Build-A-Bear's midsummer "pay your age" promotion was widely deemed a marketing blunder, but the company last week said the event rescued its second quarter sales and "delivered a meaningful profit, although it was not enough to offset the start of the quarter," according to a statement from CEO Sharon Price John.
The company also said it plans to open a store-within-a-store inside the new FAO Schwarz flagship in New York City's Rockefeller Plaza, which is slated to open in November. The location — along with new stores at Navy Pier in Chicago, Pier 39 in San Francisco and Inner Harbor in Baltimore — is part of a "strategy of expanding into a variety of high-traffic tourist areas," John said.
Build-a-Bear's revenues in the quarter rose 5%, including a 14.4% increase in e-commerce, according to the company press release. Net loss in the quarter reached $1.8 million, down from net income of $44,000 in the year-ago quarter. Overall sales result included an 8.7% increase in North America and a 14.9% decrease in Europe that is largely due to “ongoing uncertainty surrounding Brexit” as well new EU privacy laws that are restricting marketing, the company also said.
Executives' declaration of success for its "pay your age" day promotion runs counter to the assessment reached by most marketing experts and analysts, many of whom faulted the retailer for poor planning.
"With much higher than anticipated demand for its 'pay your age day' promotion, Build-A-Bear has become a victim of its own success," GlobalData Retail Managing Director Neil Saunders said in comments emailed to Retail Dive. "The decision to shut stores and end the promotion early was necessary on both safety and operational grounds, but it will damage the brand."
But it also generated sales, John insisted last week. "The surge of interest from the promotion helped to drive profitable double-digit sales increases throughout the balance of the quarter and we believe will have far-reaching implications ... allowing us to continue to proactively leverage the overall potential of our brand and company into the future,” John told analysts, according to a conference call transcript from Seeking Alpha.
She also said softer Q2 results were not due to the event, which had the retailer's most popular items (that typically sell for $30 to $60) going for the much lower numbers corresponding to the ages of its biggest fans. Not surprisingly, the event surpassed the company's previous high-water mark for store traffic, incentivizing well over half a million people to head to stores during one of the slowest periods in retail, John said.
The CEO also pushed back against the notion that the event was poorly executed. "While no reasonable interpretation of the planning data would have predicted the enormity of the turnout, [which] resulted in lines that stretched beyond the calculated time it would take guests to physically go [through] our bear-building process, we were able to quickly pivot and provide vouchers to guests waiting in line beyond our calculated stuffing throughput," she said, noting that most locations did stay open that day.
According to a Facebook post published by the company at 11 a.m. the day of the event, Build-A-Bear said it was being forced to close lines at all of its U.S. and Canadian stores due to safety concerns spurred by the overwhelming turnout.