Build-A-Bear Workshop Inc (BBW) 2017 Q3 法說會逐字稿

Greetings, and welcome to the Build-A-Bear Workshop Third Quarter 2017 Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Allison Malkin of ICR. Please go ahead.

Thank you. Good morning, and 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 2017 third quarter performance and review our strategies for the year. Voin will review the financials and guidance, and then we will take your questions. (Operator Instructions) Members of the media who may be on our call today should contact us after this conference call with your questions. Please note this call is being recorded and broadcast live via the Internet. 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.

Before I turn the call over to management, 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.

And now I would like to turn the call over to Sharon.

Thanks, Allison. Good morning, everyone. Before discussing the current results, I'd like to take a moment and acknowledge that tomorrow is the 20th birthday of Build-A-Bear Workshop. What was once labeled a fad is now a multi-generational global brand with a legacy of 170 million furry friends sold and $6 billion in cumulative revenues. Many thanks to our thousands of associates, partners and guests around the world for helping us to achieve this milestone. As a part of our celebration, we're marking our return to Manhattan with the opening of a new flagship door later today. And yesterday, we participated in the ringing of the opening bell at the New York Stock Exchange to mark this important pivot point in our company's history.

We now begin our next 20 years with significantly improved infrastructure, processes and skill sets. We have a strong balance sheet and cash flow to be able to both scale the business and monetize our powerful brand in new ways in order to drive sustained profitable growth in the future. And while you're familiar with the ongoing evolution of our real estate portfolio, we recently delivered on some key milestones in other areas of the business. We have now launched a completely upgraded version and platform of buildabear.com, designed to enable us to more efficiently leverage shifting consumer shopping trends in a much more robust manner. It has taken multiple years of planning and cadenced infrastructure upgrades to accomplish this important goal. This upgraded web platform also serves as the backbone for the reintroduction of our data-rich loyalty program, the Build-A-Bear Bonus Club. We plan to use this backbone to systematically increase the lifetime value of our members. And we have signed a new franchise agreement with a partner in China, representing our first major international expansion in several years. This accomplishment was made possible by a 3-year effort to overhaul our international organization, processes and systems, allowing us to attract new well-funded, experienced organizations to expand our valuable brand around the globe.

Now turning to the specifics of the third quarter results. In addition to delivering the forementioned milestones, the team's disciplined approach resulted in another quarter of gross margin expansion with pretax income in line with guidance as well as total revenues that approached last year despite some headwinds.

The quarter's results included total revenues of $82.4 million, a 1.6% decline from the prior year, inclusive of a 7.4% decrease in consolidated comparable sales. As we indicated at the start of the quarter, we anticipated this comp sales decline due to the expected choppiness in our base comp sale linked to the evolution of our retail footprint and the continued softness in overall traditional mall traffic.

Notably, the metrics that are more typically within our control showed increases including conversion, unit per transaction and dollars per transaction. We believe this demonstrates the strength of our product offering and enhanced service model. E-commerce sales declined 18% in the quarter as we shifted focus and resources to successfully launch the new site and transition to a new platform. E-commerce results were further impacted by a difficult comparison in last year when sales in this channel rose 25%, driven by key Pokémon launches.

Separately, we were unexpectedly impacted by store closures in a number of markets due to hurricanes and flooding in September. Normalizing for the planned e-commerce project and the impact of the hurricanes, we estimate that total revenues in the quarter would have been slightly positive. Notably, the sales trend has improved sequentially from July to August to September and now into October. In the third quarter, we were able to mitigate the impact of the sales decline with retail gross margin improvement of 90 basis points and deliver pretax income of $2.2 million in line with guidance, resulting in earnings per diluted share of $0.09.

Separately, through the first 9 months of the year, we have achieved pretax income of $4.1 million, more than double the level for the same period in 2016. We believe the investments that have been made to grow and diversify the business, upgrade the website and add more profitable stores in a range of formats and locations in the wide variety of places that families go for entertainment, position us to achieve our annual guidance and deliver profitable long-term growth. I also believe that it is important to reiterate that the ongoing changes in our real estate portfolio are expected to continue to contribute to some unevenness in comparable sales trends as some of the new stores, remodeled stores and new formats that are delivering positive results are not included in comparable sales calculations.

For example, in the third quarter, nearly 20% of stores were not included in the comp calculation as select locations were not in operation for a full year or were downsized when they were remodeled. In addition, we believe that traditional malls continue to be in an evolutionary phase, and the industry has yet to fully reflect the changes in rent structure. Rather than make extended commitments in capital investment in a long -- in a location with a long-term uncertainty, we are often electing to negotiate favorable short-term lease extensions and continue to operate in the legacy format that is now fully depreciated. These stores are typically in traditional malls that may have challenging traffic trends, giving us the potential for soft comp. But the lower occupancy costs resulting from the renegotiated short-term leases enabled the stores to meet our profitability objectives while continuing to generate cash flow. This strategic choice is allowing us to self-fund the investments needed to continue to selectively upgrade our real estate portfolio and evolve the business model as we make further advancements in other areas such as e-commerce and global expansion despite the potential impact on comps.

Other noteworthy highlights of the quarter include the second annual celebration of National Teddy Bear Day, which featured an offer of a limited edition bear. We had an outstanding response to this event as consumers once again lined up to participate in the fun with sales surpassing last year's levels. We also announced the completion of the review of strategic alternatives. After an extensive analysis, our Board of Directors authorized a share repurchase program of up to $20 million, reflecting the board's belief that Build-A-Bear stock represents an attractive investment opportunity. Since the program was put in place, we have repurchased approximately $1 million of common stock.

In conjunction with the completion of the exploration of strategic alternatives, we have also further diversified the board with the addition of Anne Parducci. Anne was previously an Executive Vice President of Family Entertainment and Marketing at Lions Gate, a premier next-generation global content leader, and recently launched her own family-centric entertainment company, CaribouKids. To continue to evolve our board, Russell Reynolds Associates has been retained to assist the board with its search for additional director candidates with skill sets and expertise reflective of our expanded strategic vision and with the continued goal of enhancing shareholder value.

Now while I've touched on some of these aspects, I would like to provide you with a more comprehensive update of our 4 key strategic platforms: channel evolution, brand and experience amplification, product expansion and profitability improvement.

Starting with our channel evolution initiatives as noted, we are focused on advancing e-commerce and omni-channel capabilities to leverage macro trends and consumer shopping habits while expanding Build-A-Bear's experiential retail concept, placing stores in a wide variety of locations where families go to have fun together.

With the recent completion of the re-platforming of buildabear.com, we believe we now offer a better user experience with more intuitive navigation, enhanced search features and a shopping configurator technology aptly called the Bear Builder that prompts add-on items through a guided process that is both customized and fun.

With this important work behind us and the platform upgrade now live, I'm pleased to note that e-commerce sales are not only back to positive but currently growing at a double-digit rate, driven by increases in both traffic and conversions. I encourage you to visit the website or explore the mobile version.

Turning to real estate. We have clear objectives that drive our decision for stores. These objectives are intended to maximize profitability while diversifying formats, increasing flexibility, reducing capital requirements, lowering occupancy cost and minimizing the number of long-term traditional mall-based lease commitments.

With these objectives in line, let me highlight one of the most recent innovations, the concourse shop. As discussed on the last earnings call, concourse shops are self-contained retail units that can be positioned in a variety of venues with a smaller footprint, higher mobility and shorter, more favorable lease terms.

In the third quarter, we opened 3 concourse shops, giving us a total of 23 locations in a variety of settings. We continue to expect concourse shops to have average annualized sales of $500,000 to $600,000 per location, which, given their smaller size, translates to $2,500 to $3,000 in sales per square foot and deliver a four-wall contribution margin that is projected to be higher than our traditional store target of 20% to 22%.

In addition, research shows that our consumers are rating their experience at concourse shops on par with the scores given for traditional stores. We believe this new model could be a game changer, both domestically and internationally.

In short, they generate approximately 50% of a traditional store's sales and 10% of the square footage and require 80% less capital than a new or remodeled discovery store. They offer high flexibility in lease length and terms and can be easily relocated if needed. Importantly, based on results from current locations, profit per square foot is multiple times higher than a traditional store. The model hits on all of the objectives that have been laid out for our real estate strategy.

As it relates to nontraditional retail, we expect to add test locations in Bass Pro Shops' popular Christmas village area, at the Fairmont Hotel in Scottsdale, Arizona and at Kings Island amusement park in Ohio. We will be back in Gaylord resorts for the popular holiday ice events and have extended our presence at Disneyland in Anaheim, California into early 2018. Build-A-Bear also continues to be offered on all 25 Carnival Cruise ships.

The changes and progress that have been made in our owned and operated business model are driving international growth as well. As I mentioned at the start of these remarks, we are pleased to have a new franchise partner in China and are working aggressively on the grand opening plans for the first store, which is targeted to open this December in Beijing.

We have selected a seasoned retail operator with a broad background in the China region, who has unique experience in interactive retail. We believe they have the passion, expertise and knowledge to develop the Build-A-Bear brand to its full potential in this territory. As a final note in the discussion on channel evolution, I want to again emphasize that the many puts and takes of our real estate initiatives are expected to contribute to continued choppiness in comparable sales. And while this remains an important metric, our focus is on total revenue growth and profit optimization.

Turning to our brand and experience amplification platform. We expect to continue to leverage our stores as important marketing tools, while enhancing the use of traditional media, social media and direct mail programs that leverage our valuable Internet database.

Fourth quarter highlights include tomorrow's celebration of Build-A-Bear Workshop's 20th birthday. We have held events throughout 2017 and leveraged the occasion to fuel our PR initiatives, leading to billions of media impressions for the year.

We also are excited about the opening of a new discovery store in New York City on 34th Street next to The Empire State Building. Not only is the area one of the top destination for tourists, it places our brand in reach of millions of local consumers.

Additionally, next week, our stores will once again transform for the holidays as the newest Merry Mission collection launches, including Glisten, our popular snowy white reindeer, and all of her friends. This propriety offering will be highlighted in the return of our Christmas catalog and advertised on TV and social media. This collection has become a perennial favorite as we build on the tradition of having a visit to Build-A-Bear be a part of family holiday celebrations.

Further building on seasonal traditions, we will once again have a float in the Macy's Thanksgiving Day Parade. This highly viewed event is the unofficial kickoff to the holiday season and we're pleased to continue to be a part of it, particularly this year as the parade culminates near our new Manhattan store.

As it relates to the third quarter product expansion, our goal is to continue to offer a balanced assortment of owned and licensed properties to meet the demands of our broadening consumer base. In addition to our propriety products such as this year's successful Halloween line and the upcoming Merry Mission collection, we plan to leverage a number of other licensed entertainment properties in the balance of the year. Importantly, this creates ongoing excitement in the stores as we are able to regularly offer new products for many of our core consumer segments. For example, the recent release of the My Little Pony movie has refueled interest in this popular product line. My Little Pony has consistently been a bestseller with our young girl and older affinity segments.

Looking forward, we expect the upcoming Justice League and Star Wars films to drive sales with the boys segment and the introduction of new characters to keep interest high for Pokémon product.

Separately, on the outbound licensing side, we expect to see distribution of a variety of new Build-A-Bear products for kids in the fourth quarter, including Build-A-Slipper program, a new offering of colorful headphones in the electronics category and the distribution of the updated rainbow version of last year's successful Build-A-Bear Stuffing Station by Spin Master.

Finally, as it relates to the fourth platform of profitability improvement, in the quarter, we delivered margin expansion, which continued to contribute to pretax income in line with guidance. Overall, we have made solid progress to leverage this multigenerational global brand to evolve from a primarily traditional mall-based retailer to a multidimensional company. With the disciplined execution of our strategic priorities, we believe we are on the path to deliver higher total revenue and profitability in 2017 versus last year.

With that, I would like to turn the call over to Voin, who will give more details on the third quarter financials and provide an update on our expectations for the fourth quarter.

Thanks, Sharon, and good morning, everyone. During the third quarter, we achieved pretax income in line with guidance as retail sales not included in the comp base, which represents approximately 20% of our store base, and strong gross margin expansion helped to mitigate the impact of negative comparable sales. Because of the activity related to the evolution of our retail portfolio, we caution that comparable sales may not give you the full picture of the health of the retail chain. In fact, we have close to a 20% contribution margin, which is more than double the contribution margin we had when we began to optimize our real estate portfolio in 2013.

We continue to transform this company to capitalize on the power of the Build-A-Bear brand by opening more productive store formats, developing new higher-margin revenue streams and offering desirable product selections while lowering promotional activities versus a year ago.

This morning's press release includes details of our third quarter performance that I will now selectively highlight in my discussion. Total revenues were $82.4 million, a decrease of 1.6% compared to the third quarter of fiscal 2016. Net retail sales were $80.6 million, a decrease of 1.4%, excluding the impact of foreign exchange. Consolidated comparable sales declined 7.4%, with North America down 7.8% and Europe down 5.2%. As an additional indicator of our retail strength, we generated increases across key metrics that are typically more within our control including conversion, units per transaction and average unit retail.

As expected, however, these increases were more than offset by a decrease in transactions, primarily due to a decline in store traffic. We remain pleased with the performance of discovery format stores. The locations in their first year of operation continued to achieve a double-digit increase over heritage locations and stores in their second year are performing in line with the company average. We are also encouraged by the opportunities that the concourse shops bring. In approximately 200 square feet, these locations are projected to average $2,500 to $3,000 in sales per square foot on an annual basis and achieve higher four-wall contribution margin versus traditional stores.

Retail gross margin expanded 90 basis point to 44.2%, reflecting a 220 basis point expansion in merchandise margins partially offset by deleverage of occupancy costs. Merchandise margin benefited from a focus on lowering discounts and improving initial markup driven by selective increase in retail pricing, ongoing efforts in value engineering and sourcing efficiencies.

SG&A increased $900,000 to $34.3 million or 41.6% of total revenues. We had previously guided for an increase in SG&A, driven by a reversal of incentive-based compensation that benefited SG&A in last year's third quarter. We also experienced additional expenses driven by the increase in store count. This was partially offset by benefit of favorable exchange rates compared to the same period last year. On a year-to-date basis, SG&A is $2.3 million below the prior year despite our store count rising approximately 7%.

Third quarter pretax income totaled $2.2 million compared to pretax income of $2.8 million last year.

Income tax was $700,000 with an effective tax rate of 33.8% compared to income tax expense of $1 million with an effective tax rate of 34.2% last year.

Net income was $1.4 million or $0.09 per diluted share compared to net income of $1.8 million or $0.11 per diluted share last year.

Turning to the balance sheet. At quarter end, cash and cash equivalents were $10.9 million and there were no borrowings under our revolving credit facility in the quarter. We ended the quarter with $62 million of consolidated inventories, representing a 4.3% increase over the prior year, driven by the timing of in transit and higher store count.

Excluding concourse shops, average inventory per store is down 6.5% compared to the prior year. For fiscal 2017, we now expect capital expenditures in the range of $20 million to $23 million. Depreciation and amortization continues to be estimated between $16 million and $17 million.

As it relates to the fourth quarter, we currently expect total revenue to grow in the low single-digit range compared to the prior year. Comparable sales to be flat to down as we expect to see improvement in conversion and dollar per transaction and anticipate the traffic patterns in traditional malls will continue to be a challenge, offset by improvement in e-commerce. Merchandise margins to continue to expand through ongoing cost improvement initiatives. Retail gross margin to improve an approximate fourth quarter 2015 levels as 2016 results included over $4 million in noncash charges. SG&A dollars to be modestly higher compared to last year, driven by timing of marketing expenses and by an increase in store count. And fourth quarter GAAP pretax income to be between $8 million and $10 million, and on a full year basis, we are reiterating our GAAP pretax income guidance range of $12 million to $14 million. In addition for fiscal 2017, we expect the annual tax rate to approximate 36% outside of discrete items, assuming consistency with the current tax code.

Finally, we anticipate ending the year with approximately 360 stores, 106 of which are expected to be in the new discovery format including the 26 concourse shop locations. As we go into this important part of the year, we feel confident in our ability to deliver improvement in areas where we have more direct control. We continue to expect our operational excellence to result in higher conversion and expansion in both merchandise and retail gross margin. We will also continue to be very focused on our expenses to mitigate uncertainties related to the challenging traffic environment.

Thanks for your time this morning. We'll now turn the call back over to the operator to take some questions. Operator?

(Operator Instructions) Our first question comes from the line of Ashley Helgans with Jefferies.

This is Ashley Helgans on for Steph Wissink. Can you quantify what gross profit dollars and EBIT dollars would have been from the revenue missed by the storm and the e-commerce site blackout?

Yes. Thanks, Ashley, for the question. So -- yes. So on a pro forma basis as we quantified like -- our total revenue was down 1.6%. So if we just assume a 1.6% revenue mix and apply our existing retail gross margin, which I think is very conservative because most of our fixed expenses are already reflected in our numbers, and you extrapolate, you will get a benefit north of $0.5 million on a pro forma basis.

Our next question comes from the line of Jeremy Hamblin with Dougherty & Company.

I wanted to just get into the real estate portfolio. You're obviously seeing some very, very strong results with your concourse shops and it sounds like kind of the longer-term plan to reformat the -- into the Discovery locations, that you're putting that a little bit on hold as you evaluate the best use of capital here. But in terms of thinking about the holistic portfolio, how long do you expect it to take to get to a point where you're -- you feel -- we've got about 80% of the real estate in the format that we want. Is this something that's kind of a 2-year target? Is it something that's considerably longer than that, just recognizing where your capital structure stands today?

Yes. Thanks, Jeremy. Yes, just to kind of walk through some of your comments, the concourse shops are still strong and we do feel like that there is an opportunity to continue to use the capital to expand those in a wide variety of places. I think as we've noted in the past, we -- our strategy at Build-A-Bear, even from beginning, the 20 years ago, was to be where families go to make memories and have fun and be entertained. And that used to be more of a traditional mall, but now it's evolved and we've created these wide variety formats to be able to meet those needs. Families are still very interested in experiencing Build-A-Bear. We just need to meet them where they're going. The long-term plan is I wouldn't exemplify putting Discovery on hold. What I would exemplify that as is managing the realities of real estate in terms of leases and 10-year projections or the lack of ability to predict a 10-year projection in some of these -- which are still A malls, but on the lower tier of some of the A malls. So we believe that as our 120, 130 leases are coming up over the next few years for renegotiation or renewal, that it gives us a lot of leverage to pause for a moment, renegotiate at a favorable rate, understanding that traditional heritage store is completely depreciated at that point and put a shorter-term lease in place so that we can continue to generate cash while we're building out some of these other alternative operations. We're also building Discovery stores in brand-new places that are totally non-mall based. One example is the New York store. There are others that we'll be able to announce at the end of next quarter. There are exciting new types of locations for us that are in mostly tourist-focused areas. So it's a really step-stone process of evolution. Giving you a date on horizon is a bit difficult. We could say 2 to 3 years would be ideal, but we are trying to be nimble in the response to making sure that when we finally do decide this place is stable, this place is stable, this is a good rent deal, that we're able to feel confident in those choices. It's, of course, the shift of a lease deal that has stepped increases on a 10-year basis is -- just really needs to change.

Okay. And then just kind of 2 follow-up questions related to that and that is given the returns on capital that you're seeing with the concourse shops, is there -- should we assume that you're going to see an increase in the total mix of concourse shop type of locations and maybe fewer of the traditional mall? I mean, it sounds like that's the direction that you're going.

Our #1 goal is to be profitable, make money and expand the company in terms of building our real estate portfolio, while doing that in a brand-right, consumer-centric way. So there's still opportunity for us to remain, as we noted, in some of these other stores and located in these traditional malls. But you are correct in the assumption that as a percent of our total offering, we will shift towards concourse shops, mostly because of all of those objectives that I highlighted in the remarks: reduced capital, increased flexibility, better lease deals. They're giving us a lot of leverage to meet the needs of our consumers in fresh ways and new places.

Understood. And then just following -- piggybacking on that. Then looking at your SG&A structure, you did a nice job of controlling that in the quarter and it sounds like you will again in Q4. Does change in portfolio, which somewhat probably implies maybe a total lower overall sales, is that -- is SG&A an area where you can look at that and look at the changes in your real estate portfolio and say "We have opportunity to further bring down that number on an absolute basis moving forward?" Is that required based on the changes in your portfolio?

Well, Jeremy, yes. So like, we continue to be really focused on SG&A and managing the SG&A from the store perspective. As a reminder, our occupancy expenses are part of the gross margin, our retail gross margin. So we will continue to manage our SG&A through the use of technology. We continue to really update our systems and make sure that we can still provide a great experience and manage our expenses really tightly as we have done all year long. The mix of the portfolio will have some of those changes as we continue to shift more to the concourse shops that tend to have higher contribution margins than our traditional stores. But in addition to that, from the SG&A perspective, we believe, as Sharon was talking about our traditional stores, that there is opportunity as we go and we are renegotiating these leases to further get some traction in reducing our overall occupancy cost. And one more thing, Jeremy, just like what we mentioned. We don't expect our total revenue to decline. We expect our total revenue to increase for the quarter beyond.

(Operator Instructions) Our next question comes from the line of Mark Rosenkranz with Craig-Hallum Capital Group.

Wondering if you could talk a little bit about the comments you made regarding the impact of the weather and the web platform redesign. How much would you attribute to each of the categories in terms of the difference between the slight revenue decline versus the anticipated slight revenue increase in the quarter?

Well, these were unfortunate events that were outside of our control, especially when we think about hurricanes that impacted some major markets for us in the quarter. We really haven't quantified and talked about this specifically, one versus the other. We talked the, as I mentioned on one of my earlier responses, we believe that our total revenue would be slightly positive compared to the last year if we were to adjust for the impact of those 2 items and we also quantify the EBIT impact from these events.

Okay. That's fair enough. And then switching, you mentioned on the comps, they're missing about 20% of stores due to the downsizing in the stores that are less than 1-year-old. Could you maybe talk a little bit more about the performance of those stores and when you might see those layered into the comp throughout '18?

Yes. I mean, like as you have seen like we have been increasing our store counts, up 7% versus last year. Also, we are changing the mix of our portfolio. We have more concourse shops as we've been also remodeling our traditional stores in the new Discovery format. These stores go in and out of comps, and they represent a big chunk of our overall base. So we still expect overall our total revenue to continue to grow as these stores go in and out of comps when they anniversary their opening or remodel dates.

And when we remodel to a Discovery store, we generally see very positive comps, closing in on double digits, sometimes passing a double digit in that first year. Additionally, the remodeled stores, when they are remodeled in place, stay in the comp, just to give you a little bit of color. But what a lot of our negotiations are in each one of these -- in our malls is to move the store to a more desirable location with a smaller square footage. Those fall out of the comp for a year. But because we see the sales increase on a smaller square footage, they're a very efficient move.

Our next question comes from the line of Brad Leonard with BML Capital Management.

I guess, the first question is you mentioned something about sequential improvement throughout the quarter and then also I think you said something about double-digit comps on the new e-comm platform. And kind of along with that, is that kind of what gives you confidence on the Q4 guidance and full year outlook?

Yes. So definitely, Brad, this sequential improvement, we saw this, as I mentioned, month-to-month all through the quarter. And then it's continued into October, even with some of the comp -- the e-comm disruption. So that's -- a lot of that is driven by improvement in the store base. But to your point, the double-digit improvement, as when we flip the switch on e-commerce, even as we stabilize and understanding there's always something that's going to have -- be a bit of a disruption when you flip over to a new platform, we have been, I would say, careful with how much advertising we've been doing on the dot-com, since we flipped the switch, to kind of stabilize the platform. Yet, we're still seeing this double-digit improvement. So yes, we are hopeful that when we actually turn on the marketing machine associated with this and move into the fourth quarter, we should see some very positive results, particularly, if you recall, compared to last year when we struggled a bit by not being able to actually meet the demand that was being generated on our dot-com because of back-end and fulfillment disruptions. So that is certainly playing into it but it's not all of the reason why we believe that we have some opportunity. We're also wrapping a soft comp on the stores themselves, if you remember, particularly as they're related to December and feel as if -- of the multiple impacts of that, some of which were traffic driven that are a little more out of our control. But we felt, and I think we clarified this last year, that some of the things such as catalogs and more overt marketing and some were more in our control and we've certainly corrected for some of those things as we're moving into the quarter this year.

Okay. And then just a couple more quick ones here. If -- how many Bass Pros are you going to go into for the Q4?

Yes. It's really a test this year. It's about 5. We're excited about this. If -- for those of you that might not be familiar with it, it may seem a little odd off the cuff, but they have a wonderful, highly experiential Christmas area that is very successful for them and they're really excited to have us as a part of that offering for their guests in consumer base. And clearly, on both sides, if this is successful, we feel that there is a tremendous opportunity to expand to a broader reach for their -- in their locations.

Great. And then I have a couple, just quick balance sheet ones for Voin. If -- Voin, one, would you care to give a range of where you expect year-end cash to be? And then, two, what is the decline in the accounts payable?

Sure, Brad. So like we still are very focused on managing our cash. We expect to finish the year probably above our cash levels from last year, assuming our -- we hit our guidance and our sales comp in line with expectations. As you know, some changes in the balance sheet, especially in the accounts payable line item, are related to changes in our sourcing agreements and some payment term changes. We are paying for our inventories sooner than what we have done in the past. But we are getting significant benefit in our margin that's continued -- that we expect to continue. So that's the big change in accounts payable, just the timing of cash payments.

(Operator Instructions) There are no further questions at this time. I would like to turn the floor back over to Ms. Price John for any closing remarks.

Thanks to everyone for joining us on the call today. And I encourage you to join us in this weekend's birthday celebration of Build-A-Bear Workshop at a store near you. We look forward to reporting the fourth quarter call, and have a great day.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.