What changed in BUILD-A-BEAR WORKSHOP INC's 2023 10-K compared to 2022?

Across the narrative sections we track, BUILD-A-BEAR WORKSHOP INC (BBW) added 241 paragraphs, removed 260, and edited 192 between the 2022 and 2023 10-K filings. The biggest movers are Item 7. Management's Discussion & Analysis (+89/−104), Item 1A. Risk Factors (+99/−97), Item 1. Business (+42/−50).

Did BUILD-A-BEAR WORKSHOP INC add new Risk Factors in the 2023 10-K?

Yes — Item 1A Risk Factors shows 99 new/edited paragraphs and 97 removed paragraphs versus the 2022 10-K.

What changed in BUILD-A-BEAR WORKSHOP INC's MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 89 new/edited paragraphs and 104 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Did BUILD-A-BEAR WORKSHOP INC's Legal Proceedings (Item 3) change in 2023?

Item 3 shows 1 added/edited paragraphs and 1 removed paragraphs — usually indicating new litigation disclosed or settled cases removed.

Where does this BBW 10-K diff come from?

The source filings are BUILD-A-BEAR WORKSHOP INC's official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

What changed in BUILD-A-BEAR WORKSHOP INC's 10-K — 2022 vs 2023

Paragraph-level year-over-year comparison of BUILD-A-BEAR WORKSHOP INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+241 added−260 removedSource: 10-K (2023-04-13) vs 10-K (2022-04-14)

Top changes in BUILD-A-BEAR WORKSHOP INC's 2023 10-K

241 paragraphs added · 260 removed · 192 edited across 6 sections

Item 7. Management's Discussion & Analysis+89 / −104 · 70 edited
Item 1A. Risk Factors+99 / −97 · 84 edited
Item 1. Business+42 / −50 · 30 edited
Item 5. Market for Registrant's Common Equity+6 / −5 · 4 edited
Item 2. Properties+4 / −3 · 3 edited

Item 1. Business

Business — how the company describes what it does

30 edited+12 added−20 removed15 unchanged

2022 filing

2023 filing

Biggest changeMerchandise Sourcing and Inventory Management Our stores and e-commerce sites offer an extensive and coordinated selection of merchandise, including a wide range of different styles of plush products to be stuffed, pre-stuffed plush products, sounds and scents that can be added to the stuffed animals and a broad variety of clothing, shoes and accessories, as well as other brand appropriate toy and novelty items, sourced from multiple vendors primarily in China and Vietnam.

Biggest changeIn addition, we expect to continue to strategically manage our capital to support key initiatives and innovative developments designed to deliver long-term profitable growth while returning value to shareholders through actions such as the dividend announced by our Board of Directors and paid in fiscal 2021, the recent completion of the share repurchase program that was adopted in November 2021, the buyback of additional shares through a newly-authorized share repurchase program announced in August 2022, and the special dividend announced by our Board of Directors on March 8, 2023 payable to all common stock holders as of March 23, 2023, which we believe demonstrates the confidence our Board of Directors continues to have in our strategy and future. 6 Table of Contents Merchandise Sourcing and Inventory Management Our stores and e-commerce sites offer an extensive and coordinated selection of merchandise, including a wide range of different styles of plush products to be stuffed, pre-stuffed plush products, sounds and scents that can be added to the stuffed animals and a broad variety of clothing, shoes and accessories, as well as other brand appropriate toy and novelty items including family sleepwear, sourced from multiple vendors primarily in Vietnam and China.

Specifically, we believe all of the products sold in our stores and through our e-commerce sites meet Consumer Product Safety Commission (CPSC) requirements including the Consumer Product Safety Improvement Act (CPSIA) for children’s products.

Specifically, we believe all of the toy products sold in our stores and through our e-commerce sites meet Consumer Product Safety Commission (CPSC) requirements including the Consumer Product Safety Improvement Act (CPSIA) for children’s products.

We require our supplier factories to be compliant with the International Council of Toy Industries (ICTI) Ethical Toy Program certification or with other third-party social compliance programs.

We require our supplier factories to be compliant with the International Council of Toy Industries (ICTI) Ethical Toy Program certification or with other comparable third-party social compliance programs.

Information on our website is not incorporated by reference into, and does not constitute a part of, this Annual Report on Form 10-K.

Information on our website is not incorporated by reference into, and does not constitute a part of, this Annual Report on Form 10-K. 8

The average time from product conception to the arrival in stores is approximately 12 months, including approximately 90 to 120 days from the beginning of production to in-store delivery. Through an ongoing analysis of selling trends, we regularly update our product assortment by increasing quantities of productive styles and eliminating less productive styles.

The average time from product conception to the arrival in stores is approximately 12 months, including approximately 90 to 150 days from the beginning of production to in-store delivery. Through an ongoing analysis of selling trends, we regularly update our product assortment by increasing quantities of productive styles and eliminating less productive styles.

Specificall y, we have key strategic relationships with select companies in which we feature their brands on products sold in our stores, including Disney®, NBCUniversal, Lucasfilm, Warner Bros., Pokémon, ViacomCBS, Nintendo, and major professional and collegiate sports along with other culturally relevant brands.

Specificall y, we have key strategic relationships with select companies in which we feature their brands on products sold in our stores, including Disney®, NBCUniversal, Lucasfilm, Warner Bros., Pokémon, ViacomCBS, Nintendo, and major professional sports leagues along with other culturally relevant brands.

We make these filings available free of charge in the Investor Relations section of our corporate website, the URL of which is http://ir.buildabear.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We make these filings available free of charge in the Investor Relations section of our corporate website, the URL of which is http://ir.buildabear.com, as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC.

We operate a vertical retail channel with stores that feature a unique combination of experience and product in which guests can “make their own stuffed animals” by participating in the stuffing, fluffing, dressing, accessorizing and naming of their own teddy bears and other stuffed animals.

We operate a vertical retail channel with experience locations that feature a unique combination of interactivity and product in which guests can “make their own stuffed animals” by participating in the stuffing, fluffing, dressing, accessorizing and naming of their own teddy bears and other stuffed animals.

Back-up supplies, such as stuffing for the plush animals, are often stored in limited amounts at regional pool points. During fiscal 2020, we introduced "Buy Online, Ship From Store" and "Buy Online, Pick Up In Store" for orders placed in the U.S. and "Click and Collect" for orders placed in the U.K.

Back-up supplies, such as stuffing for the plush animals, are often stored in limited amounts at regional pool points. 7 Table of Contents During fiscal 2020, we introduced "Buy Online, Ship From Store" and "Buy Online, Pick Up In Store" for orders placed in the U.S. and "Click and Collect" for orders placed in the U.K.

We seek to provide outstanding guest service and experiences across all channels and touch points including our stores, our e-commerce sites, our mobile sites and apps as well as traditional, digital and social media.

We seek to provide outstanding guest service and experiences across all channels and touch points including our retail locations, our e-commerce sites, our mobile sites and apps as well as traditional, digital and social media.

Our plush products and clothing are produced from high quality, man-made materials or natural fibers, and the stuffing is made of a high-grade polyester fiber. We believe we comply with governmental toy safety requirements specific to each country where there are Build-A-Bear Workshop stores.

Our plush products and clothing are produced from high quality, man-made materials or natural fibers, and the stuffing is made of a high-grade polyester fiber. We believe we comply with governmental safety requirements specific to each product category and country where there are Build-A-Bear Workshop locations.

Intellectual Property and Trademarks We believe our copyrights, service marks, trademarks, trade secrets, patents and similar intellectual property are critical to our success, and we intend, directly or indirectly, to maintain and protect these marks and, where applicable, license the intellectual property.

As of January 29, 2022, we operated 346 corporately-managed locations, including 305 stores in the United States (“U.S.”) and Canada, 41 stores in the United Kingdom (“U.K.”) and Ireland, 61 locations operated through our "third-party retail" model in which we sell our products on a wholesale basis to other companies that then in turn execute our retail experience, and had 72 franchised stores operating internationally, all under the Build-A-Bear Workshop brand.

As of January 28, 2023, we operated 350 corporately-managed locations, including 312 stores in the United States (“U.S.”) and Canada, 38 stores in the United Kingdom (“U.K.”) and Ireland, 70 locations operated through our "third-party retail" model in which we sell our products on a wholesale basis to other companies that then, in turn, execute our retail experience, and 68 franchised stores operating internationally, all under the Build-A-Bear Workshop brand.

You may also request copies of these materials without charge by writing to our Investor Relations department at World Headquarters, 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114. The SEC maintains a website, http://www.sec.gov, that contains our annual, quarterly and current reports and other information we file electronically with the SEC.

You may also request copies of these materials without charge by writing to our Investor Relations department at World Headquarters, 415 South 18th Street, St. Louis, MO 63103. The SEC maintains a website, http://www.sec.gov, that contains our annual, quarterly and current reports and other information we file electronically with the SEC.

These programs allow our brick and mortar stores to operate essentially as mini distribution centers allowing us to leverage the geographic proximity of stores, available inventory and labor to fulfill e-commerce demand. Employees As of January 29, 2022 , we had approximately 1,000 full-time and 2,700 regular part-time employees in the U.S., Canada, the U.K., Ireland and China.

These ongoing programs allow our brick and mortar locations to operate essentially as mini distribution centers allowing us to leverage the geographic proximity of stores, available inventory and labor to fulfill digital demand. Employees As of January 28, 2023 , we had approximately 1,000 full-time and 3,200 regular part-time employees in the U.S., Canada, the U.K., and Ireland.

The primary consumer target for our retail stores is families with children while our e-commerce sites focus on collectors and gift givers that are primarily tweens, teens and adults.

Our retail stores also act as “mini distribution centers” that provide efficient omnichannel support for our digital demand. The primary consumer target for our retail stores is families with children while our e-commerce sites focus on collectors and gift givers that are primarily tweens, teens and adults.

Our relationships with our vendors generally are on a purchase order basis without contractual obligation to provide adequate supply or acceptable pricing on a long-term basis . As of January 29, 2022, our inventory balance was $71.8 million, an increase of $24.9 million compared to January 30, 2021.

Our relationships with our vendors generally are on a purchase order basis without contractual obligation to provide adequate supply or acceptable pricing on a long-term basis . As of January 28, 2023, our inventory balance was $70.5 million, a decrease of $1.3 million compared to January 29, 2022.

We believe the hands-on and interactive nature of our stores, our personal service model and engaging digital shopping experiences result in guests forming an emotional connection with our brand which has multi-generational appeal that captures today’s zeitgeist including desire for experience, personalization and “DIY” while being recognized as trusted, giving, and a part of pop culture.

We believe the hands-on and interactive nature of our experience locations, our personal service model and engaging digital shopping experiences result in guests forming an emotional connection with our brand which has multi-generational appeal that captures today’s zeitgeist including desire for engaging experiences, personalization and “DIY” while being recognized as trusted, giving, and a part of pop culture. 5 Table of Contents We believe there are opportunities to extend the reach and size of our diverse consumer segments through expanded products and licensing relationships, evolved experiences, and incremental occasions, partnerships, and marketing activities.

This agreement contains clauses that allow for termination if certain performance criteria are not met. In Asia, we contract with a third-party distribution center and office space in Shanghai, China, both of whose agreements end in April 2023. Transportation from the warehouses to stores is managed by several third-party logistics providers.

This agreement contains clauses that allow for termination if certain performance criteria are not met. In Asia, we contract for office space and a third-party distribution center in Shanghai, China, with the office space contract ending in August 2023 and the distribution center contract ending in April 2024.

ITEM 1. BUSINESS Overview Build-A-Bear Workshop, Inc., a Delaware corporation, was formed in 1997 as a mall-based, experiential specialty retailer where children and their families could create their own stuffed animals. Over the last 25 years, Build-A-Bear has become a brand with high consumer awareness and positive affinity with over 225 million furry friends sold.

We also operate e-commerce sites that focus on gift-giving, collectible merchandise and licensed products that appeal to consumers that have an affinity for characters from a range of entertainment, sports, art, and gaming properties. Our engaging digital purchasing experiences include our online “Bear-Builder”, the animated “Bear Builder 3D Workshop”, an age-gated adult-focused “Bear Cave” and the “HeartBox” gift site.

Our reportable segments are primarily determined by the types of customers they serve and the types of products and services that they offer. Each reportable segment may operate in many geographic areas. Financial information related to our segments and the geographic areas in which we operate is contained in “Item 7.

Segments and Geographic Areas Our business is conducted through three reportable segments consisting of direct-to-consumer (“DTC”), commercial, and international franchising. Our reportable segments are primarily determined by the types of customers they serve and the types of products and services that they offer. Each reportable segment may operate in many geographic areas.

In the U.S., Canada and Europe, merchandise is shipped by a variety of distribution methods, depending on the store and seasonal inventory demand. Shipments from our distribution centers are scheduled throughout the week in order to smooth workflow, and stores are grouped together by shipping route to reduce freight costs.

Shipments from our distribution centers are scheduled throughout the week in order to smooth workflow, and stores are grouped together by shipping route to reduce freight costs.

We expect to more effectively use our expanded digital capabilities and platforms to inform and drive marketing and content campaigns and deliver personalized experiences and sales messaging. We also plan to expand our addressable market by reaching beyond the core kid base and acquire new tween, teen, and adult consumers by offering unique affinity offerings and expanding purchase occasions.

We also plan to expand our total addressable market by reaching beyond the core kid base and continuing to acquire new tween, teen, and adult consumers by offering unique affinity offerings and expanding purchase occasions.

The Company has leveraged, and expects to continue to leverage, its brand strength to strategically evolve its brick-and-mortar retail footprint beyond traditional malls with a versatile range of formats and locations including tourist destinations; to extend into international markets primarily via a franchise model; and to broaden its consumer base beyond children by adding teens and adults with entertainment/sports licensing, collectible and gifting offerings.

We are leveraging this brand strength to strategically evolve our brick-and-mortar retail footprint beyond traditional malls with a versatile range of formats and locations including tourist destinations, to expand into international markets primarily via a franchise model, grow the total addressable market beyond children by adding teens and adults with entertainment/sports licensing, collectible and gifting offerings as well as add product categories beyond plush such as gift boxes and pajamas.

While we are comfortable with the receipt flow, level, and composition of our inventory, we continue to manage our supply chain in an effort to mitigate logistics disruptions and delays in product shipments. 7 Distribution and Logistics We own a 350,000 square-foot distribution center in Groveport, Ohio (near Columbus) that serves the majority of our stores in the U.S. and Canada.

We are comfortable with the composition and level of our inventory, which supports increased consumer demand and critical seasonal products. Distribution and Logistics We own a 350,000 square-foot distribution center in Groveport, Ohio (near Columbus) that serves the majority of our stores in the U.S. and Canada.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See Not e 15 — S egment Information to the consolidated financial statements for information regarding sales, results of operations and identifiable assets of the Company by business segment and by geographic area. 5 Description of Operations Build-A-Bear Workshop offers interactive entertainment experiences via both physical and e-commerce engagement, targeting a range of consumer segments and purchasing occasions through digitally-driven, diversified omnichannel capabilities.

Our patents do not expire until the years 2032 and 2033. 8 We have developed licensing and strategic relationships with leading retail and cultural organizations. We plan to continue to collaborate with companies that have strong, family-oriented brands and provide us with attractive marketing and merchandising opportunities.

We have developed licensing and strategic relationships with leading retail and cultural organizations. We plan to continue to collaborate with companies that have strong, family-oriented brands and provide us with attractive marketing and merchandising opportunities. These relationships for specific products are generally reflected in contractual arrangements for limited terms that are terminable by either party upon specified notice.

The Company has also significantly advanced its digital transformation which is enabling meaningful growth in its e-commerce and omnichannel business primarily via opportunities related to Build-A-Bear’s pop-culture and multi-generational appeal; the advancement of an elevated consumer loyalty program with the goal of capturing first party data, expanding multi-channel shopping and driving lifetime value; the development of robust digital marketing programs and content capabilities with industry-leading partners.

Build-A-Bear's pop-culture and multi-generational appeal have also played a key role in our digital transformation which includes a meaningful e-commerce/omni-channel business that has delivered sustained growth, engaging consumer loyalty program and robust digital marketing and content capabilities with industry-leading partners.

In addition, 2022 marks the 25 th anniversary since Build-A-Bear Workshop was founded and we plan to capitalize on the occasion to create interest, leverage nostalgia and drive incremental purchases. • Optimizing our solid financial position including a strong balance sheet to support our business and make strategic investments designed to drive further growth.

We also continue to develop innovative experiences to expand our brand reach. This includes Build-A-Bear vending machines, also known as ATMs or automatic teddy machines. • Optimizing our solid financial position including a strong balance sheet to support our business and make strategic investments designed to drive further growth.

Removed

Over the last nearly 25 years, Build-A-Bear has become a brand with high consumer awareness and positive affinity with over 200 million furry friends having been made by our guests around the world.

Added

In addition to these stores, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements.

Removed

In addition to our stores, we sold product on our company-owned e-commerce sites, third-party marketplaces and franchisee sites and through retailer’s wholesale agreements. Select corporately-managed, franchised, and third-party retail locations were temporarily closed due to pandemic-related government mandates as well as our internal COVID management policies at various times throughout fiscal 2021, primarily in the U.K. and Canada.

Added

Financial information related to our segments and the geographic areas in which we operate is contained in “Item 7.

Removed

COVID Pandemic Update At the beginning of fiscal 2021, our U.S. store portfolio was open and operating while our stores in the U.K, Ireland and Canada remained temporarily closed.

Added

Description of Operations Build-A-Bear Workshop offers interactive entertainment experiences via both physical and digital engagement, targeting a range of consumer segments and purchasing occasions through digitally-driven, diversified omnichannel capabilities.

Removed

In April 2021, stores in the U.K. reopened as the government lifted lockdown restrictions resulting in essentially all of our stores operating at the end of the 2021 first fiscal quarter with the remaining stores in the U.K. and Ireland opening in the second fiscal quarter thereby ending that period with all stores open in those geographies.

Added

Operating Strategies We believe we have built the infrastructure to respond with greater agility to deal with ongoing and future potential uncertainty, and we did deliver continued growth in total revenues and profit in fiscal 2022 compared to fiscal 2021.

Removed

The majority of our Canadian stores remained temporarily closed at the beginning of the second quarter with the majority reopening in June 2021 and with all stores ending that period open. Our year-over-year results discussed below were impacted by prior year store closures and operating hour reductions as a result of the pandemic.

Added

While we believe that we have seen benefits from select pandemic-driven factors such as pent-up demand and stimulus packages, we believe that the initiatives and investments that were put in place prior to the pandemic, and in many cases accelerated during the pandemic, are driving improved results, which we expect to continue.

Removed

Throughout the fiscal year, temporary, unplanned store closures occurred due to COVID exposures on a limited basis, with one store temporarily closed as of the end of the 2021 fiscal year. The scope and nature of these impacts on our business and financial performance are discussed in more detail throughout this report, including within Item 1. "Business", Item 1A.

Added

We remain focused on our strategic priorities which are centered primarily on three key areas: • Further acceleration of our digital transformation including content and entertainment initiatives. We expect to more effectively use our expanded digital capabilities and platforms to inform and drive marketing and content campaigns and deliver personalized experiences and promotional messaging.

Removed

"Risk Factors, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations", and the footnotes to our financial statements included in Item 15. "Exhibits and Financial Statement Schedules" below. Segments and Geographic Areas Our business is conducted through three reportable segments consisting of direct-to-consumer (“DTC”), commercial, and international franchising.

Added

We prepared for and launched the planned updated mobile-first version of our e-commerce site with extended testing and algorithm refinements being made throughout the year on multiple points from the landing page to checkout. In addition, we plan to continue to utilize digital media, content and entertainment as marketing and brand-building tools to engage consumers and create incremental value.

Removed

Our engaging digital purchasing experiences include our online “Bear-Builder”, the animated “Bear Builder 3D Workshop”, an age-gated adult-focused “Bear Cave” and the recently introduced “HeartBox” gift site. Our retail stores also act as “mini distribution centers” that provide efficient omnichannel support for our growing digital demand.

Added

While our fourth quarter e-commerce sales were marginally up from the fourth quarter of 2022, the results reflect an increase of 137% compared to the fourth quarter of fiscal 2019, which was pre-pandemic and prior to the implementation of key digital initiatives. • Continuing to leverage our expanded omnichannel capabilities while further evolving experience location point-of-sale and purchase occasions.

Removed

We believe there are opportunities to extend the reach and size of our diverse consumer segments through expanded products and licensed relationships, evolved experiences, and incremental occasions, partnerships, and marketing activities.

Added

During fiscal 2022, we opened over 20 new Build-A-Bear Workshop retail experience locations, through a combination of corporately-managed and third-party operated models. In fiscal 2023, we expect a net increase in the number of stores in North America inclusive of third-party retail sites and to have fewer locations in Europe compared to the end of fiscal 2022.

Removed

Operating Strategies To support our overall strategy, we have evolved many aspects of our company in recent years ranging from an organizational re-structure to supply chain diversification to rebuilding our IT infrastructure.

Added

Combined across geographies and business models, we plan to have more total locations at the end of fiscal 2023 compared to the end of fiscal 2022. We have made a concerted effort to shift to non-traditional locations including family-centric tourist and hospitality sites and now have approximately 35% of total retail locations in non-traditional settings.

Removed

We believe the activities and investments that were initiated prior to the pandemic, and in many cases accelerated during the pandemic, particularly as it relates to our primary objective to comprehensively digitally transform the company, are the primary drivers of the positive performance that we delivered in fiscal 2021 including growth in total revenues and the highest profitability in our company’s history.

Added

While tourist sites have been and will remain a critical part of our overarching location expansion strategy, recent research data supports our opportunity to reengage in profitable expansion of our corporately-managed experience locations on a more localized level, particularly given the numerous and flexible store models we have developed in the past few years.

Removed

We remain focused on the disciplined execution of our multi-year strategy to elevate and monetize our iconic brand, take advantage of the growing digital economy as well as advanced marketing capabilities and believe we are a fundamentally different company compared to the pre-COVID timeframe.

Added

Transportation from the warehouses to stores is managed by several third-party logistics providers. In the U.S., Canada and Europe, merchandise is shipped by a variety of distribution methods, depending on the store and seasonal inventory demand.

Removed

Our strategic priorities are centered primarily on three key areas: • Further acceleration of our digital transformation including content and entertainment initiatives. We have plans in place designed to increase repeat purchase rates and enhance engagement with the over 12 million opted-in first party data contacts including over 10 million active Build-A-Bear Bonus Club members.

Removed

In addition, we plan to continue to utilize digital media, content and entertainment as marketing and brand-building tools to engage consumers and create value. 6 • Continuing to leverage our expanded omnichannel capabilities while further evolving retail experiences and purchase occasions.

Removed

With the vast majority of our U.S. stores profitable in fiscal 2021, we believe there is an opportunity to add up to 20 locations in the next two to three years through a combination of our corporately-managed and third-party retail models with an emphasis on tourist sites.

Removed

We also plan to leverage our enhanced omnichannel options including Buy Online Ship From Store, Buy Online Pickup In Store and same day delivery through our relationship with Shipt to efficiently support fulfillment of our growing digital demand.

Removed

This strategic use of hundreds of store locations as “mini distribution centers” significantly improves e-commerce fulfillment efficiency and throughput, decreases ship time (which is especially critical to minimize holiday cut-off days) and leverages available labor in our retail stores. We also re-introduced our in-store party offering after a nearly two-year hiatus due to COVID in March of 2022.

Removed

In addition, we expect to continue to strategically manage our capital to support key initiatives and innovative developments designed to deliver long-term profitable growth while returning value to sharrholders.

Removed

The majority of the increase was related to in-transit inventory due to strategically planned accelerated purchases used to partially mitigate inflationary and supply chain COVID-related pressure and anticipated continued increases in product and freight costs.

Removed

These relationships for specific products are generally reflected in contractual arrangements for limited terms that are terminable by either party upon specified notice.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

84 edited+15 added−13 removed86 unchanged

2022 filing

2023 filing

Biggest changeIf we are unable to renew, renegotiate or replace our store leases or enter into leases for new stores on favorable terms, or if we violate any of the terms of our current leases, our revenue and profitability could be harmed. We lease all of our corporately-managed store locations.

Biggest changeFurthermore, the cost of certain investments in e-commerce and digital technology may adversely impact our financial performance in the short-term and failure to realize the benefits of these investments may adversely impact our financial performance over the longer term. 12 If we are unable to renew, renegotiate or replace our store leases or enter into leases for new stores on favorable terms, or if we violate any of the terms of our current leases, our revenue and profitability could be harmed.

Our strategy, which includes investments in e-commerce platforms, digital technology, and other consumer initiatives, may not adequately or effectively allow us to continue to grow our e-commerce business, increase sales, and grow our position in the specialty retail and gifting and collectibles markets such as adult to adult gifting (e.g. Heartbox), adult driven affinity (e.g.

Our strategy, which includes investments in e-commerce platforms, digital technology, and other consumer initiatives, may not adequately or effectively allow us to continue to grow our e-commerce business, increase sales, or grow our position in the specialty retail and gifting and collectibles markets such as adult to adult gifting (e.g. Heartbox), adult driven affinity (e.g.

Our operating results for one period may not be indicative of results for other periods, and may fluctuate significantly due to a variety of factors, including: • the profitability of our stores; • increases or decreases in total revenues; • changes in general economic conditions and consumer spending patterns; • the timing and frequency of our marketing initiatives; • changes in foreign currency exchange rates; • seasonal shopping patterns; • the timing of store closures, relocations and openings and related expenses; • the effectiveness of our inventory management; • changes in consumer preferences; • the continued introduction and expansion of merchandise offerings including those associated with major motion pictures; • actions of competitors or mall anchors and co-tenants; • weather conditions and natural disasters; • public health issues such as COVID, and associated impacts on store openings and store operations • the timing and frequency of national media appearances and other public relations events; and 19 • the impact of a 53rd week in our fiscal year, which occurs approximately every six years, (e.g., next to occur in fiscal 2023).

Our operating results for one period may not be indicative of results for other periods, and may fluctuate significantly due to a variety of factors, including: • the profitability of our stores; • increases or decreases in total revenues; • changes in general economic conditions and consumer spending patterns; • the timing and frequency of our marketing initiatives; • changes in foreign currency exchange rates; • seasonal shopping patterns; • the timing of store closures, relocations and openings and related expenses; • the effectiveness of our inventory management; • changes in consumer preferences; • the continued introduction and expansion of merchandise offerings including those associated with major motion pictures; • actions of competitors or mall anchors and co-tenants; • weather conditions and natural disasters; • public health issues such as COVID, and associated impacts on store openings and store operations • the timing and frequency of national media appearances and other public relations events; and • the impact of a 53rd week in our fiscal year, which occurs approximately every six years, (e.g., next to occur in fiscal 2023).

The market price of our common stock may be significantly affected by a number of factors, including, but not limited to, actual or anticipated variations in our operating results or those of our competitors as compared to analyst expectations, changes in financial estimates by research analysts with respect to us or others in the retail industry, and announcements of significant transactions (including mergers or acquisitions, divestitures, joint ventures, stock repurchases or other strategic initiatives) by us or other similar companies.

The market price of our common stock may be significantly affected by a number of factors, including, but not limited to, actual or anticipated variations in our operating results or those of our competitors as compared to analyst expectations, changes in financial estimates by research analysts with respect to us or others in the retail industry, and announcements of significant transactions (including mergers or acquisitions, divestitures, joint ventures, stock repurchases, dividends, or other strategic initiatives) by us or other similar companies.

If any of our significant vendors were to discontinue their relationship with us, or if the factories with which they contract were to suffer a disruption in their production, we may be unable to replace the vendors in a timely manner, which could result in short-term disruption to our inventory flow or quality of the inventory as we transition our orders to new vendors or factories which could, in turn, disrupt our store operations and have an adverse effect on our business, financial condition and results of operations.

If any of our significant vendors were to discontinue their relationship with us, or if the factories with which they contract were to suffer a disruption in their production, we may be unable to replace the vendors in a timely manner, which could result in short-term or long-term disruption to our inventory flow or quality of the inventory as we transition our orders to new vendors or factories which could, in turn, disrupt our store operations and have an adverse effect on our business, financial condition and results of operations.

We measure our data security effectiveness through industry accepted methods and remediate critical findings. Additionally, we certify our major technology suppliers and any outsourced services through accepted security certification 16 measures. We maintain and routinely test backup systems and disaster recovery, along with external network security penetration testing by an independent third party as part of our business continuity preparedness.

We measure our data security effectiveness through industry accepted methods and remediate critical findings. Additionally, we certify our major technology suppliers and any outsourced services through accepted security certification measures. We maintain and routinely test backup systems and disaster recovery, along with external network security penetration testing by an independent third party as part of our business continuity preparedness.

The extent to which the pandemic may impact our operational and financial performance remains uncertain and will depend on many factors outside of our control, including the timing, extent, trajectory and duration of the pandemic, the emergence of new variants, the development, availability, distribution and effectiveness of vaccines and treatments, the imposition of protective public safety measures, and the impact of the pandemic on the global economy and demand for our products.

The extent to which a pandemic may impact our operational and financial performance remains uncertain and will depend on many factors outside of our control, including the timing, extent, trajectory and duration of the pandemic, the emergence of new variants, the development, availability, distribution and effectiveness of vaccines and treatments, the imposition of protective public safety measures, and the impact of the pandemic on the global economy and demand for our products.

Moreover, these inflationary pressures have caused, and are expected to continue to cause, significant increases in the costs of other products which are required by consumers, such as gasoline, home heating and cooling fuels, or groceries, which in turn is likely to reduce household spending on the types of discretionary products and entertainment we offer.

Moreover, these inflationary pressures have caused, and are expected to continue to cause, significant increases in the costs of other products which are required by consumers, such as gasoline, home heating and cooling fuels, or groceries, which in turn are likely to reduce household spending on the types of discretionary products and entertainment we offer.

Brand awareness in international markets may be lower than in the U.S. and we may face higher labor and rent costs, as well as different holiday schedules. Although we have realized benefits from our operations in the U.K. and Ireland, we may be unable to continue to do so on a consistent basis.

Brand awareness and affinity in international markets may be lower than in the U.S. and we may face higher labor and rent costs, as well as different holiday schedules. Although we have realized benefits from our operations in the U.K. and Ireland, we may be unable to continue to do so on a consistent basis.

Change in regulations or interpretation could negatively impact our operations by increasing the cost of and reducing the supply of products available to us. In addition, decreases in the value of the U.S. dollar against foreign currencies, particularly the Chinese renminbi and Vietnamese dong, could increase the cost of products we purchase from overseas vendors.

Our future results will largely depend on our ability to optimize store productivity and profitability by strategically evolving our real estate portfolio to align with market trends while selectively opening new locations and systematically refreshing our store base.

Our future results will largely depend on our ability to optimize and maintain store productivity and profitability by strategically evolving our real estate portfolio to align with market trends while selectively opening new locations and systematically refreshing our store base.

The flow of merchandise from our vendors could also be adversely affected by financial or political instability in any of the countries in which the goods we purchase are manufactured, if the instability affects the production or export of merchandise from those countries.

The flow of merchandise from our vendors could also be adversely affected by financial or political instability in any of the countries in which the materials or goods we purchase are manufactured, if the instability affects the production or export of merchandise from those countries.

For example, we may purchase products in U.S. dollars but sell them to customers in local currencies, which exposes us to foreign exchange risk, as described in “ Our merchandise is manufactured by foreign manufacturers and we transact business in various foreign countries, and the availability and costs of our products, as well as our product pricing, may be negatively affected by risks associated with international manufacturing and trade and foreign currency fluctuations ” below.

For example, we may purchase products in U.S. dollars but sell them to consumers in local currencies, which exposes us to foreign exchange risk, as described in “ Our merchandise is manufactured by foreign manufacturers and we transact business in various foreign countries, and the availability and costs of our products, as well as our product pricing, may be negatively affected by risks associated with international manufacturing and trade and foreign currency fluctuations ” below.

To operate this location, our ability to meet changing labor needs while controlling our costs is subject to external factors such as labor laws, regulations, unemployment levels, prevailing wage rates, and changing demographics. In addition, we rely on third parties to manage all of the warehousing and distribution aspects of our business in the western U.S. and Europe.

To operate this distribution center, our ability to meet changing labor needs while controlling our costs is subject to external factors such as labor laws, regulations, unemployment levels, prevailing wage rates, and changing demographics. In addition, we rely on third parties to manage all of the warehousing and distribution aspects of our business in the western U.S. and Europe.

The retail sector has experienced an immense increase in sales initiated online and using mobile applications, as well as online sales for both in-store or curbside pick-up. Online and multi-channel retailers continue to focus on delivery services, with customers increasingly seeking faster, guaranteed delivery times and low-cost or free shipping.

The retail sector has experienced an immense increase in sales initiated online and using mobile applications, as well as online sales for both in-store or curbside pick-up. Online and multi-channel retailers continue to focus on delivery services, with consumers increasingly seeking faster, guaranteed delivery times and low-cost or free shipping.

We cannot ensure that our franchisees will be successful in identifying and securing desirable locations or in operating their stores. International markets frequently have different demographic characteristics, competitive conditions, consumer tastes and discretionary spending patterns than our existing corporately-managed markets, which impact the performance of these stores.

We cannot ensure that our franchisees will be successful in identifying and securing desirable locations or in operating their stores. International markets frequently have different demographic characteristics, competitive conditions, consumer tastes and discretionary spending patterns than our corporately-managed markets, which may impact the performance of these stores.

Any significant interruption in the operation of the distribution centers due to natural disasters or severe weather, events such as fire, accidents, power outages, system failures, public health issues such as the current COVID pandemic (or other future pandemics), or other unforeseen causes could damage a significant portion of our inventory.

Any significant interruption in the operation of the distribution centers due to natural disasters or severe weather, events such as fire, accidents, power outages, system failures, public health issues such as the COVID pandemic (or other future pandemics or health risks), or other unforeseen causes could damage a significant portion of our inventory.

Such a weakened economic and business climate, as well as consumer uncertainty created by such a climate, could harm our revenues and profitability. 10 Our success and profitability not only depend on consumer demand for our products, but also on our ability to produce and sell those products at costs which allow us to make a profit.

Such a weakened economic and business climate, as well as consumer uncertainty created by such a climate, could harm our revenues and profitability. 9 Our success and profitability not only depend on consumer demand for our products, but also on our ability to produce and sell those products at costs which allow us to make a profit.

Such disruptions may result from public health issues such as the current COVID pandemic (or other future pandemics), weather related events, natural disasters, trade restrictions, tariffs, changes in local laws, work stoppages or slowdowns, shipping capacity constraints, supply or shipping interruptions, or other factors beyond our control.

Such disruptions may result from public health issues such as the COVID pandemic (or other future pandemics), weather related events, natural disasters, trade restrictions, tariffs, changes in local laws, work stoppages or slowdowns, shipping capacity constraints, supply or shipping interruptions, geopolitical issues or other factors beyond our control.

We engage key third-party business partners to support various functions of our business, including, but not limited to, information technology, web hosting and cloud-based services. We, and those third-party businesses that support us, are also subject to risks related to computer viruses, telecommunications failures, and similar disruptions.

In addition, due to COVID, our workforce is in a state of transition to a combination of remote work and flexible work schedules opening us up for cyber-security threats and potential breaches as a result of increased employee usage of networks other than company-managed.

In addition, due to lingering affects of COVID, our workforce is in a state of transition to a combination of remote work and flexible work schedules opening us up for cyber-security threats and potential breaches as a result of increased employee usage of networks other than company-managed.

Failure of our systems, including failures due to cyber-attacks that would prevent the ability of systems to function as intended, could cause transaction errors, loss of customers and sales, and could have negative consequences to us, our employees, and those with whom we do business.

Failure of our systems, including failures due to cyber-attacks that would prevent the ability of systems to function as intended, could cause transaction errors, loss of consumers and sales, and could have negative consequences to us, our employees, and those with whom we do business.

Our future success in international markets may be impacted by differences in consumer demand, regulatory and cultural differences, economic conditions, public health issues such as COVID, changes in foreign government policies and regulations, changes in trading status, compliance with U.S. laws affecting operations outside the U.S., such as the Foreign Corrupt Practices Act, as well as 14 other risks that we may not anticipate.

Our future success in international markets may be impacted by differences in consumer demand, regulatory and cultural differences, economic conditions, public health issues such as COVID (or other future pandemics), changes in foreign government policies and regulations, changes in trading status, compliance with U.S. laws affecting operations outside the U.S., such as the Foreign Corrupt Practices Act, as well as other risks that we may not anticipate.

The amount available for borrowing could be restricted under our agreement if the amount of assets used to calculate the borrowing base (specified percentages of eligible credit card receivables, eligible inventory, and, under certain circumstances, eligible foreign in-transit inventory and, in the discretion of the agent, eligible receivables) decrease.

While we have implemented programs and procedures designed to protect the privacy of people from whom we collect information which may include information regarding their children, and our websites are designed to be fully compliant with all applicable regulations including the Federal Children’s Online Privacy Protection Act, there can be no assurance that such programs will conform to all applicable laws or regulations.

While we have implemented programs and procedures designed to protect the privacy of people from whom we collect information which may include information regarding their children, and we intend for our websites to be fully compliant with all applicable regulations including the Federal Children’s Online Privacy Protection Act, there can be no assurance that such programs will conform to all applicable laws or regulations.

The operation of our stores is dependent on our ability to distribute merchandise to locations throughout the U.S., Canada, and Europe in a timely manner. We own a 350,000-square-foot distribution center in Groveport, Ohio and rely on this warehouse to receive, store and distribute merchandise for the majority of our North American stores.

Whether due to inflation or other factors, rising petroleum and material prices, increased transportation and shipping costs, and increased labor costs in the markets in which our products are manufactured and sold all may further increase the costs we incur to produce and transport our products, which in turn may reduce our margins, reduce our profitability, and harm our business, in particular if we are unable to further adjust prices beyond what we have been able to do in fiscal 2021, as discussed above.

Whether due to inflation or other factors, rising petroleum and material prices, increased transportation and shipping costs, and increased labor costs in the markets in which our products are manufactured and sold all may further increase the costs we incur to produce and transport our products, which in turn may reduce our margins, reduce our profitability, and harm our business, in particular if we are unable to further adjust prices beyond what we were able to do in fiscal 2022, as discussed above.

Volatility in petroleum prices can be due to many external factors that are beyond the Company's control including political, environmental, and economic factors such as hostilities or other conflicts in oil producing areas (including the current Russia-Ukraine crisis), limitations and/or disruptions in refining and pipeline capacity, and worldwide demand for petroleum.

Volatility in petroleum prices can be due to many external factors that are beyond our control including political, environmental, and economic factors such as hostilities or other conflicts in oil producing areas (including the current Russia-Ukraine conflict), limitations and/or disruptions in refining and pipeline capacity, and worldwide demand for petroleum.

Continued or further declines in retail customer traffic could adversely affect our financial performance and profitability. While we invest in integrated marketing efforts and believe we are more of a destination location than other retailers, we rely to a great extent on retail customer traffic in the malls and tourist locations in which our stores are located.

Continued or further volatility in retail consumer traffic could adversely affect our financial performance and profitability. While we invest in integrated marketing efforts and believe we are more of a destination location than other retailers, we rely to a great extent on consumer traffic in the malls and tourist locations in which we are located.

For example, the potential adverse effects across geographies of COVID or future pandemics, inflation, and geopolitical conflicts could result in lower net retail sales and could also result in excess inventories, which could, in turn, lead to increased merchandise markdowns and related costs associated with higher levels of inventory and adversely affect our liquidity and profitability.

For example, the potential adverse effects of inflation, or geopolitical conflicts could result in lower net retail sales and could also result in excess inventories, which could, in turn, lead to increased merchandise markdowns and related costs associated with higher levels of inventory and adversely affect our liquidity and profitability.

Risks Related to Owning Our Common Stock Fluctuations in our operating results could reduce our cash flow , or trigger restrictions under our credit agreement, and we may be unable to repurchase shares at all or at the times or in the amounts we desire, or the results of our share repurchase program may not be as beneficial as we would like.

Fluctuations in our operating results could reduce our cash flow , or trigger restrictions under our credit agreement, and we may be unable to repurchase shares at all or at the times or in the amounts we desire, or the results of our share repurchase program may not be as beneficial as we would like.

Prior to 2020, over 90% of merchandise received annally was produced in China, however, our efforts to diversify our supply chain reduced China sourcing to 58% of merchandise received as production shifted primarily to Vietnam, which provided 34% of our merchandise in 2021.

Prior to 2020, over 90% of merchandise received annually was produced in China, however, our efforts to diversify our supply chain reduced China sourcing to 58% of merchandise received as production shifted primarily to Vietnam, which provided 34% of our merchandise in 2022.

From time to time, we have repurchased shares under plans authorized by our Board of Directors, including a $25 million program adopted in November 2021. Such programs generally do not require us to repurchase any specific number of shares, and may be modified, suspended or terminated at any time without prior notice.

From time to time, we have repurchased shares under plans authorized by our Board of Directors, including a $50 million program adopted in August 2022. Such programs generally do not require us to repurchase any specific number of shares, and may be modified, suspended or terminated at any time without prior notice.

For example, our strategy includes a focus on tourist locations due to changing consumer preferences and declining traditional mall traffic and we cannot be certain that this strategy will be successful.

For example, our real estate development initiatives includes a focus on tourist locations due to changing consumer preferences and declining traditional mall traffic and we cannot be certain that this strategy will be successful.

Although we took actions to mitigate these pressures, such as strategic price increases on highly sought-after products and accelerated purchases of inventory, there can be no assurance that we will be able continue these actions or that they will be successful in the future.

Although we took actions to mitigate these pressures, such as strategic price increases on highly sought-after products, there can be no assurance that we will be able continue these actions or that they will be successful in the future.

If we are unable to effectively manage our international franchises, attract new franchisees or if the laws relating to our international franchises change, our growth and profitability could be adversely affected, and we could be exposed to additional liability. As of January 29, 2022, there were 72 Build-A-Bear Workshop international franchised stores.

If we are unable to effectively manage our international franchises, attract new franchisees or if the laws relating to our international franchises change, our growth and profitability could be adversely affected, and we could be exposed to additional liability. As of January 28, 2023, there were 68 Build-A-Bear Workshop international franchised stores.

Additionally, in the event of a significant price increase from these suppliers, we may not be able to find alternative sources of supply in a timely manner or raise prices to offset the increases, which could have an adverse effect on our business, financial condition and results of operations.

Additionally, in fiscal 2021 we operated 22 stores located within other retailers’ stores and 61 stores through our "third-party wholesale" model and as such are subject to the operational risks of these retailers, including but not limited to, ineffective store operations, labor disputes and negative publicity, all of which could have a negative impact on our sales and operating performance.

Additionally, in fiscal 2022 we operated 25 stores located within other retailers’ stores and 70 stores through our "third-party wholesale" model and as such are subject to the operational risks of these companies, including but not limited to, ineffective store operations, labor disputes and negative publicity, all of which could have a negative impact on our sales and operating performance.

For example, our vendors in China and Vietnam were temporarily closed for periods of time in 2020 and 2021 as a result of COVID, ceasing production of inventory and supplies.

For example, our vendors in China and Vietnam were temporarily closed for periods of time in 2021 and 2022 as a result of the pandemic, ceasing production of inventory and supplies.

Because we are primarily mall-based, we see our competition as those mall-based retailers that compete for prime mall locations, including various apparel, footwear and specialty retailers.

Because we have mall-based locations, we see our competition as other retailers that compete for prime mall locations, including various apparel, footwear and specialty retailers.

If we are unable to do so, our results of operations and financial condition could be harmed, and we may be required to record significant additional impairment charges.

If we are unable to do so, our results of operations and financial condition could be harmed, and we may be required to record significant additional impairment charges. We are subject to risks associated with technology and digital operations.

If our future quarterly results fluctuate significantly or fail to meet the expectations of the investment community, then the market price of our common stock could decline substantially. The market price of our common stock is subject to volatility, which could attract the interest of activist shareholders.

If our future quarterly results fluctuate significantly or fail to meet the expectations of the investment community, then the market price of our common stock could decline substantially.

Moreover, such volatility could attract the interest of activist shareholders. Responding to activist shareholders can be costly and time-consuming, and the perceived uncertainties as to our future direction resulting from responding to activist strategies could itself then further affect the market price and volatility of our common stock.

Moreover, we believe that such volatility has attracted the interest of activist shareholders in the past and may continue to do so. Responding to activist shareholders can be costly and time-consuming, and the perceived uncertainties as to our future direction resulting from responding to activist strategies could itself then further affect the market price and volatility of our common stock.

The retail business continues to rapidly evolve and consumers increasingly embrace digital shopping. As a result, the portion of total consumer expenditures with retailers occurring through digital platforms is increasing and the pace of this increase could continue to accelerate.

As a result, the portion of total consumer expenditures with retailers occurring through digital platforms is increasing and the pace of this increase could continue to accelerate.

Therefore, any such increase could have an adverse impact on our business and profitability. 11 Our business may be adversely impacted at any time by a variety of significant competitive threats. We operate in a highly competitive environment characterized by low barriers to entry. We compete against a diverse group of competitors.

Our business may be adversely impacted at any time by a variety of significant competitive threats. We operate in a highly competitive environment characterized by low barriers to entry. We compete against a diverse group of competitors.

Consumer traffic may also be reduced due to factors such as the economy, civil unrest, actual or threatened acts of terrorism to shopping locations, the impact of weather or natural disasters or a decline in consumer confidence resulting from international conflicts or war. A decrease in consumer traffic could have an adverse effect on our financial condition and profitability.

Consumer traffic may also be reduced due to factors such as the economy, civil unrest, actual or threatened acts of terrorism or other crime in shopping locations, the impact of weather or natural disasters or a decline in consumer confidence resulting from international conflicts or war.

If we execute termination rights, we may incur expenses and charges associated with those closures that could negatively impact our profitability. 13 Additionally, several large landlords dominate the ownership of prime malls, particularly in the U.S. and Canada, and because of our dependence on these landlords for a substantial number of our locations, any significant erosion in their financial conditions or our relationships with these landlords could negatively affect our ability to obtain and retain store locations.

Additionally, several landlords dominate the ownership of prime malls, particularly in the U.S. and Canada, and because of our dependence on these landlords for a substantial number of our locations, any significant erosion in their financial conditions or our relationships with these landlords could negatively affect our ability to obtain and retain store locations.

In addition, if we miscalculate the market for our merchandise or the purchasing preferences of our guests, we may be required to sell a significant amount of our inventory at discounted prices or even below costs, thereby adversely affecting our financial condition and profitability. 12 Fail ure to successfully execute our omnichannel strategy and the cost of our investments in e- commerce and digital technology may materially adversely affect our financial condition and profitability.

We are currently subject to one lawsuit, and a possible class action lawsuit, containing allegations that our business violated the TCPA. 17 We may fail to renew, register or otherwise protect our trademarks or other intellectual property and may be sued by third parties for infringement or misappropriation of their proprietary rights, which could be costly, distract our management and personnel and result in the diminution in value of our trademarks and other important intellectual property.

We may fail to renew, register or otherwise protect our trademarks or other intellectual property and may be sued by third parties for infringement or misappropriation of their proprietary rights, which could be costly, distract our management and personnel and result in the diminution in value of our trademarks and other important intellectual property.

We currently obtain and retain personal information about our website users, store shoppers and loyalty program members. Federal, state and foreign governments have enacted or may enact laws or regulations regarding the collection and use of personal information, with particular emphasis on the collection of information regarding minors. Such regulation may also include enforcement and redress provisions.

Federal, state and foreign governments have enacted or may enact laws or regulations regarding the collection and use of personal information, with particular emphasis on the collection of information regarding minors. Such regulation may also include enforcement and redress provisions.

We may not be able to maintain or obtain favorable locations within these desirable shopping locations. The terms of new leases may not be as favorable, which could cause an increase in store expenses negatively impacting overall profitability. If we execute termination rights, we may incur expenses and charges associated with those closures that could negatively impact our profitability.

Our planned marketing expenditures may not result in increased total sales or generate sufficient levels of product and brand awareness, which could also have a material adverse effect on our financial condition and profitability. Additionally, we have shifted a number of our marketing programs to digital outlets which may not be as effective as our more traditional, historical programs.

We rely on a few global supply chain vendors to supply substantially all of our merchandise, and significant price increases or any disruption in their ability to deliver merchandise could harm our ability to source products and supply inventory to our stores. We do not own or operate any factories that produce our plush products, clothing, shoes or accessories.

INTERNATIONAL RISKS We rely on a few global supply chain vendors to supply substantially all of our materials and merchandise, and significant price increases or any disruption in their ability to deliver materials and merchandise could harm our ability to source products and supply inventory to our stores.

To the extent COVID adversely affects our business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to retail customer traffic, general global economic conditions, and demand for our interactive retail experience. 9 We depend upon the shopping malls and tourist locations in which our stores are located to attract guests.

To the extent a pandemic adversely affects our business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to retail consumer traffic, general global economic conditions, and demand for our interactive retail experience.

If one of these manufacturers violates labor laws or other applicable regulations or is accused of violating these laws and regulations, or if such a manufacturer engages in labor or other practices that diverge from those typically acceptable in the U.S., we could in turn experience negative publicity, reputational harm, increased compliance and operating costs or be sued. 18 We may suffer negative publicity or a decrease in sales or profitability if the products from other companies that we sell in our stores do not meet our quality standards or fail to achieve our sales expectations.

We are unable to predict what the price of crude oil and the resulting petroleum products will be in the future. We may be unable to pass along to our customers the increased costs that would result from higher petroleum prices.

We are unable to predict what the price of crude oil and the resulting petroleum products will be in the future. We may be unable to pass along to our guests the increased costs that would result from higher petroleum prices. Therefore, any such increase could have an adverse impact on our business and profitability.

These provisions may: • discourage, delay or prevent a change in the control of our company or a change in our management, even if such change may be in the best interests of our stockholders; • adversely affect the voting power of holders of common stock; and • limit the price that investors might be willing to pay in the future for shares of our common stock. 20 GENERAL RISKS We may not be able to operate successfully if we lose key personnel, are unable to hire qualified additional personnel, or experience turnover of our management team.

Inflation impacted our business operations throughout fiscal 2021 and began to have an adverse impact on our business in the fourth quarter of this year, mainly in freight and other supply chain related costs.

Inflation impacted our business operations in fiscal 2022 and had an adverse impact on our business throughout the year, mainly in freight and other supply chain related costs.

The loss of certain key employees, our inability to attract and retain other qualified key employees or a labor shortage that reduces the pool of qualified candidates could have a material adverse effect on our business, financial condition and results of operations. 20 Table of Contents We may be unsuccessful in acquiring businesses or engaging in other strategic transactions, which may negatively affect our financial condition and profitability.

We may not be able to evolve our store locations over time to align with market trends, successfully diversify our store models and formats in accordance with our strategic goals or otherwise effectively manage our overall portfolio of stores which could adversely affect our ability to grow and could significantly harm our profitability.

Further, as our online sales have increased and have become critical to our growth, the risk of any interruption of our information technology system capabilities is heightened. 13 Table of Contents We may not be able to evolve our store locations over time to align with market trends, successfully diversify our store formats and business models in accordance with our strategic goals or otherwise effectively manage our overall portfolio of stores which could adversely affect our ability to grow and could significantly harm our profitability.

INTERNATIONAL RISKS We may not be able to operate our international corporately-managed locations profitably. In addition to our U.S. locations, we currently operate stores in the U.K., Canada, and Ireland.

In addition to our U.S. locations, we currently operate stores in the U.K., Canada, and Ireland.

OPERATIONAL RISKS If we are unable to generate interest in and demand for our interactive retail experience and products, including being able to identify and respond to consumer preferences in a timely manner, our sales, financial condition and profitability could be adversely affected.

Our ability to be competitive on delivery times and delivery costs depends on many factors, and our failure to successfully manage these factors and offer competitive delivery options could negatively impact the demand for our products and our profit margins. 11 OPERATIONAL RISKS If we are unable to generate interest in and demand for our interactive retail experience and products, including being able to identify and respond to consumer preferences in a timely manner, our sales, financial condition and profitability could be adversely affected.

For example, the EU’s General Data Protection Regulation (“GDPR”), which became effective in May 2018, and the California Consumer Privacy Act (“CCPA”), which became effective in January 2020, greatly increase the jurisdictional reach of EU and California law, respectively, and adds a broad array of requirements related to personal data, including individual notice and opt-out preferences and the public disclosure of significant data breaches.

For example, the EU General Data Protection Regulation - 2016/679 (“EU GDPR”) and related guidance together with the UK General Data Protection Regulation ("UK GDPR," collectively with the EU GDPR, the "GDPR"), and the California Consumer Privacy Act 2018, as amended by the California Privacy Rights Act 2020 (collectively "CCPA"), greatly increase the jurisdictional reach of EU and California law, respectively, and adds a broad array of requirements related to personal data, including individual notice and opt-out preferences and the public disclosure of significant data breaches.

As a result, the results of any share repurchase program may not be as beneficial as expected. In addition, our credit agreement restricts our ability to repurchase shares when certain liquidity conditions exist. Fluctuations in our quarterly results of operations could cause the price of our common stock to substantially decline. Retailers generally are subject to fluctuations in quarterly results.

As a result, the results of any share repurchase program may not be as beneficial as expected. In addition, our credit agreement restricts our ability to repurchase shares when certain liquidity conditions exist. 19 Table of Contents Our relatively low market capitalization can cause the market price of our common stock to become volatile.

Any security breach involving the misappropriation, loss, or other unauthorized disclosure of confidential information could also severely damage our reputation, expose us to the risks of litigation and liability, and harm our business. While we carry insurance that would mitigate the losses to an extent, such insurance may be insufficient to compensate us for potentially significant losses.

We may expand our product assortment to include products manufactured by other companies. If sales of such products do not meet our expectations or are impacted by competitors’ pricing, we may have to take markdowns or employ other strategies to liquidate the product.

If sales of such products do not meet our expectations or are impacted by competitors’ pricing, we may have to take markdowns or employ other strategies to liquidate the product. If other companies do not meet quality or safety standards or violate any manufacturing or labor laws, we may suffer negative publicity and may not realize our sales plans.

The majority of our store leases contain provisions for base rent plus percentage rent based on sales in excess of an agreed upon minimum annual sales level.

We lease all of our corporately-managed store locations. The majority of our store leases contain provisions for base rent plus percentage rent based on sales in excess of an agreed upon minimum annual sales level. Some store leases only include a provision for a percentage of a store's total sales, instead of a fixed base rent amount.

We may suffer negative publicity or be sued if the manufacturers of our merchandise or of Build-A-Bear branded merchandise sold by our licensees ship any products that do not meet current safety standards or production requirements or if such products are recalled or cause injuries.

Securing registrations does not fully insulate us against intellectual property claims, as another party may have rights superior to our registration, or our registration may be vulnerable to attack on various grounds. 17 Table of Contents We may suffer negative publicity or be sued if the manufacturers of our merchandise or of Build-A-Bear branded merchandise sold by our licensees ship any products that do not meet current safety standards or production requirements or if such products are recalled or cause injuries.

We may be unsuccessful in acquiring businesses or engaging in other strategic transactions, which may negatively affect our financial condition and profitability. We may from time to time engage in discussions and negotiations regarding acquisitions or other strategic transactions that could affect our financial condition, profitability or other aspects of our business.

We may from time to time engage in discussions and negotiations regarding acquisitions or other strategic transactions that could affect our financial condition, profitability or other aspects of our business. There can be no assurance that we will be able to identify suitable acquisition targets that we believe complement our existing business.

During fiscal 2021, the trading price of our common stock fluctuated between $4.65 and $23.50 per share.

During fiscal 2022, the trading price of our common stock fluctuated between $12.47 and $26.87 per share.

A decli ne in general global economic conditions could lead to disproportionately reduced discretionary consumer spending and a corresponding reduction in demand for our products and have an adverse effect on our liquidity and profitability.

MACROECONOMIC AND INDUSTRY RISKS Any uncertainty or decline in general global economic conditions, caused by inflation, rising interest rates, geo-political conflicts, or other external factors, could lead to disproportionately reduced discretionary consumer spending and a corresponding reduction in demand for our products and have an adverse effect on our liquidity and profitability.

The success of our franchising business depends upon our ability to attract and maintain qualified franchisees with sufficient financial resources to develop and grow their operations and upon the ability of those franchisees to successfully develop and operate their franchised stores.

These challenges, as well as others, could have a material adverse effect on their business and in turn negatively impact our own business, financial condition and results of operations. 15 Table of Contents The success of our franchising business depends upon our ability to attract and maintain qualified franchisees with sufficient financial resources to develop and grow their operations and upon the ability of those franchisees to successfully develop and operate their franchised stores.

Additionally, because most of our foreign subsidiaries buy their inventory in U.S. dollars, we are also exposed to risk when their 15 functional currencies fluctuate relative to the U.S. Dollar.

We purchase all inventory in U.S. dollars, and our foreign subsidiaries buy their inventory from us in their functional currency, which exposes us to currency risk when their functional currencies fluctuate relative to the U.S. Dollar.

The pandemic accelerated a trend that has been occurring for years of consumers shifting behavior to increasingly purchase products from online merchants rather than traditional brick-and-mortar stores. While we had significant growth in our e-commerce sales and continue with initiatives intended to develop and strengthen our online business, the majority of our sales are generated from our physical store locations.

While we have had significant growth in our e-commerce sales compared to pre-pandemic levels and continue with initiatives intended to develop and strengthen our online business, the majority of our sales are generated from our physical store locations.

If any of these risks or events occur, our business, financial condition or results of operations may be adversely affected. MACROECONOMIC AND INDUSTRY RISKS The COVID pandemic has had and is expected to continue to have an adverse effect on our business and results of operations.

If any of these risks or events occur, our business, financial condition or results of operations may be adversely affected.

For fiscal 2021 and fiscal 2020 , we purchased 74% and 77% of our merchandise from four vendors, respectively. These vendors in turn contract for the production of merchandise with multiple manufacturing facilities.

We do not own or operate any factories that produce our plush products, clothing, shoes or accessories. In both fiscal 2022 and fiscal 2021 , we purchased 77% of our merchandise from five vendors. These vendors in turn contract for the production of merchandise with multiple manufacturing facilities.

Our future success depends, in part, on the popularity and consumer demand for brands of licensors such as Disney, NBCUniversal, Lucasfilm, Warner Bros., and Nintendo. If we are not able to meet our contractual commitments or are unable to maintain licensing agreements with key brands, our business would be adversely affected.

If we are not able to meet our contractual commitments or are unable to maintain licensing agreements with key brands, our business would be adversely affected.

With an increasing allocation of capital expenditures focused on digital initiatives, our failure to successfully execute on individual components of this strategy may adversely affect our financial performance. In addition, a greater concentration of e-commerce sales could result in a reduction in the amount of traffic in our stores and materially adversely affect our financial performance.

In addition, a greater concentration of e-commerce sales could result in a reduction in the amount of traffic in our brick-and-mortar locations and materially adversely affect our financial performance.

The success of our business depends upon the quality of associates throughout our organization and our ability to attract and retain qualified key employees.

GENERAL RISKS We may not be able to operate successfully if we lose key personnel, are unable to hire qualified additional personnel, or experience turnover of our management team. The success of our business depends upon the quality of associates throughout our organization and our ability to attract and retain qualified key employees.

The Bear Cave), and occasion gifting (e.g. graduation, Valentine's Day) which is in addition to our historically core consumer base of adult to children gifting. The success of our strategy will depend on our ability to continue building and delivering a seamless omnichannel shopping experience for our customers.

The Bear Cave), and occasion gifting (e.g. graduation, Valentine's Day). The success of our strategy will depend on our ability to continue building and delivering a seamless omnichannel shopping experience for consumers. With an increasing allocation of capital expenditures focused on digital initiatives, our failure to successfully execute on individual components of this initiative may adversely affect our financial performance.

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Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−0 removed2 unchanged

2022 filing

2023 filing

Biggest changeI n Europe, we contract with a third-party distribution center in Selby, England under an agreement th at ends in January 2025. This agreement contains clauses that allow for termination if certain performance criteria are not met. In Asia, we contract with a third-party distribution center and office space in Shanghai, China, both of which end in April 2023.

In the U.K., w e lease approximately 6,500 square feet for our regional headquarters in Slough, England under a lease that commenced in March 2016 with a term of 10 years. We also contract with a third-party warehouse in southern California to service our West Coast stores. The contract has a one-year term and is renewable.

In the U.K., w e lease approximately 6,500 square feet for our regional headquarters in Slough, England under a lease that commenced in March 2016 with a term of 10 years. We also contra ct with a third-party warehouse in southern California to service our West Coast stores. The contract has a one-year term and is renewable.

ITEM 2. PROPERTIES Stores We lease all of our store locations. As of January 29, 2022, we operated 346 retail stores located primarily in major malls throughout the U.S., Canada, the U.K., and Ireland in our DTC segment.

ITEM 2. PROPERTIES Stores We lease all of our store locations. As of January 28, 2023, we operated 350 retail stores located primarily in major malls throughout the U.S., Canada, the U.K., and Ireland in our DTC segment.

Added

In Asia, we contract for office space and a third-party distribution center in Shanghai, China, with the office space contract ending in August 2023 and the distribution center contract ending in April 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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2023 filing

Biggest changeInformation with respect to certain legal proceedings is set forth in Note 10 Commitments and Contingencies to the Consolidated Financial Statements (included in Part IV of this form 10-K) and is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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2022 filing

2023 filing

Biggest changeISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares (or Units) Purchased (1) (b) Average Price Paid Per Share (or Unit) (2) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (3) Oct 31, 2021 - Nov 27, 2021 - $ - - $ - Nov 28, 2021 - Jan 1, 2022 181,409 17.37 166,855 21,996,093 Jan 2, 2022 - Jan 29, 2022 78,699 16.83 78,699 20,641,704 Total 260,108 $ 17.21 245,554 $ 20,641,704 (1) Includes shares of our common stock delivered to us in satisfaction of the tax withholding obligation of holders of restricted shares which vested during the quarter.

Biggest changeIssuer Purchases of Equity Securities Period (a) Total Number of Shares (or Units) Purchased (1) (b) Average Price Paid Per Share (or Unit) (2) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (3) Oct 30, 2022 - Nov 26, 2022 - $ - - $ 46,498,084 Nov 27, 2022 - Dec 31, 2022 - - - 46,498,084 Jan 1, 2023 - Jan 28, 2023 - - - 46,498,084 Total - $ - - $ 46,498,084 (1) Includes shares of our common stock delivered to us in satisfaction of the tax withholding obligation of holders of restricted shares which vested during the quarter.

This program authorizes the Company to repurchase shares through November 30, 2023 and does not require the Company to repurchase any specific number of shares, and may be modified, suspended or terminated at any time without prior noticed. Shares repurchased under the program will be subsequently retired.

This program authorizes the Company to repurchase shares through August 31, 2025 and does not require the Company to repurchase any specific number of shares, and may be modified, suspended or terminated at any time without prior noticed. Shares repurchased under the program will be subsequently retired.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “BBW.” Our common stock commenced trading on the NYSE on October 28, 2004.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “BBW.” Our common stock commenced trading on the NYSE on October 28, 2004. 21 Holders As of April 10, 2023, the number of holders of record of the Company’s common stock totaled approximately 1,963.

(3) In November 2021, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $25 million of our common stock.

(3) On August 31, 2022, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $50 million of our common stock.

Removed

As of April 11, 2022, the number of holders of record of the Company’s common stock totaled approximately 1,976.

Added

Dividends Our Board of Directors declared a special cash dividend of $1.50 per share that was paid on April 6, 2023, to all stockholders of record as of March 23, 2023, following a $1.25 per share special cash dividend declared on November 30, 2021.

Added

Securities Authorized for Issuance Under Equity Compensation Plans Refer to Part III, Item 12, for information related to our equity compensation plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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2022 filing

2023 filing

Biggest changeBorrowings under the Credit Agreement continue to bear interest (a) at a base rate determined under the Credit Agreement, or (b) at the Borrower’s option, at a rate based on LIBOR, plus in either case a margin based on average undrawn availability as determined in accordance with the Credit Agreement, but the First Amendment reduced such rates and reduced the LIBOR floor.

Biggest changeIn light of the upcoming cessation of LIBOR, the Second Amendment (i) changed the interest calculation from a LIBOR based reference rate to secured overnight financing rate (“SOFR”) based reference rate, (ii) updated the mechanics to use a future reference rate in the event that SOFR is no longer available, (iii) updated various provisions regarding compliance with sanctions and anti-money laundering laws, and (iv) implemented certain other technical amendments. 29 Table of Contents As a result, any borrowings under the Credit Agreement will bear interest by reference to, at our option, either (a) a base rate determined under the Credit Agreement, or (b) at a rate based on SOFR, plus in either case a margin based on average undrawn availability as determined in accordance with the Credit Agreement, as such rates and floor were reduced by the First Amendment.

Impairment losses in the future are dependent on a number of factors such as site selection, general economic trends, public health issues (such as the COVID pandemic) and thus could be significantly different than historical results. The assumptions used in future calculations of fair value may change significantly which could result in further impairment charges in future periods.

Impairment losses in the future are dependent on a number of factors such as site selection, general economic trends, public health issues (such as COVID), and thus could be significantly different than historical results. The assumptions used in future calculations of fair value may change significantly which could result in further impairment charges in future periods.

These expenses also include depreciation of central office assets and the amortization of other assets. Certain store expenses such as credit card fees historically have increased or decreased proportionately with net retail sales. In addition, bad debt expenses and accounts receivable related charges are recorded in SGA.

These expenses also include depreciation of central office assets and the amortization of other assets. Certain store expenses such as credit card fees historically have increased or decreased proportionately with net retail sales. In addition, bad debt expenses and recoveries and accounts receivable related charges are recorded in SGA.

Build-A-Bear’s pop-culture and multi-generational appeal have also played a key role in the Company’s digital transformation with a focus on accelerating our initiatives to expand our digitally-driven, diversified omnichannel capabilities that offer interactive entertainment experiences via both physical and e-commerce engagement, targeting a range of consumer segments and purchasing occasions.

Build-A-Bear’s pop-culture and multi-generational appeal have also played a key role in our digital transformation with a focus on accelerating our initiatives to expand our digitally-driven, diversified omnichannel capabilities that offer interactive entertainment experiences via both physical and e-commerce engagement, targeting a range of consumer segments and purchasing occasions.

These prior year negotiations and new leases, extensions, and modification in fiscal 2021 have increased the percentage of leases with variable rent structures resulting in the increase in variable rent expense in fiscal 2021 compared to fiscal 2020. Most of our retail stores are located within shopping malls and all are operated under leases classified as operating leases.

These prior year negotiations and new leases, extensions, and modification in fiscal 2022 have increased the percentage of leases with variable rent structures resulting in the increase in variable rent expense in fiscal 2022 compared to fiscal 2021. Most of our retail stores are located within shopping malls and all are operated under leases classified as operating leases.

(2) Net retail sales per square foot in the U.K. represents net retail sales from stores open throughout the entire period in the U.K., excluding e-commerce sales, divided by the total selling square footage of such stores. 24 Costs and Expenses Cost of merchandise sold : Cost of merchandise sold is driven primarily by our retail segment.

(2) Net retail sales per square foot in the U.K. represents net retail sales from stores open throughout the entire period in the U.K., excluding e-commerce sales, divided by the total selling square footage of such stores. 24 Table of Contents Costs and Expenses Cost of merchandise sold : Cost of merchandise sold is driven primarily by our retail segment.

However, if we are unable to recover the impact of these costs through price increases to our customers, or if consumer spending decreases as a result of inflation, our business, results of operations, financial condition and cash flows may be adversely affected.

However, if we are unable to recover the impact of these costs through price increases to our guests, or if consumer spending decreases as a result of inflation, our business, results of operations, financial condition and cash flows may be adversely affected.

Results of Operations 2021 Overview Our performance continues to reflect the success of our strategy which has allowed us to put the building bl ocks in place to develop a powerful platform to support our initiatives to deliver consistent profitable growth.

Results of Operations 2022 Overview Our performance continues to reflect the success of our strategy which has allowed us to put the building bl ocks in place to develop a powerful platform to support our initiatives to deliver consistent profitable growth.

We continue to monitor the impact of inflation on our business operations on an ongoing basis and may need to adjust our prices further to mitigate the impacts of changes to the rate of inflation during 2022 or in future years.

Retail gross margin is defined as net retail sales less the cost of merchandise sold - retail. For the commercial segment, cost of merchandise includes the cost of merchandise sold to third-party retailers on a wholesale basis for sale within their stores.

Retail gross profit is defined as net retail sales less the cost of merchandise sold - retail. For the commercial segment, cost of merchandise includes the cost of merchandise sold to third-party retailers on a wholesale basis for sale within their stores.

In addition, unredeemed gift cards or breakage revenue is recorded in proportion to the customer’s redemption pattern using an estimated breakage rate based on historical experience. The Company utilizes historical redemption data to develop a model to analyze the amount of breakage expected for gift cards sold to customers and business partners.

In addition, unredeemed gift cards or breakage revenue is recorded in proportion to our customers' redemption pattern using an estimated breakage rate based on historical experience. The Company utilizes historical redemption data to develop a model to analyze the amount of breakage expected for gift cards sold to customers and business partners.

Our leases typically require us to pay personal property taxes, our pro rata share of real property taxes of the shopping mall, our own utilities, repairs and maintenance in our store, a pro rata share of the malls’ common area maintenance and, in some instances, merchant association fees and media fund contributions.

Our leases typically require us to p ay personal property taxes, our pro rata share of real property taxes of the shopping mall, our own utilities, repairs and maintenance in our store, a pro rata share of the malls’ common area maintenance and, in some instances, merchant association fees and media fund contributions.

Management regularly assesses the tax risk of the company’s return filing positions and believes its accruals for uncertain tax benefits are adequate as of January 29, 2022 and January 30, 2021. Recent Accounting Pronouncements See Note 2 – Summary of Significant Accounting Policies for additional information. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.

Management regularly assesses the tax risk of the company’s return filing positions and believes its accruals for uncertain tax benefits are adequate as of January 28, 2023 and January 29, 2022. Recent Accounting Pronouncements See Note 2 – Summary of Significant Accounting Policies for additional information. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.

We believe our elevated omnichannel business model, which includes a highly profitable e-commerce and experiential retail store base, complimented by diversified revenue streams and disciplined expense and balance sheet management, puts us in a solid position for continued future success. W e delivered a full year pre-tax profit of $50.7 million, which was the highest in our company’s history.

We believe our elevated omnichannel business model, which includes a highly profitable e-commerce and experiential retail store base, complimented by diversified revenue streams and disciplined expense and balance sheet management, puts us in a solid position for continued future success. W e delivered a full year pre-tax profit of $61.9 million, which was the highest in our company’s 25-year history.

As we had incurred a cumulative book loss in the U.K. over the three-year period ended February 2, 2019, we evaluated the realizability of our UK deferred tax assets and, accordingly, in the fourth quarter of fiscal 2018, the Company recorded a $3.7 million valuation allowance on its U.K. deferred tax assets, and remains in a full valuation allowance, as the U.K. continues to be in a three year cumulative loss.

Capital spending in fiscal 2021 totaled $8.1 million and was primarily used to support our ongoing omnichannel strategy and digital initiatives. We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. Additional information is provided in the notes to our consolidated financial statements.

Capital spending in fiscal 2022 totaled $13.6 million and was primarily used to support our ongoing omnichannel strategy and digital initiatives. We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. Additional information is provided in the notes to our consolidated financial statements.

The following table details net retail sales per square foot for stores open throughout the fiscal year other than periods of temporary government-mandated closures, for the periods presented: Fiscal year ended January 29, January 30, Net retail sales per square foot 2022 2021 North America (1) $ 404 $ 234 United Kingdom (2) £ 418 £ 199 (1) Net retail sales per square foot in North America represents net retail sales from stores open throughout the entire period in North America, excluding e-commerce sales, divided by the total leased square footage of such stores.

The following table details net retail sales per square foot for stores open throughout the fiscal year other than periods of temporary government-mandated closures, for the periods presented: Fiscal year ended January 28, January 29, Net retail sales per square foot 2023 2022 North America (1) $ 479 $ 404 United Kingdom (2) £ 679 £ 418 (1) Net retail sales per square foot in North America represents net retail sales from stores open throughout the entire period in North America, excluding e-commerce sales, divided by the total leased square footage of such stores.

(2) China master franchise agreement includes Hong Kong where no stores are currently open. (3) Gulf States master franchise agreement includes Kuwait, Qatar and the United Arab Emirates which all have stores as well as Bahrain and Oman where no stores are currently open.

(2) China master franchise agreement includes Hong Kong where two stores are currently open. (3) Gulf States master franchise agreement includes Kuwait, Qatar and the United Arab Emirates which all have stores as well as Bahrain and Oman where no stores are currently open. (4) India master franchise agreement includes Sri Lanka where no stores are currently open.

Business Overview Build-A-Bear Workshop started as a mall-based, experiential specialty retailer where children and their families could create their own stuffed animals. Over the last nearly 25 years, Build-A-Bear has become a brand with high consumer awareness and positive affinity with over 200 million furry friends made by guests around the world.

Business Overview Build-A-Bear Workshop started as a mall-based, experiential specialty retailer where children and their families could create their own stuffed animals. Over the last 25 years, Build-A-Bear has become a brand with high consumer awareness and positive affinity with over 225 million furry friends sold to guests around the world.

Our consolidated net income was $47.3 million in fiscal 2021 compared to net loss of $23.0 million in fiscal 2020. We believe that we have a concept that has broad demographic appeal which, for North American stores open for the entire year averaged net retail sales per store of $1.0 million and $0.6 million in fiscal 2021 and 2020, respectively.

Our consolidated net income was $48.0 million in fiscal 2022 compared to net income of $47.3 million in fiscal 2021. We believe that we have a concept that has broad demographic appeal which, for North American stores open for the entire year averaged net retail sales per store of $1.2 million and $1.0 million in fiscal 2022 and 2021, respectively.

Our lease term includes options to extend or terminate a lease only when it is reasonably certain that we will exercise that option. The majority of our leases do not provide an implicit rate and therefore, we estimate the incremental borrowing discount rate based on information available at lease commencement.

Future volatility of general price inflation and the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead could adversely affect our financial results. Inflationary pressures may be exacerbated by higher transportation costs due to ware and other geopolitical conflicts, such as the current Russia-Ukraine crisis.

Future volatility of general price inflation and the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead could adversely affect our financial results. Inflationary pressures may be exacerbated by higher transportation costs due to war and other geopolitical conflicts, such as the current Russia-Ukraine conflict and tension between China and Taiwan.

We ended the year with cash and cash equivalents of $32.8 million with no outstanding borrowings on our credit facility.

We ended the year with cash and cash equivalents of $ 42.2 million with no outstanding borrowings on our credit facility.

As of January 29, 2022, we had 346 corporate-managed stores globally, 61 locations operating through our "third-party retail" model in which we sell our products on a wholesale basis to other companies that then in turn execute our retail experience, and 72 franchised stores operating internationally under the Build-A-Bear Workshop brand.

As of January 28, 2023, we had 350 corporate-managed stores globally, 70 locations operating through our "third-party retail" model in which we sell our products on a wholesale basis to other companies that then in turn execute our retail experience, and 68 franchised stores operating internationally under the Build-A-Bear Workshop brand.

For fiscal 2021, we had an immaterial amount of interest income compared to an immaterial amount of interest expense in fiscal 2020, resulting in an immaterial difference in activity. Provision for income taxes . The provision for income taxes was $3.4 million in fiscal 2021 compared to $2.8 million in fiscal 2020.

For fiscal 2022, we had an immaterial amount of interest expense compared to an immaterial amount of interest income in fiscal 2021, resulting in an immaterial difference in activity. Provision for income taxes . The provision for income taxes was $ 13.9 million in fiscal 2022 compared to $ 3.4 million in fiscal 2021 .

S tores Co rporately-managed locations : The number of Build-A-Bear Workshop stores in the U.S., Canada and Puerto Rico (collectively, North America), the U.K. and Ireland (collectively, Europe) and China for the last two fiscal years is summarized as follows: Fiscal year ended January 29, 2022 January 30, 2021 North North America Europe China Total America Europe China Total Beginning of period 305 48 1 354 316 55 1 372 Opened 5 - - 5 3 - - 3 Closed (5 ) (7 ) (1 ) (13 ) (14 ) (7 ) - (21 ) End of period 305 41 - 346 305 48 1 354 During fiscal 2021, our retail business model continued to evolve to address changing shopping patterns by diversifying our locations, formats and geographies.

S tores Co rporately-Managed L ocations : The number of Build-A-Bear Workshop stores in the U.S. and Canada (collectively, North America), the U.K. and Ireland (collectively, Europe) and China for the last two fiscal years is summarized as follows: Fiscal year ended January 28, 2023 January 29, 2022 North North America Europe China Total America Europe China Total Beginning of period 305 41 - 346 305 48 1 354 Opened 9 3 - 12 5 - - 5 Closed (2 ) (6 ) - (8 ) (5 ) (7 ) (1 ) (13 ) End of period 312 38 - 350 305 41 - 346 During fiscal 2022, our retail business model continued to evolve to address changing shopping patterns by diversifying our locations, formats and geographies.

As a result of a $750,000 letter of credit against the line of credit at the end of fiscal 2021, approximately $22.5 million was available for borrowing. As of January 29, 2022, the Company had no outstanding borrowings.

As a result of a $500,000 letter of credit against the line of credit at the end of fiscal 2022, approximately $24.5 million was available for borrowing. As of January 28, 2023, the Company had no outstanding borrowings.

As of January 29, 2022, we had purchase obligations totaling approxim ately $ 99.9 million, of which $ 25.7 million a re due in the next 12 months. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.

As of January 28, 2023, we had purchase obligations totaling approxim ately $ 87.5 million, of which $ 27.5 million a re due in the next 12 months. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.

Percentages do total due to immaterial rounding: Fiscal year ended January 29, January 30, 2022 2021 Revenues: Net retail sales 96.6 % 97.6 % Commercial revenue 2.8 1.7 International franchising 0.6 0.7 Total revenues 100.0 100.0 Costs and expenses: Cost of merchandise sold - retail (1) 46.9 59.3 Store asset impairment 0.0 2.9 Cost of merchandise sold - commercial (1) 49.1 41.5 Cost of merchandise sold - international franchising (1) 66.1 55.9 Total cost of merchandise sold 47.0 61.8 Consolidated gross profit 53.0 38.2 Selling, general and administrative 40.6 46.1 Interest (income) expense, net (0.0 ) 0.0 Income (loss) before income taxes 12.3 (7.9 ) Income tax expense 0.8 1.1 Net income (loss) 11.5 (9.0 ) Retail gross margin (2) 53.1 % 40.7 % (1) Cost of merchandise sold – retail is expressed as a percentage of net retail sales.

Percentages may not total due to immaterial rounding: Fiscal year ended January 28, January 29, 2023 2022 Revenues: Net retail sales 95.3 % 96.6 % Commercial revenue 4.0 2.8 International franchising 0.7 0.6 Total revenues 100.0 100.0 Costs and expenses: Cost of merchandise sold - retail (1) 47.4 46.9 Cost of merchandise sold - commercial (1) 46.4 49.1 Cost of merchandise sold - international franchising (1) 61.4 66.1 Total cost of merchandise sold 47.5 47.0 Consolidated gross profit 52.5 53.0 Selling, general and administrative 39.3 40.6 Interest expense (income), net 0.0 (0.0 ) Income before income taxes 13.2 12.3 Income tax expense 3.0 0.8 Net income 10.3 11.5 Retail gross margin (2) 52.6 % 53.1 % (1) Cost of merchandise sold – retail is expressed as a percentage of net retail sales.

Significant judgment is required in evaluating our uncertain tax positions. We establish accruals for uncertain tax positions when we believe that the full amount of the associated tax benefit may not be realized.

We establish accruals for uncertain tax positions when we believe that the full amount of the associated tax benefit may not be realized.

As a matter of sensitivity, a hypothetical 1% change in our gift card breakage rate in fiscal 2021 would have resulted in a change in breakage revenue of $ 1.3 million.

As a matter of sensitivity, a hypothetical 1% change in our gift card breakage rate in f iscal 2022 would have resulted in a change in breakage revenue of $ 1.0 million.

The number of international, franchised stores opened and closed for the periods presented below is summarized as follows: Fiscal year ended January 29, 2022 January 30, 2021 Beginning of period 71 92 Opened 9 8 Closed (8 ) (29 ) End of period 72 71 As of January 29, 2022, the distribution of franchised locations among these countries was as follows: South Africa 20 Australia 19 India (1) 11 China (2) 10 Gulf States (3) 6 Chile 6 Total 72 (1) India master franchise agreement includes Sri Lanka where no stores are currently open.

The number of international, franchised stores opened and closed for the periods presented below is summarized as follows: Fiscal year ended January 28, 2023 January 29, 2022 Beginning of period 72 71 Opened 12 9 Closed (16 ) (8 ) End of period 68 72 As of January 28, 2023, the distribution of franchised locations among these countries was as follows: South Africa 21 Australia (1) 17 China (2) 9 Gulf States (3) 9 Chile 9 India (4) 3 Total 68 (1) Australia master franchise agreement includes New Zealand where one store is currently open.

In addition, ongoing inflation in product costs may result in lower gross margins due to a requirement to maintain higher inventory reserves.

In addition, ongoing inflation in product costs may result in lower gross margin rates due to the need to maintain higher inventory reserves.

We have no off-balance sheet arrangements as of January 29, 2022. 31 Inflation The impact of inflation on the Company's business operations was seen throughout fiscal 2021 and began to have an adverse impact on our business in the fourth quarter of the year, mainly in freight and other supply chain related costs.

We have no off-balance sheet arrangements as of January 28, 2023. 30 Table of Contents Inflation The impact of inflation on the Company's business operations was seen throughout fiscal 2021 and continued to adversely affect our business in fiscal 2022, mainly in freight and other supply chain related costs.

We operate in three segments that share the same infrastructure, including management, systems, merchandising and marketing, and generate revenues as follows: • Direct to Consumer (“DTC”) – Corporately-managed retail stores located in the U.S., Canada, Puerto Rico, the U.K., Ireland, and two e-commerce sites as well as Denmark and China which have now closed; • Commercial – Transactions with other businesses, mainly comprised of wholesale product sales and licensing our intellectual property, including entertainment properties, for third-party use; and • International franchising – Royalties as well as product and fixture sales from other international operations under franchise agreements. 23 Selected financial data attributable to each segment for fiscal 2021 and 2020 are presented in Note 15 — Segment Information to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Financing activities used cash of $22.5 million in fiscal 2021 compared to $0.1 million in fiscal 2020. Cash used in financing activities in fiscal 2021 increased as compared to fiscal 2020, driven primarily by the payment of a special cash dividend of $19.9 million and repurchases of our common stock for $4.4 million, offset by proceeds from stock option exercises.

Cash used in financing activities in fiscal 2022 increased as compared to fiscal 2021, driven primarily by the repurchases of our common stock for $24.1 million throughout fiscal 2022, offset by the payment of a special cash dividend of $19.9 million in fiscal 2021. Capital Resources .

At the closing date of the First Amendment, we had a $750,000 letter of credit issued and no outstanding indebtedness under the Credit Agreement; and, we were in compliance with the Credit Agreement covenants. As of January 29, 2022, the Company had a borrowing base of $22.3 million.

At the closing date of the Second Amendment, we had a $500,000 letter of credit issued and no outstanding indebtedness under the Credit Agreement and the Company is currently in compliance with the Credit Agreement covenants. As of January 28, 2023, the Company had a borrowing base of $25.0 million.

Capital Resources . As of January 29, 2022, we had a cash balance of $32.8 million, of which 69% was domiciled within the U.S. On December 17, 2021, we entered into a First Amendment to Revolving Credit and Security Agreement with PNC Bank, National Association, as agent.

As of January 28, 2023, we had a cash balance of $42.2 million, of which 72% was domiciled within the U.S. On November 21, 2022, we entered into a Second Amendment to the Revolving Credit and Security Agreement with PNC Bank, National Association, as agent.

We are updating our store portfolio with our Discovery format, which represented 42% of our store base as of January 29, 2022. During fiscal 2021, we executed 5 planned new store openings in North America, all Discovery format and 4 of which were in tourist sites.

We are updating our store portfolio with our Discovery format, which represented 45% of our store base as of January 28, 2023. During fiscal 2022, we executed 9 planned new store openings in North America, with 6 being opened under the Discovery format and 3 of which were in tourist sites.

Retail gross margin was $211.3 million in fiscal 2021 compared to $101.4 million in fiscal 2020, an increase of $109.9 million or 108.3% As a percentage of net retail sales, retail gross margin increased to 53.1% for fiscal 2021 from 40.7% for fiscal 2020, or 1,240 basis points as a percentage of net retail sales.

Retail gross margin was $234.7 million in fiscal 2022 compared to $211.3 million in fiscal 2021, an increase of $23.4 million or 11.1% As a percentage of net retail sales, retail gross margin decreased to 52.6% for fiscal 2022 from 53.1% for fiscal 2021, or 50 basis points as a percentage of net retail sales.

Fiscal year ended January 29, January 30, 2022 2021 Net cash provided by operating activities $ 28,077 $ 13,386 Net cash used in investing activities (8,130 ) (5,046 ) Net cash used in financing activities (22,456 ) (114 ) Effect of exchange rates on cash 514 (112 ) Net change in cash, cash equivalents and restricted cash $ (1,995 ) $ 8,114 Operating Activities.

Fiscal year ended January 28, January 29, 2023 2022 Net cash provided by operating activities $ 47,276 $ 28,077 Net cash used in investing activities (13,634 ) (8,130 ) Net cash used in financing activities (25,056 ) (22,456 ) Effect of exchange rates on cash 767 514 Increase (decrease) in cash, cash equivalents and restricted cash $ 9,353 $ (1,995 ) Operating Activities.

Revenue from international franchising was $2.3 million for fiscal 2021 compared to $1.7 million for fiscal 2020. This $0.7 million or 39.0% increase was primarily due to having more stores in operation in 2021 compared to the same period in 2020 when significantly more locations were temporarily closed due to pandemic-related mandated government restrictions. Retail gross margin .

This $0.9 million or 38.9% increase was primarily due to having more stores in operation in 2022 compared to the same period in 2021 when some franchisee locations were temporarily closed due to pandemic-related mandated government restrictions. Retail gross margin .

The primary consumer target for our retail stores is families with children while our e-commerce sites focus on collectors and gift givers that are primarily tweens, teens and adults.

Our retail stores also act as “mini distribution centers” that provide efficient omnichannel support for our growing digital demand. The primary consumer target for our brick-and-mortar locations is families with children while our e-commerce sites focus on collectors and gift givers that are primarily tweens, teens and adults.

During fiscal 2020, we renegotiated a large portion of our store lease portfolio resulting in a combination of rent reductions, deferments, and abatements in North America, the U.K. and Ireland.

The decrease in restricted cash is the result of a red uction to our required deposit with the U.K. Customs Authority. During fiscal 2021, we renegotiated a large portion of our store lease portfolio resulting in a combination of rent reductions, deferments, and abatements in North America, the U.K. and Ireland.

The discount rates used are indicative of a synthetic credit rating based on quantitative and qualitative analysis and adjusted one notch higher to estimate a secured credit rating. For non-U.S. locations, a risk-free rate yield based on the currency of the lease is used to estimate the incremental borrowing rate.

The discount rates used are indicative of a synthetic credit rating based on quantitative and qualitative analysis and adjusted one notch higher to estimate a secured credit rating.

We returned $24.3 million in value to shareholders through $4.4 million in share repurchases and payment of a $19.9 million special dividend in fiscal 2021. 26 The following table sets forth, for the periods indicated, selected statement of operations data expressed as a percentage of total revenues, except where otherwise indicated.

During the period of November 30, 2021 through April 10, 2023, we returned over $73 million in value to shareholders through $31.6 million in share repurchases and payments of a $20.2 million special dividend in fiscal 2021 and 2022 and a $21.6 million special dividend in fiscal 2023. 26 Table of Contents The following table sets forth, for the periods indicated, selected statement of operations data expressed as a percentage of total revenues, except where otherwise indicated.

The majority of our Canadian stores remained temporarily closed at the beginning of the second quarter with the majority reopening in June 2021 and with all stores ending the second fiscal quarter open. Our year-over-year results discussed below are impacted by prior year store closures and operating hour reductions as a result of the pandemic.

The majority of our Canadian stores remained temporarily closed at the beginning of the second quarter with the majority reopening in June 2021 and with all stores ending the second fiscal quarter open. No stores were closed as a result of the pandemic in fiscal 2022.

As of January 29, 2022, we had six master franchise agreements, which typically grant franchise rights for a particular country or group of countries, covering an aggregate of 10 countries.

All franchised stores have similar signage, store layout and merchandise assortments as our corporately-managed stores. As of January 28, 2023, we had six master franchise agreements, which typically grant franchise rights for a particular country or group of countries, covering an aggregate of 10 countries.

See Note 4 - Leases and Note 6 - Property and Equipment, Net to our consolidated financial statements for further discussion. 32 During fiscal 2021, we did not record any impairment charges.

See Note 4 - Leases and Note 6 - Property and Equipment, Net to our consolidated financial statements for further discussion. 31 Table of Contents During fiscal 2022, we recorded immaterial impairment charges. In fiscal 2021, we recorded no impairment charges on long-lived assets.

The 2021 effective rate of 6.8% differed from the statutory rate of 21% primarily due to the tax benefit resulting from the reversal of the valuation allowance in North America of $7.8 million.

The $10.5 million increase in the provision for income taxes for fiscal 2022 from fiscal 2021 is due to the full reversal of the Company’s tax valuation allowance in North America of $7.8 million in fiscal 2021. The 2022 effective rate of 22.5% differed from the statutory rate of 21% primarily due to state tax income expense.

We ended fiscal 2021 with no borrowings under our credit agreement and with $32.8 million in cash, cash equivalents and restricted cash after investing $8.1 million in capital projects throughout the year.

We ended fiscal 2022 with $42.2 million in cash, cash equivalents and restricted cash after investing $13.6 million in capital projects throughout the year.

We ended fiscal 2021 with $32.8 million in cash, cash equivalents and restricted cash after investing $8.1 million in capital projects throughout the year. As of January 29, 2022, we have utilized $4.4 million in cash to repurchase 245,554 shares under our $25.0 million program that was authorized by our Board of Directors on November 30, 2021 .

During fiscal 2022, we utilized $24.1 million in cash to repurchase 1,533,503 shares under the $25.0 million program that was authorized by our Board of Directors on November 30, 2021 and the $50.0 million program authorized by our Board of Directors in August 31, 2022, which was authorized after we completed the share repurchase program authorized on November 30, 2021 .

Selling, general and administrative expenses were $167.3 million or 40.6% of consolidated revenue for fiscal 2021 as compared to $117.6 million or 46.1% of consolidated revenue for fiscal 2020.

The decrease in gross margin was the result of increased air and ocean freight costs throughout fiscal 2022 compared to fiscal 2021. Selling, general and administrative . Selling, general and administrative expenses were $183.9 million or 39.3% of consolidated revenue for fiscal 2022 as compared to $167.3 million or 40.6% of consolidated revenue for fiscal 2021.

Investing Activities . Cash flows used in investing activities were $8.1 million and $5.0 million in fiscal years 2021 and 2020, respectively. Cash used in investing activities in fiscal 2021 increased as compared to fiscal 2020 primarily driven by reductions in planned capital expenditures in fiscal 2020 as a result of COVID cash management initiatives. Financing Activities .

Cash flows used in investing activities were $13.6 million and $8.1 million in fiscal years 2022 and 2021, respectively. Cash used in investing activities in fiscal 2022 increased as compared to fiscal 2021 primarily driven by an increase in spending on capital expenditures related to information technology projects and new store openings. Financing Activities .

We consider the Company’s ability to carry back its tax losses or credits for refunds, the availability of tax planning strategies and reversals of existing taxable temporary differences as well as projections of future taxable income. In the fourth quarter of fiscal 2021, we performed an analysis of all available positive and negative evidence.

When evaluating if a valuation allowance is necessary, we evaluate the sustained profitability and three years of cumulative income in each jurisdiction and consider the Company’s ability to carry back its tax losses or credits for refunds, the availability of tax planning strategies, reversals of existing taxable temporary differences and projections of future taxable income.

Fiscal Year Ended January 29, 2022 Compared to Fiscal Year Ended January 30, 2021 Total revenues. Net retail sales were $397.7 million for fiscal 2021, compared to $249.2 million for fiscal 2020, an increase of $148.5 million or 59.6%, driven by an increase in North America of $138.0 million or 62.7% and in Europe of $17.5 million or 51.8%.

Fiscal Year Ended January 28, 2023 Compared to Fiscal Year Ended January 29, 2022 Total revenues. Net retail sales were $446.2 million for fiscal 2022, compared to $397.7 million for fiscal 2021 , an increase of $ 48.5 million or 12.2% , compared to the prior year.

Commercial revenue was $11.5 million for fiscal 2021 compared to $4.4 million for fiscal 2020, an increase of $7.1 million or 159.9% primarily due to increased sales volume from our commercial accounts versus the prior year which was impacted by pandemic driven closures of third-party retail locations serviced by these customers.

Commercial revenue was $18.5 million for fiscal 2022 compared to $11.5 million for fiscal 2021, an increase of $7.0 million or 61.0% primarily due to increased sales volume from our commercial accounts through our third-party retail model. Revenue from international franchising was $3.2 million for fiscal 2022 compared to $2.3 million for fiscal 2021.

The components of this increase are as follows: Fiscal year ended January 29, 2022 (dollars in millions) Impact from: Existing stores $ 138.0 E-commerce 5.7 New stores 2.4 Store closures (3.1 ) Gift card breakage 2.7 Deferred revenue estimates 1.5 Foreign currency translation 1.3 $ 148.5 27 The retail revenue increase was primarily the result of the increase in store operating days of corporately-managed stores due to a reduced impact from COVID in fiscal 2021 and consolidated e-commerce sales.

The compon ents of this increase are as follows: Fiscal year ended January 28, 2023 (dollars in millions) Impact from: Existing stores $ 68.0 E-commerce (12.1 ) New stores 4.8 Store closures (6.6 ) Gift card breakage (1.3 ) Foreign currency translation (6.4 ) Other 2.1 $ 48.5 27 Table of Contents The retail revenue increase was primarily the result of an increase in demand for our product and in-person interactive experience (partially offset by a decrease in digital sales), select strategic price increases, and lower promotional activity.

In fiscal 2020, we recorded impairment charges on long-live assets totaling $ 7.3 million, $ 3.5 million for property and equipment and $ 3.8 million for right-of-use lease assets. As a measure of sensitivity for fiscal 2021, a hypothetical 10% decrease in the undiscounted future cash flows for the stores would not have resulted in impairments for the year.

As a measure of sensitivity for fiscal 2022, a hypothetical 10% decrease in the undiscounted future cash flows for the stores would have resulted in immaterial impairments for the year .

Through our third-party retail model, there were 61 stores in operation at the end of the fiscal year with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Beaches Family Resorts. As in prior years, we operated in a number of other non-traditional locations as well as shop-in-shop arrangements within other retailers’ stores.

Third-Party Retail L ocations : The number of third-party retail locations opened and closed for the periods presented below is summarized as follows: Fiscal year ended January 28, 2023 January 29, 2022 Beginning of period 61 56 Opened 13 8 Closed (4) (3) End of period 70 61 25 Table of Contents Through our third-party retail model, there were 70 stores in operation at the end of fiscal year 2022 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Beaches Family Resorts.

Temporary locations generally have lease terms of two to eighteen months. These specific sites are designed to capitalize on short-term opportunities.

Temporary locations generally have lease terms of two to eighteen months. These specific sites are designed to capitalize on short-term opportunities. In the future, we expect to close certain stores in accordance with natural lease events as an ongoing part of our real estate management and day-to-day operational plans.

While we believe the majority of our positive performance was driven by the disciplined execution of our strategic initiatives, impact from pent-up demand and government stimulus may have also helped to contribute to a 61.2% increase in total revenue to $411.5 million in fiscal 2021.

We believe that the majority of our positive performance was driven by the disciplined execution of our strategic initiatives, including leveraging our financial management to invest in growth initiatives, to contribute to a 13.7% increase in total revenue to $ 467.9 million in fiscal 2022.

Cash flows provided by operating activities were $28.1 million and $13.4 million in fiscal years 2021 and 2020, respectively.

Cash flows provided by operating activities were $47.3 million and $28.1 million in fiscal years 2022 and 2021, respectively. Cash flows from operating activities increased in fiscal 2022 as compared to fiscal 2021 primarily driven by a decrease in cash spent on inventory purchases in fiscal 2022 compared to fiscal 2021. Investing Activities .

Rates were developed for length of lease term for each year 1 through 10 and for 12, 15, 20, 25, and 30-year terms. 33 Income Taxes We recognize deferred tax assets resulting from tax credit carryforwards and deductible temporary differences between taxable income on our income tax returns and income before taxes under GAAP.

For non-U.S. locations, a risk-free rate yield based on the currency of the lease is used to estimate the incremental borrowing rate. 32 Table of Contents Income Taxes We recognize deferred tax assets resulting from tax credit carryforwards and deductible temporary differences between taxable income on our income tax returns and income before taxes under GAAP.

The First Amendment amended the Revolving Credit and Security Agreement dated as of August 25, 2020. The Credit Agreement continues to provide for a senior secured revolving loan in aggregate principal amount of up to $25,000,000, which may be increased by an amount not to exceed $25,000,000.

The Second Amendment amended the Revolving Credit and Security Agreement, dated as of August 25, 2020 as amended by the First Amendment, dated as of December 17, 2021.

However, due to mitigating actions taken by the Company, such as strategic price increases on highly sought-after products and accelerated purchases of inventory, the impact of general price inflation on our 2021 financial position and results of operations has not been significant. We expect the inflationary pressures experienced at the end of fiscal 2021 to continue into fiscal 2022.

However, we continue to take mitigating actions, such as select strategic price increases on highly sought-after products, accelerated purchases of inventory, and leveraging occupancy and distribution costs.

In November 2021, our Board of Directors authorized a share repurchase program of up to $25 million and as of January 29, 2022, we had utilized $4.4 million in cash to repurchase 245,554 shares under the program. Additionally, we paid a special dividend of $19.9 million to shareholders of record as of December 10, 2021.

On August 31, 2022, we announced that our Board of Directors authorized a share repurchase program of up to $50.0 million, and during fiscal 2022, we had utilized $24.1 million in cash to repurchase 1,533,503 shares under both stock buyback programs.

(4) Other revenues from external customers are comprised of commercial revenue and international franchising. 29 Liquidity and Capital Resources Our cash requirements are primarily for the opening, remodeling or reformatting of stores, installation and upgrades of information systems and working capital. Over the past several years, we have met these requirements through cash generated from operations.

The overall increase in EBITDA was due to increased consolidated revenues, allowing for a leverage of fixed occupancy and payroll costs compared to the prior year. Liquidity and Capital Resources Our cash requirements are primarily for the opening, remodeling or reformatting of stores, installation and upgrades of information systems and working capital.

Removed

Added

Selected financial data attributable to each segment for fiscal 2022 and 2021 are presented in Note 15 — Segment Information to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 23 Table of Contents Our year-over-year results discussed below are impacted by prior year store closures and operating hour reductions as a result of the pandemic.

Removed

We use store contribution as the key performance metric for our retail stores. Consolidated store contribution, which consists of store location net retail sales less cost of product, marketing and store related expenses, as a percentage of net retail sales was 27.3% for fiscal 2021 and 8.5% for fiscal 2020, the latter reflecting the negative impact of COVID.

Added

We ended fiscal 2022 with no borrowings under our credit agreement and with $42.2 million in cash, cash equivalents and restricted cash after investing $13.6 million in capital projects throughout the year. During the third quarter of fiscal 2022, we completed the $25.0 million stock buyback program authorized by our Board of Directors in November 2021.

Removed

Non-store gene ral and administrative expenses are excluded as are our revenues and expenses associated with e-commerce sites and adjustments to deferred revenue related to gift card breakage and our loyalty program.

Added

Additionally, our Board of Directors declared a special cash dividend of $1.50 per share that was paid on April 6, 2023, to all stockholders of record as of March 23, 2023, following a $1.25 per share special cash dividend declared on November 30, 2021 and paid in December 2021 in the prior year.

Removed

The diversification of our real estate portfolio and shift to smaller more flexible store formats may result in lower average store revenue but is expected to improve store contribution on a long-term basis. See “Non-GAAP Financial Measures” for a reconciliation of store contribution to net income.

Added

The third-party retail model is capital light for us, with the partner company building out and operating the workshops including providing the real estate location and covering the cost of labor and inventory, which is purchased on a wholesale basis.

Removed

The increase in consolidated store contribution as a percent of net retail sales in fiscal 2021 compared to fiscal 2020 was due to increased retail gross margin by 1,240 basis points primarily driven by increased leverage of fixed occupancy costs as a percent of revenue by 1,048 basis points.

Added

These locations are heavily-weighted to the hospitality industry, which allow us to further advance our focus on experience location expansion in non-traditional and tourist areas, as well as shop-in-shop arrangements within other retailers’ stores. International Franchise Locations : Our first franchisee location was opened in November 2003.

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