Build-A-Bear Workshop, Inc. Price & Performance (BBW)

Good morning, everyone, and welcome to Build A Bear's fourth quarter twenty twenty four earnings conference call. With us today are Sharon John, Build A Bear's Chief Executive Officer Chris Hurt, Chief Operating Officer and Boing D'Dorovich, Chief Financial Officer. During this call, we'll refer to forward looking statements that are subject to risks and uncertainties. Actual results could differ materially. Please refer to our Forms 10 ks and 10 Q, including the risk factors section. We undertake no obligation to update any forward looking statements. During this call, we will present both GAAP and non GAAP financial measures. A reconciliation of non GAAP to GAAP measures is included in today's earnings press release. Which is distributed and available to the public through our Investor Relations website. And now, I'll turn the call over to Sharon.

Thank you, Gary. Good morning, and thanks for joining us for Build-A-Bear Bear's fourth quarter and fiscal twenty twenty four earnings call. Before we get started today, I'd like to welcome new Board formerly the Chair and CEO of Foot Locker, Dick brings a wealth of global retail and operations experience and we are delighted to have him as part of the Build A Bear family. Now, today, based on the monetization of the power of the Build A Bear brand has enabled us to report record results. Which exceeded our most recent guidance for the year. Given our solid corporate comparative store performance and continued expansion of our retail footprint on a global basis, 2024 is now in the books as the most successful year in the history of the company from both a total revenue and pre tax income perspective. All while continuing to return value directly to our shareholders invest in the future and maintain a solid balance sheet. Additionally, our most valued asset, the Build A Bear brand, proved to be as strong as ever as we successfully expanded our consumer segments, categories, channels and countries.

This further supports our belief in the stretchability of the memorable impact and subsequent halo effect created by Build A Bear's unique experiential retail model and the premise that a teddy bear hug is understood in every language. In fact, fiscal twenty twenty four marks the fourth consecutive year of record results for Build A Bear. We currently expect to harness that momentum to deliver a fifth straight year of record breaking revenue in fiscal twenty twenty five, although we are cautiously optimistic on pretax income results largely due to tariff concerns as we highlighted in this morning's press release. Voyn will provide additional details in his remarks. Before I review our strategic initiatives, please note the full year fiscal twenty twenty four results showed both revenue and profit expansion inclusive of the additional week in 2023 However, the following results have been adjusted to exclude the fifty third week for improved comparative purposes. Revenues increased 3.6% to more than $496,000,000 pretax income grew 5.1% to more than $67,000,000 and we also returned $42,000,000 in capital to shareholders. We attribute Build A Bear's record revenue and meaningful margin expansion over the past several years to the dedication and successful execution of our multiyear strategy, which includes the diverse dictation of our business model that in many ways is summarized by focusing on and making investments in opportunities, to drive repeat purchase, in more places with more types of products for more purposes.

This consistency despite various economic and geopolitical headwinds over the years, stems mainly from the company's commitment to three key initiatives aimed at driving long term profitable growth. One, the evolution and expansion of our experiential retail footprint two, the advancement of our comprehensive digital transformation and three, continued incremental investments to leverage the strength of the brand across multiple fronts. While returning capital to shareholders. The first strategic initiative is to evolve and expand globally through Build A Bear's three experience location models.

Corporately operated, partner operated and franchising. It is important to note that the significant improvements in profitability and cash flow from In fact, it has been through a disciplined approach and relentless focus that began over a decade ago. That has enabled us to enhance our corporately operated store contribution margins at least 25%. A best in class rate. Which we have maintained for four consecutive years. With a fleet that is essentially 100% profitable. The combined effort across all three store models has extended Build A Bear's global footprint by over 100 additional locations in the past two years. Most of which are partner operated. To review this strategic initiative in more detail, I would like turn the call over to Chris Hurt, our Chief Operations Officer.

Chris has been an exceptional executive for the company since 2015. And has been instrumental in driving store fleet profitability, and growth by evolving the retail footprint format lease deals, service model and operations. Well as overseeing multiple improvements through the years including the important implementation of our warehouse management system and recent point of sale upgrades. Chris Spearheads, our partner operated and franchise portion of our three pronged retail model even as his responsibilities have expanded to now include merchandising, product and marketing. Therefore, while Chris will touch on our total new location expansion, he will focus on the partner operated and franchise growth which is largely international. Plus, he will note some exciting news you may have already seen in the press this morning, that has been in the works for multiple years.

Chris?

Thanks, Sharon. I'd like to begin by highlighting some of the next nine new corporately operated stores that we added in 2024. Starting with the first of its kind Hello Kitty And Friends Build A Better Workshop We Opened Late In The Year In The Popular Century City Mall in Los Angeles to tremendous fanfare. We also opened three tourist destinations in England during the year, including a workshop in Windsor, right across from the famed Windsor Castle. Featuring a unique assortment of tourist inspired products. A location in Stratford, England in the highly trafficked Stratford Westville Mall adjacent to Olympic Park and the West Ham Football Stadium. Plus an Oxford Street store in the heart of one of the busiest shopping areas in Europe, in the city center of London. In The U. S, we opened key tourist destinations in Chicago, and the famous Ridley Build-A-Bear on Michigan Avenue. In Irvine, California in the popular Irvine Spectrum in the famous tourist destination of Hershey, Pennsylvania. All these new locations represent our continued focus on places where our guests go for fun, and entertainment. Regarding our partner operated asset light model, we added a total of 30 new locations internationally, representing 10 new countries.

Our largest unit expansion occurred in Italy, where we now have 13 partner operated locations. [indiscernible] Mexico, Norway and Colombia opened four units each and a new Build A Bear workshop also opened at Copenhagen Airport in Denmark. Our franchise model units expanded as well new stores in Fiji, Kuwait, and The UAE.

In summary, we believe our experience location expansion across more than 25 countries with remodels corporately operated, partner operated, and franchise operated clearly demonstrates the global power of the Build A Bear brand. Separately, we announced in a press release this morning exciting plans to introduce a new retail experience in ICON Park located in Orlando, Florida.

One of the largest tourist destinations in the world. Again, this supports our multiyear strategic evolution and expansion of our footprint. Particularly in tourist and hospitality destinations. This location is designed to benefit from natural consumer traffic driven by Walt Disney World, Sea World Universal Studios and the highly anticipated opening this summer of Universal's new theme park Epic Universe, with very close proximity to ICON Park. Plans include a new creative interpretation of Build A Bear's famous make your own teddy bear retail concept and is lined up to be a must visit attraction for a wide array of fans.

We look forward to continuing to create memorable moments for our guests in this one of a kind location which we expect to open in the first half of 2026. In summary, I'd like to thank all the teams and partners across the globe that helped to bring our 24 net new locations this year to fruition. We have plans for the continued expansion of our experienced with an expectation to open at least 50 new net locations during the fiscal year. With the majority being partner operated as we continue to bring our brand to more places and more people. With that, I want to turn the call back over to Sharon.

Thank you, Chris. Our second initiative is our multiyear comprehensive digital transfer including the omni channel focus, of unlocking value with new capabilities to drive incremental opportunities like same day delivery, gifting and personalization programs. We have discussed our progress on this initiative for several quarters Last quarter highlighting Build A Bear's new Chief Revenue Officer Dave Henderson, who leads our first time cost company omnichannel consolidation effort. This is designed to integrate and scale our corporately operated retail model and our digital e commerce model. I am pleased to report that we have taken yet another important step in the company's omnichannel evolution with significant across the warehouse and stores. This allows order fulfillment to be faster, and more accurate The extension of order cutoff windows and the provision of even more flexibility for our growing on buy online, ship from store or pick up from store capabilities. All positively enhancing the guest experience. For example, this improved omni channel capability has extended our cutoff windows allowing guests more time to shop at buildabear.com before holidays. Such as Christmas and Valentine's Day. It also was a key enabler to successfully execute a same day shipping initiative with Uber increasing same day shipping shipped orders over the past few months tenfold versus the entirety of 2024.

While admittedly a small base, it's a directionally positive indicator of this potential demand. Finally, we successfully simplified and digitized our online record your voice offering to be completed right from our e commerce site So the personalized audible message can be executed during the online checkout process. Without the need for a callback. While this may seem like a minor change, Build-A-Bear Bear's unique record your voice offering is a big part of our promise to guests as it allows consumers to add their very own special message to any furry friend, turning an already special gift into a timeless keepsake. Because the record your voice element when placed in a Build A Bear plush is used to capture countless special moments from the sweet voices of young children sending Happy Mother's Day wishes to a heartfelt request of Will You Marry Me to announcing a new baby by sharing the infant's actual ultrasound heartbeat with the family. It's easy to understand how this is Build A Bear's number one selling SKU and unit volume across the company.

Since the online makes it much easier for the consumer to order, this change has already driven Record Your Voice online sales up scheduled [indiscernible] Double digits. The third initiative is our increased investment to drive profitable growth. While continuing to return value to our shareholders. Build A Bear's improved and more consistent cash flow has allowed us to make longer term investments in products, infrastructure, content and people. Regarding products, we are expanding our audience with new offerings as we continue to broaden Build A Bear's consumer base. By taking advantage of our significant multi generational adulting appeal. Representing 40% of sales through collectibles, trends, licensing and gifting, as well as new plush segments. One example from this Valentine's season was the cougar bear. And available only through our age gated microsite, beark.com. Which drove over 1,000,000,000 media impressions, including a hit on TMZ. Regarding concepts designed to to go beyond our classic Make Your Own Plus offerings, is a highly successful [indiscernible] That was introduced just one year ago.

MiniBeans, which have now sold over 1,250,000 units to date, are priced under $10 and released in collectible ways. While they are currently primarily offered in our own stores, given their success, we plan to extend them into other retail locations in a whole basis in 2025. In summary, we are pleased with our continued success and the delivery of yet another record setting year. Looking ahead, while we acknowledge some uncertainty, we believe we have the plans in place to again deliver record revenue and solid profit for the coming year. Even as we work through the current geopolitical and economic environment, particularly related to tariffs. I would also note that over the past several years, we have honed and proven our ability to navigate including the retail apocalypse, Brexit and COVID.

And understands that uncertainty has now become more of a norm than an anomaly. That said, we are encouraged by our quarter to date results with a positive Valentine's as our store traffic continues to outpace national levels. While we are also making progress on our website. Separately, we enjoyed which has driven sales in conjunction with our multiyear NFL license relationship culminating with our retail activation of Build A Bear workshop inside the NFL Super Bowl experience for the seventh time this time in New Orleans. We have also experienced a positive early reaction to our spring and Easter offerings, including the return of Build-A-Bear Bear's Surprise Golden Egg, which sold out last year. Finally, licenses such as Bluey, and the new versions of popular Pokemon and San Rio Hello Kitty characters have been delivering. Enhanced by our new Hello Kitty Build A Bear store that Chris mentioned, which we are also pleased to share is now one of our top performing locations since launch. In closing, I'd like to mention that Build A Bear's founder, Mac Dean Clark, recently received a well deserved induction to the Toy Industry Hall of Fame for her undeniable and indelible contribution to both the retail and toy industries.

Her entrepreneurial spirit, and balance energy inspired her to envision and launch a concept in 1997. That has now become a multi generational icon and unforgettable memory for more than two fifty fifty million people around the world. And we're still going strong.

But also to the entire Build A Bear family, our hundreds of partners and millions of amazing guests.

As we strive to continue to deliver on our corporate mission to add a little more heart to life. [indiscernible] Thank you, Sharon, and good morning, everyone.

It's good to speak with you again today and share our fiscal fourth quarter and full year 2024 results. Before I touch on our financials from the past year, I want to recap a few highlights. First, we are pleased that we exceeded our guidance and delivered our fourth consecutive year of record results. We grew across all segments. Expanded gross profit margin, and increased pre tax income compared to last year. We also continue to return capital to shareholders. For the year, we returned $42,000,000 through our quarterly dividends and share repurchases.

Of note, we repurchased 1,000,000 shares which is over 6% of our outstanding share count. Over the past four years, we have returned over $130,000,000 to shareholders.

To put this in perspective, this return of capital to shareholders represents more than 100% of our market cap from four years ago.

Additionally, yesterday, our Board of Directors increased the quarterly dividend by 10% to $0.22 per share. Quarter to date, we have used nearly $4,000,000 to repurchase shares with $85,000,000 remaining under our stock repurchase program. Now moving to a more detailed review of our financial results. As you may recall, twenty twenty third third quarter included an extra week that generated 35% flow through to EBITDA. I will provide growth rates on a thirteen week comparable basis. For the fourth quarter, total revenues were $150,400,000 and increased 5.7%. Net retail sales were $139,500,000 and increased 4.7%. Stores delivered strong performance offsetting an anticipated slowdown in e commerce demand. Our store traffic was up 3% significantly outpacing U. S. National traffic which declined almost 1%. We also had a positive contribution from dollars per transaction. Commercial revenue, which primarily represents wholesale sales to our partner operators, and international franchise revenue rose a combined 20.5% versus the prior year. Gross margin was 56.6% an improvement of 20 basis points compared to last year. Gross margin was driven by a slight expansion of our retail gross margin plus expansion of our commercial gross margin. SG and A expenses were $57,800,000 or 38.4% of total revenues.

Compared to 39.2% of total revenues in 20 more efficient marketing spend and leverage of corporate level costs drove the 80 basis point improvement. Our pre tax income of $27,500,000 was 18.3% of total revenues. Representing growth of 15.8% year over year. Adjusted EPS was $1.59 an increase of 18.7% reflecting higher pretax income, a lower tax rate and a reduced fair count. Now moving to select full year results on a fifty two week comparable basis. 2024 was a record year with $496,400,000 in total revenues, which increased 3.6%. Pretax income of $67,100,000 was was also a record and grew 5.1% year over year.

Finally, adjusted EPS was $3.77 and grew 10.2% for the year. With respect to the balance sheet, at year end, we had cash and cash equivalents of $27,800,000 a decrease of $16,600,000 compared to year end 2023. Again, this was after spending $42,000,000 between dividends and share repurchase during the year. I'd like to call out two other drivers of this change in cash. An increase in accounts receivable and a decline in accrued expenses. Both for uses of cash in 2024 and we expect them to be sources of cash this year. The change in cash balance was also driven by higher inventory investment reflecting an increase of almost 10% from the end of last year. The inventory increase was due to an accelerated purchase of twenty twenty five core products to help mitigate potential tariff impact. Turning to the outlook. [indiscernible] The full details of our guidance are included in our press release but I will highlight a few key metrics. We currently expect total revenue to grow on a mid single digit basis This growth is partially driven by the addition of at least 50 net new experienced locations. The majority of which are expected to be international partner operated.

We expect our commercial segment revenue to grow at least 20% for the year. Which will be significantly back half weighted. We expect pretax income to range from a low single digit decline to low single digit growth. Pretax income growth is expected to lag revenue growth due to inflationary pressures largely from tariffs but also including medical costs minimum wage increases investments for future growth. We expect the combination of these pressures dollars in expenses for the year. We are estimating that about one half of this headwind will be related to expected sales of inventory that will be impacted by the current level of tariffs and believe our guidance is appropriately measured based on the most recent announcements. For context regarding the announced tariffs, international trade is critically important to us. And we have made significant strides to diversify our supply chain over the past several years. In 2018, we sourced nearly all of our products from China. We have seen to reduce our dependency and we expect China to be the source of less than 50% of our inventory shipped to North America in 2025. Even with these macro challenges, during fiscal twenty twenty five, our objective is to stay focused on our strategy to grow the number of global locations continue our digital transformation, and invest in our company to drive another year of record revenues and deliver solid pre tax income margins.

While returning capital to shareholders.

I would like to thank all our store and warehouse associates and corporate team members for contributing to our 2024 record results, which have positioned us for our fifth consecutive successful year. This concludes our prepared remarks We will now turn the call back over to the operator for questions. Operator, Thank you. We'll now be conducting a question and answer session. Our first question is coming from Michael Baker from D. A. Davidson. Your line is now live.

Great. Thanks. One, just your view on the overall consumer environment A lot of consumer companies are seeing a slowdown in early twenty twenty five, but it doesn't seem like you're seeing that at least through Valentine's Day and Easter, early Easter things seem good. But your view for 2025? How does your business typically react in a slowdown So that's one question. Second question, if you could just talk a little bit more about the progress you're making in e commerce It looks like the year over year decline was well, last quarter I think was up slightly, so not as good performance at least in the short term there.

Talk about the progress that you're making towards improving that business longer term.

Thank you.

Yes. Thanks a lot. [indiscernible] concerning your first question, We are seeing positive quarter to date results. And as I noted in the remarks, our traffic is outpacing national traffic We've been fairly pleased with both the Valentine's portion that actually occurs in the the fiscal year 2025, which is only a couple of weeks there. But even just the set of Easter and spring, some positive results to that. Now the question concerning the outlook, you're getting a sense of our outlook from a Rev side, we've provided some guidance. But in general, the toy industry seems to be over time recession resistant.

I don't even want to say the recession word, but you but you do have to imagine some of those scenarios. And we know that when a third of our business is birthdays and 40% of our sales are to collectors, It bodes well for us to be in a good position And that speaks to the ongoing strategy of diversifying not only from a consumer perspective, but a reasons for purchase perspective, but also for globally. For us to be able to better maneuver more macro excuse me, more micro impacts. On the website, we've wholly acknowledge that we still have a lot of opportunity. We believe in our Build-A-Bear as a real driver for us from a business perspective, particularly on the collect the more adult driven side, the giftables business. And we've been doing a lot of work behind strategically and from an implementation of different applications. And infrastructure as well as bringing on new team members to access, integrate and elevate that entire omnichannel space.

The key, I think, to understand is that we're not just trying to drive build a bear dot com. We're trying to build a complete integrated omni channel organization. Where we understand how and when the consumer shopping between the brick and mortar and the e commerce site.

That's one of the reasons why we've now brought on day Henderson, which I mentioned in the call, to integrate that business We have so many great partners and so many great applications that we've put in that we have yet to optimize. From partners with our partnerships with Salesforce to our Journeys program, to our email systems, to putting in our entirely new POS system last year, which you might recall, that is designed to also plug in to that in entire ecosystem, that we have yet to unlock. Truly. So I think that's an important point. That we're acknowledging that we're looking at this in a much more I think, holistic way, which is the appropriate way to look at it. Versus I'm going to gooseecom versus driving the We want to grow the pie. Not keep splitting between the pie based on how and when we market. So it's it's a long term initiative and I think that we're on the right road.

Thank you for those detailed comments. That helps. Appreciate it.

Thank you. Next question today is coming from Eric Beder from SEC Research. Your line is now live. [indiscernible] Good morning. Congratulations on a great quarter.

Thank you, Eric.

Where should we think about in terms of the tariffs and your ability to continue to reduce the dependence on China And I guess in the longer term, the ability to potentially have to offset some of the tariffs with that? Higher pricing. [indiscernible] Eric, we have been very proactive as the organization in our thinking and in anticipation of potential tariff impact.

As a result, we've been talking on the last couple of conference calls that we are going to be pulling forward our inventory purchases, especially of our core product to help mitigate some of those potential impacts. As we have some visibility and stability what the rates may be, we can manage through that challenge.

As we are having multiple hits of different increases from the tariff perspective, it becomes increasingly more difficult in the spur of the moment to manage those. I firmly believe that over time, we are going to be working with our partners with our vendors and like to become more efficient to help mitigate some of those things.

And like the last resort is really to continue to raise prices. Again, we need to have a little bit more stability, understand where these things may land so that we can really manage our business. In addition to that, first time when in 2017, 2018, when there was a threat of tariffs, as I mentioned in my prepared remarks, nearly all of our production was coming out of China. I also mentioned this morning that less than 50% of our receipts into North America this year will be coming from China. So our teams have done tremendous job working with our partners to mitigate costs, to really diversify our supply chain, and to expand our factory base, both to mitigate costs, but also to help grow our business internationally. As we have been focused on that aspect of the business. So I believe we have strong team in place to help manage these things. But at the same time, it is very challenging to manage things that keep moving as we go along.

I think, Eric, too, it's important to note that we've shown a real alacrity over the years of pricing increases in a way that I think are much more scaffold and consumer conscious We keep that accessible entry level price point. For young kids to come in and have an experience to Build-A-Bear bear. We have been incredibly prudent about appropriate price banding and testing the upper limits where it makes sense. And we also again because of this diversification into collectibles, gifting, limited editions, exclusive, certain licenses. It gives us the permission to push prices even higher. I mean, we have bears now like Cerrosy, crystal bears that are $99 So if there's an upper limits that we are still exploring as the brand continues to grow in its diversification as well as its appeal.

Great. Speaking of exploring new things, Uber rollout obviously for holidays like Valentine's Day where same day delivery makes a huge difference as works. It's I guess this expansion of being able to kind of be there anytime really customer wants you you. What do you kind of see in the future for that? Are we going to see more of these kind of A relationships and B, see them expand even more kind of expand out how easily it can be for someone to get their furry friend when they need it.

Yes. So you're right that one of them were obvious reasons to partner with Uber on same day delivery is that it shipping windows when it comes to holidays or or deadlines like Valentine's Day, I mean, I know that you probably, Eric, would plan way early in advance for Valentine's Day, but a lot of people don't. So being there for that guy who's ready to get the special teddy bear is very helpful. Definitely adding a little more heart to life. But in a broader way, that's also true for birthdays. Those are individual deadlines that happen all year long. That people want to be not late for someone's birthday, but importantly, two, we believe with our personalization aspect where you can embroidery on the teddy bear, that those those newborns and it's a really big peak of our business. I mentioned in our remarks how people do reveals of whether they're the pregnant or gender reveals using Build A Bear a lot. And we're just a part of that. And one of the things that we want to do from pushing into that particularly aspect is it it pulls forward the first time you experience the bear, which if managed correctly, again, back to this omni channel guest lifetime management question, extend your lifetime value on the lower end.

So there's a lot of different aspects of this sort of woven through the strategy and why we want same day delivery because it helps us unleash a number of different opportunities. And it's pushed right into some of the consumer trends today, which is just straight convenience. And we want to be where the consumer goes.

Great.

Good luck for the rest of the year. Thank you.

Thank you, Eric.

Thank you. Our next question is coming from Greg Gavas from Northland Securities. Your line is now live. Hey, great.

Congrats on the strong Q4. Wanted to it sounds like MiniBeans, the product line is trending very well with sales there. And given your kind of commentary on expanding reach within wholesale, could you maybe elaborate on kind of plans there this year and when we might see additional developments there?

Yes. So as I mentioned, many beings who sold well over 1,000,000 units at this point. We launched it February, March of last year, so almost one twelve month period here. And it has been very well received. And one of things we really like about many beans as well is we're seeing it's not in general not a trade down for us.

We're seeing a good attachment rate to our products and also helps us with conversion. So it's helping DPT, UPT dollars per transaction unit per transaction, as well as conversion. Because sometimes people come in to just look around and think about what they want when they want to go through the entire process, but now we still have a quick purchase for them. But on the expansion front, I want to note before I give you a little more color there, This was one of the reasons why we launched mini beans in the first place. We wanted to see the stretchability of the brand beyond the make your own and and see if there was this halo effect that I didn't get mentioned that we believe certainly exists. People place value on products because they carry the Build A Bear brand. And they don't have to be in our make your own form for that to happen. There's affinity to the brand beyond the store concept. So we are talking to retailers. We were at Toy Fair this year. We have a lot of opportunity and I before anything's put in place, I'm I'm reticent to mention anything specifically.

But what I can say for our partners outside The United States that own their own retail where we do shop in shops. They're already in the business of put of many beans in other countries, in toy stores, Italy is a great example, where we partner with Gio Cipperosi. And they have, again, independent tour stores and they also are our partners for our shop in shop in independent Build A Bear partner operated retailers in that country. And they're very successful there.

Great. Very helpful, Sharon. Looking forward to getting updates there. For Voin, was wondering if you could maybe clarify, I'm not sure I caught all the metrics in terms of the key for revenue related metrics.

I think you said traffic up 3% year over year.

Could you kind of if you haven't already comment on conversion, units transaction and I think you said average transaction size was up as well.

Yes.

So what I mentioned, 3% was our improvement in traffic year over year. Compared to national traffic that was down roughly improvements in dollars per transaction. Again, that's both units per transaction and AUR, but we had a little bit of softness in conversion. But overall positive results for the quarter. Great.

Thanks for clarifying. I guess lastly, as it relates to the 50 stores that you expect to add in 2025, it makes sense that you have been having an increased focus on international versus domestic and your commentary there. One of the if you could maybe comment on expectations on a pacing or cadence level for new unit growth this year? Yes. So thanks again for the question. As we think about the growth this is definitely one of the big areas of growth for us and I'd like to express my appreciation to Chris and team for doing all this hard work and live [indiscernible] last year in Q4 we opened 24 stores On a full year basis, we opened 64 stores. Just for clarity there, 64 locations. This year, we are expecting to add at least net 50 new locations. So most of that stuff, Greg, as we think about there is timing with our partners when we can open some of those things. There are logistics things that we are working through.

We said our commercial revenue is going to grow 20% on a full year basis and a lot of this stuff is going to be driven by partner operated that are internationally based. And it's going to be back half weighted. So again, that's the idea. We recognize the revenue at the time of ship of product to them. So usually, especially in these growth stages, we see some choppiness in our revenue and comparability year over year. But we are very pleased with the progress that things are making in that part of the business. And we definitely continue to see growth year after year.

All right. Thanks for the color.

Thank you. Next question is coming from Steve Silver from Argus Research. Your line is now live.

Thanks operator and thanks for taking my questions. First, Voin, I got a question about inventory. I know you guys mentioned that you've accelerated some of your purchases of some of the core products. Trying to get ahead of some of the tariff kind of situations. And I think the prepared remarks had also mentioned that you remain comfortable with the overall inventory levels. Thinking about 2025, given the new store expansion that you guys expect, should we expect inventories to stay near current levels or should we expect inventory levels to rise a little bit more over the course of the year to accommodate the expansion of the footprint?

So great. Thanks for the question. Good question. When we think about inventory and growth, there are multiple things that may be impacting this from that units that we are buying and purchasing. Definitely, there is going to be growth as we are supporting some of the expansion, especially as we just talked about the international. We expect to grow our store count So there is just the natural increase in buy. When we think about time timing year over year, however the inventory is going to end up, Throughout the year, we'll see spikes, but I wouldn't think at least from that perspective, that's going to significantly grow from the unit perspective even though we are going to be supporting by the end of the year new businesses. Now there is going to be some of the unique things that we are talking about, especially for next year, as we announced earlier today that in the first half of twenty twenty six, we are going to be opening our Orlando location. And with some of the stuff and some of the things there will be some timing of inventory receipts and flow.

And another piece from the total cost perspective, what we will need also contemplate if you guys from the modeling perspective, there is going to be a higher cost of inventory if tariffs stay at the same level as they are currently enacted or go up, which would make those numbers go up more.

Great.

Thanks for the color. And one more if I may.

So a lot of the prepared remarks and discussion so far have focused on really the positive trends and the resilience of the business as traffic continues to outpace the national averages revenues per transaction are in a healthy place. The store count of 50 for the for 2025 is expected, which is still very healthy growth. Not to mention some of the other initiatives. So those are all positives. And with guidance for the year being in the mid single digit range, Curious to know what maybe what some of those offsets might be to a more maybe kind of headwinds or just anything else you're thinking about in terms of keeping revenue guidance a little bit more on the conservative side?

Well, here is the thing. I wouldn't consider revenue conservative or aggressive. Again, we are providing guidance in mid single digits to account for some of those things. So clearly, if you are at the higher end of that mid single digit range, the results would be better There is some of the stuff as we talked about twenty percent least 20% growth from the commercial segment driven by growth of our international partner operated locations. We believe there is some room for improvement in our web business Our store performance has been very solid and with some of the trends and initiatives that we are putting in place, we feel strong about we've seen strong results so far and gives us certain level of confidence how consumers reacting to some of the new product and some of the new stories that Sharon highlighted in her prepared remarks. So there are things that definitely are positive. At the same time, we are not immune to everything that's happening around us. And what the macro environment will do. And how the impact of tariffs both directly on that product cost as well is indirectly on the overall inflationary side. Will impact the economy.

And those things are outside of our control. But considering what's within our control, we feel good about it trajectory that our business is on. [indiscernible] too, we have been enjoying some positive macro trends that we also don't control, which are consumers returning to physical retail, wanting to invest in experiences and memory making, and a lot of the personalization, as I mentioned before, [indiscernible] but also consulting, which has been a rising trend. And we're in the good crosshairs of all of those things. So that's a part of what's helping our business. Now we're leaning into that with the right types of product, the right types of licensing, the right types of offers. Some of the tech technology, as I mentioned, are even just being aware of the kinds of things that those consumers are looking for very beneficial for us thus far. We can't predict what how the consumer will continue to trend in that regard. But thus far, from having on-site birthdays to Teams coming in for trend animals and even adult wanting to come in to build a bear. Has been on the rise for us.

Great.

Thanks for all the color. I appreciate it. And congratulations on the results and the expansion of the dividend.

Thank you.

Thanks so much everyone for joining us today and we really appreciate you joining us for the call and to hear some more details regarding this year's record breaking fiscal twenty twenty four results. And look forward to sharing more information with you in the first quarter of twenty twenty five. Have a wonderful day.

Line at this time and have a wonderful day. Thank you for your participation today. [indiscernible] [indiscernible] [indiscernible]