue to drive our top line growth.

Michael Baker

Thank you. Appreciate it.

Operator

Greg Gibas, Northland Securities.

Greg Gibas

Hey, good morning. Thanks for taking the questions. I'm curious how own store comp sales performed if you back out that it will be Q4?

Vojin Todorovic

Well, clearly, no, what we said in Q4, we had 149 million in total revenue. That was 3.9% growth year-over-year. The impact of the 53rd week was about $7 million. So our sales were down overall. We also said that our web demand was down about 8.8%. So even though we were overall down the impact on us, even though we don't talk about the same-store sales, but the retail sales, it's a smaller impact than what was in on the web demand.

Sharon John

And just got clarity. I just for clarity. When you say owned stores, you're talking about our corporately managed stores. All of that data is based on our corporately managed stores. We're not including partner operated or franchise stores in that particular database.

Greg Gibas

Okay, perfect. Thanks for clarifying.
Yes. And I'm curious, you know what we kind of X out, the is that additional 50 stores, at least I'm curious what you're kind of implying comp store sales growth is in the 2024 outlook?

Vojin Todorovic

So we are expecting to grow, as I mentioned in the remarks on if we adjust for one extra week, we expect to grow in mid-single digit range a year over year. A lot of that growth is going to be coming from these additional net 50 new locations. Again, that may be back weighted. As you know, we continue to add stores and our partners opened them. So that portion of that growth in addition to that, we expect our e-com business to recover. But the digital transformation that's in place as well as we would expect improvement in our base business as well.

Greg Gibas

Okay. Fair enough. And really nice to see the anticipation of an acceleration in new store sales from I think it was 37 in 2023 going to at least 50 as expected. And I know you previously. It's just kind of a follow-up, but you previously said you're not really specifically breaking down, but curious if you could talk about maybe the rough mix on I guess first corporate versus partner operated and franchise, maybe like the rough breakdown is like 50 50 and and also international versus domestic, given your commentary on a lot of opportunity internationally, I'm just curious would be what maybe rough breakdown would be international direct domestic for those new stores?

Vojin Todorovic

Certain that, Sam, what we have shared that we expect majority of these locations to be partner operated of the openings. So so that is going to be definitely more than 50% like we are not providing the specific color on some of those. Again, some of this also depends on the timing and flexibility and openings again, as we are opening these locations. Some of this is outside of our direct control and there are supply chain challenges and impacts. But you know, we feel good about the overall number that we are guiding and how that's going to open in Brisbane open. It's still in work from the partner-operated perspective, a big portion of that we would expect to be in international markets as we continue to expand and does. So again, just because of all those reasons that I highlighted a second ago. I don't want to break some of those numbers in more detail, but we also expect our international franchise business will have some opportunities and, you know, be extremely we are planning to expand internationally. So it's again, beginning of the journey in some of those markets now that we are behind COVID and we are opening, as we mentioned, we have first two stores in Continental Europe in many years. So we are excited about that and they are going to continue to open throughout the year and we will be providing more context as we have more information to share.

Greg Gibas

Okay.
Greg, I appreciate that.

Sharon John

On the one thing. The one thing that I would add to that is clearly that 50 stores is a plus for us. It's a pretty long pipeline and so on. There's and we're planning years out beyond that as well without providing any specific detail on that. But and we have to one, we're saying, particularly in partner operated and even in corporately managed. These are leases that we're working with other partners. It's not a unilateral decision on which store what kind of format it is. And even in some partner locations, sometimes we end up running a corporately operated stores. So that's why we're we're being we have not crystal as we probably could be it's because it sometimes is down to the last portion of the negotiation on what form the store actually takes. And I guess and Voin mentioned, we just opened in Rome. But you might recall on the last earnings release, we discussed the excitement and the positive reaction in the Italian market when we opened in Milan. So that opened just yesterday, but we're quite hopeful we'll see the same sort of impact.

Greg Gibas

Great.
That's helpful.
Thank you.

Operator

Steve Silver, Argus Research.

Steve Silver

Thanks, operator, and thanks for taking the questions and congratulations on the new dividend policy. The underlying confidence in the business that must have helped inform that decision. And I appreciate the color on the positive impact that the Merry Mission movie had across all the various touch points across the business. I'm just curious as to whether there were any surprises or any unexpected lessons that you learned going through that process you expect to now be able to leverage in future content projects?

Sharon John

Well, there's always things that we learn and particularly with a new initiative. And we that was our first, as I mentioned on the theatrical animated feature. And we made the decision to do that with Merry Mission because we were already we had already enjoyed multiple years of success with these characters and the marketing and the storyline and already had an app and we had a real sense of is that this would be something that we would hope would resonate with with guest. Additionally, because and I mentioned it in the call, the power of the Build-A-Bear brand, we were able to secure a talent level that would we have typically, I would think not be that normal for a quote, unquote, specialty retailer creating a film. And so from Chevy Chase to Julia Michaels. And it was a really fun adventure for moms and kids alike. So and we went into this with eyes wide open in terms of looking at it like we do so much of our content creation as a primary marketing tool, something to make it a center point of what we do have reason to communicate and spread it across everything that we do to create a comprehensive impact on the guest. And so from what we learned on well, we didn't expect that we would have a theatrical release just because that was not part of our thought process that we were able to create a partnership with Cinemark from early on for exclusive theatrical release in October and early November, and that was an interesting we've never been at theatrical market or before. So that was an interesting process for us. And we were pleased that people are willing to come out to theaters and see our film. And we believe that we could actually next year because what we're trying to create and I believe we have created is a an evergreen concept and that we don't have to reinvent the marketing for the holidays every year. If you think about the longevity of holiday films that are targeted to kids and we will have a Merry Mission tradition marketing campaign next Christmas and each year, I would hope that we would learn something and improve, and I expect that will to be the case next year as we look through our marketing programs, look through our communications with through our content and as well as the media plan on how we can elevate, not just the Merry Mission program, which we did was up significantly, but to raise the low water level of everything that we do.

Steve Silver

Great.
I appreciate the color, and congratulations again.

Vojin Todorovic

Thank you.

Operator

David Kanen with Kanen Wealth Management frequency with your question.

David Kanen

Good morning, guys. Thanks for taking my questions. The first one is in the guide for 2020 for mid-single digit growth on what is it looks like if I back into it, you're expecting same-store sales to decline for the year. Can you give me an approximation on that or and please correct me if I'm wrong and you expect that to grow.

Vojin Todorovic

I just I think I answered that question just a minute ago, but I'll go again through this exercise. So as we talked about the mid single digits growth year-over-year in our guidance, that's compared on a adjusted 52 week basis 22. And we expect our growth to come from the store base as well as from our e-com base. In addition to that, we would expect to see growth from our base business as well we haven't quantified that growth in that number, but we expect to grow that portion of the business as well.

David Kanen

Okay. And then on e-commerce, I know it was down and you know the comparisons were more difficult. Do you expect in 2020 for e-commerce to resume growth? And if so, is it similar to the overall guidance of mid-single digits?

Vojin Todorovic

We haven't specified specifically for e-com. But again, based on some of the challenges we have seen in 2023, we believe that that particular sub segment with all the digital transformation initiatives that we have in place should be growing at a faster pace than some of the other initiatives.

David Kanen

Okay. So are you thus far in 2024? Have you seen the trends reverse to positive in e-commerce?

Vojin Todorovic

Yes, we have.

David Kanen

Okay. Great. And then final question, I'm not sure if this is meaningful or not, but on this new products shares was that I know there's a lawsuit there and a claim that you've infringed upon them, but is it is it a meaningful product? I know it just launched, was it a significant contributor to the quarter or it's essentially diminimus. And therefore, even if you you lose that, it's not going to affect results. Any color you can provide there is appreciated.

Sharon John

Well, as First I’d just like to note that Build-a-Bear is a 25 year old upstanding intellectual property holder, and we understand Interfor intellectual property law and that Skechers is based on many of our pre-existing animals and we are excited about the concept.
Is it, but two years more specifically to your question, clearly, we just launched it. So it currently it would be immaterial which is why we didn't mention it any of our any of our comments today.

David Kanen

Thanks for clarifying that. Good luck, guys.

Vojin Todorovic

Thank you.

Operator

Thank you. And we have reached the end of the question and answer session, and I'll now turn the call over to Sharon and John for closing remarks.

Sharon John

Thank you for your time today, and we look forward to speaking to you at our first quarter call. Have a nice day.

Operator

And this concludes today's conference, and you may disconnect your lines. Thank you for your participation.
Yes.
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Yes. Yes. Yes. Yes.
No, I do and then. Thanks.
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No, thanks, you.
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Yes, yes. Thank you.
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