Problems with its e-commerce platform left Build-A-Bear Workshop Inc. feeling less than cuddly about its online sales performance in December, and now the toy and stuffed animal manufacturer and retailer is going to do something about it.
Build-A-Bear, No. 663 in the Internet Retailer 2016 Top 1000, reported e-commerce sales grew by 2.0% on a comparable basis year over year during the fourth quarter, which is a sharp decline from the 16.4% e-commerce comparable sales gain it experienced the year before. The retailer does not break out online sales figures. For full-year 2016, Build-A-Bear posted an e-commerce sales gain of 7.2%, compared with 11.8% a year ago.
President and CEO Sharon Price John told analysts on Build-A-Bear’s Q4 2016 earnings call that the retailer’s e-commerce platform couldn’t handle a double-digit spike in traffic in December, leading to disappointing year-over-year online sales growth during the month of 3.0%.
“The e-commerce system and processes were not able to capture the increased sales opportunity in its entirety,” she told analysts on the call, according to a transcript from Seeking Alpha. As Build-A-Bear experienced a double-digit decrease in store traffic, it had a double-digit increase in traffic in e-commerce traffic “and we just weren’t quite ready to handle that” she said.
A company spokeswoman could not be reached for comment about what, specifically, went wrong with Build-A-Bear’s site in December, but on the call, Price John said it is because the site is old.
“We’ve just had this website for some years now,” she says. “The good news is all the homework and everything, the money, the capital everything has been approved for us to upgrade that e-commerce site and actually take us into a new digital age.” According to Top500Guide.com, Oracle is Build-A-Bear’s e-commerce platform vendor.
Chief financial officer Voin Todorovic told analysts that 25% of the company’s capital budget of between $20-$25 million will be allocated to e-commerce and technology infrastructure upgrades.
“We are going to overhaul our entire digital platform by the end of this year, from e-commerce to website to the way kids interface with Build-A-Bear, even from a mobile perspective,” Price John said. “A big part of that solution is an aggressive and comprehensive content strategy.” She cited the success of content centered on the company’s Honey Girls, three stuffed bears that form a band, have their own app and star in several of the company’s YouTube videos featuring original songs. More such material will be developed, she said.
For the fourth quarter ended Dec. 31, Build-A-Bear reported:
- Net retail sales of $107.7 million, down 7.6% from $116.5 million last year.
- A comparable-store sales decline, including e-commerce, of 8.3%, compared with a 5.6% decline.
- Total revenue of $110.3 million, down 6.3% from $117.7 million.
- Net income of $318,000 compared with $20.1 million.
For 2016, Build-A-Bear reported:
- Net retail sales of $357.6 million, down 4.1% from $372.7 million last year.
- A comparable sales decline of 4.4% compared with a 1.0% gain.
- Total revenue of $364.2 million, down 3.6% from $377.7 million last year.
- Net income of $1.4 million compared with $27.3 million last year.