FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains certain statements that are, or may be considered to be, “forward-looking statements” for the purpose of federal securities laws, including, but not limited to, statements that reflect our current views with respect to future events and financial performance. We generally identify these statements by words or phrases such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “future,” “potential,” “will,” “could,” “target,” “project,” “contemplate,” or “continue,” the negative or any derivative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include, among other things, projections or statements regarding:

These statements are only predictions based on our current expectations and projections about future events. For example, the novel strain of coronavirus that was first identified in China has become a global pandemic and has resulted in significant uncertainty. We have experienced a deterioration in our financial results as a result of the temporary closure of our retail stores in late March 2020, and may experience further deterioration depending on the duration or severity of the pandemic. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements, including those factors discussed under the caption entitled “Risk Factors” as well as other places in this Annual Report on Form 10-K.

We operate in a competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all the risk factors, nor can it assess the impact of all the risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K, as a prediction of actual results.

You should read this Annual Report on Form 10-K completely and with the understanding that our actual results may be materially different from what we expect. Except as required by law, we undertake no duty to update these forward-looking statements, even though our situation may change in the future. We qualify all of our forward-looking statements by these cautionary statements.

Unless the context otherwise requires, references in this Annual Report on Form 10-K to the “Company,” “we,” “us,” and “our” refer to Build-A-Bear Workshop, Inc. and, where appropriate, its subsidiaries.

The following discussion contains references to fiscal 20192022 and fiscal 2018,2021, which represent our fiscal years ending February 1, 2020January 28, 2023 and February 2, 2019,January 29, 2022, respectively.

PART I

Overview

Build-A-Bear Workshop, Inc., a Delaware corporation, was formed in 1997 and is primarilyas a mall-based, experiential specialty retailer offering a “make yourwhere children and their families could create their own stuffed animal” interactive retail-entertainment experience. 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 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. 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. 

As of February 1, 2020,January 28, 2023, we operated 372350 corporately-managed locations, including 316312 stores in the United States (“U.S.”) and Canada, 5638 stores in the United Kingdom (“U.K.”), and Ireland, Denmark, and China and had 92 franchised stores operating internationally under the Build-A-Bear Workshop brand. 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. There were also 6070 locations operatingoperated 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.

Recent Developments

As described elsewhere in this Report,experience, and 68 franchised stores operating internationally, all under the COVID-19 pandemic has recently had far-reaching adverse impactsBuild-A-Bear Workshop brand. In addition to these stores, we sell products on many aspects of our operation, directlycompany-owned e-commerce sites and indirectly, includingthird-party marketplace sites, our people, consumer behavior, distribution, our suppliers, and the market generally. The scope and nature of these impacts continue to evolve each day.  For a discussion of remedial measures and other key trends and uncertaintiesfranchisees sell products through sites that have affected our business, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, including the “Recent Developments,” “Revenues,” “Costs and Expenses” and “Stores” subsections of the Overview, along with “Results of Operations” and “Liquidity and Capital Resources”, and Item 9B "Other Information"they manage as well as Item 1A “Risk Factors”, below.other third-party marketplace sites and other parties sell products on their sites under wholesale agreements.

Segments and Geographic Areas

BusinessOur 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. Financial information related to our segments and the geographic areas in which we operate is contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See Note 15 — Segment 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.

Description of Operations

Currently, we primarily operate specialty stores that provide a “make your own stuffed animal”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. We operate a vertical retail channel with experience in which guests, with the help of our associates, visit a variety of stations to “assemble” and customize a stuffed animal. Our concept islocations that feature a unique combination of experienceinteractivity and product in which guests can “make their own stuffed animals” by participating in the stuffing, fluffing, dressing, accessorizing and we are focusednaming of their own teddy bears and other stuffed animals. We also operate e-commerce sites that focus on enhancing our brand equity while meeting the needs of consumers by offering a relevant selection of premiumgift-giving, collectible merchandise and licensed products that meet high quality standardsappeal to consumers that have an affinity for characters from a range of entertainment, sports, art, and are on trend. In addition, products are sold throughgaming 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 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 third-party retail locations, and franchise sites. Our store experience appeals to a broad range of age groups and demographics, including children, as well as their parents and grandparents, teens, adultfocus on collectors and gift givers as well as affinity consumers. that are primarily tweens, teens and adults. We have also extended our business model by leveraging our brand strength and owned intellectual properties through the creation of engaging content for kids and adults while also offering products at wholesale and in non-plush consumer categories via outbound licensing agreements with leading manufacturers.

We seek to provide outstanding guest service and experiences across all channels and touch points including our stores,retail locations, our e-commerce site,sites, our mobile sites and apps as well as traditional, digital and social media. Guests visit our stores for multiple reasons including interactive family experiences, birthdays, parties and other milestone occasions as well as to purchase gifts including the “gift of experience” that comes with a gift card. We believe the hands-on and interactive nature of our storeexperience locations, our personal service model and high touch service modelengaging digital shopping experiences result in guests forming an emotional connection with our brand.  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.

We believe there are opportunities to leverageextend the strengthreach and size of the Build-A-Bear brand to generateour diverse consumer segments through expanded products and licensing relationships, evolved experiences, and incremental revenueoccasions, partnerships, and profits given the high consumer recognition and strong positioning asmarketing activities. We believe we can further develop our business by creating a trusted, high quality brand that is emotionally connectedcontinuous circle of engagement with both kids and their parents through expanded programs including outbound branded licensing and entertainment that drives retail performance and leverages our brand equity which may in turn positively impact other channels of distribution.

Operating StrategiesStrategies

InWe 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 2019,2022 compared to fiscal 2021. While we continuedbelieve 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 evolvethe pandemic, and executein many cases accelerated during the pandemic, are driving improved results, which we expect to continue. We remain focused on our strategic plan with key initiatives in the areas outlined below,priorities which are intended to drive long-term shareholder value:centered primarily on three key areas: 

Channel Evolution through diversifying retail locations to broaden consumer accessibility to our brand

We continued to diversify our real estate portfolio beyond traditional malls to locations where families are increasingly going to shop and for entertainment, such as tourist destinations, seasonal pop-up shops and mass merchandising locations in order to reach a broader consumer base. We continue to strategically manage the traditional mall portfolio and renegotiate leases to optimize the cash flow to fund investments needed to achieve our desired future state. Therefore, we have strategically used favorable short-term extensions to maintain flexibility and optionality within our corporately-managed portfolio with over 70% of our leases across geographies having a natural lease event in the next three years.

In 2019, we expanded locations through our third-party retail model in which we sell products on a wholesale basis to other companies that then in turn execute our retail experience. These types of locations operate on cruise ships, in hotels and resorts and other typically entertainment and hospitality-based venues.

Leveraging an enhanced platform and infrastructure to more effectively take advantage of growth in the digital economy

In the fall of 2017, we launched an upgraded e-commerce platform and have had double-digit sales increases through this channel for nine consecutive quarters since the upgrade, including all four quarters of fiscal 2019. We have also been methodically updating systems and processes in order to further improve our digital capabilities. For example, with over 85% of our website traffic originating from a personal device, in 2019, we upgraded our mobile capabilities to reduce cart abandonment and improve conversion rates. We also believe that a focus on gift-giving including adult-to-adult gifting occasions and web-exclusive affinity products has contributed to our e-commerce growth. In addition, we shifted a significant level of marketing initiatives to digital categories that not only drove e-commerce but also benefited our retail store base resulting in improved returns on advertisement spending in the year.

Increasing acquisition, engagement and lifetime value of loyalty program members

Our Build-A-Bear Bonus Club loyalty program has over 4 million active members as well as a robust database with over 8 million consumers opted-in to receive marketing and promotional messages across geographies. In 2019, we focused on improving our segmentation models, refining messaging and developing specific consumer journeys to increase engagement and shopping frequency with a goal to build member lifetime value. With birthdays being a top occasion for visits to Build-A-Bear Workshop locations, we continued our “Count Your Candles” campaign in which a Bonus Club member can bring a child into a store during the month of their birthday and pay their age for a collectible teddy bear. We believe this program helps to add new members to the loyalty program and delivers incremental repeat visits.

Monetizing the awareness and trust that consumers have for our brand to add incremental profitable revenue streams

We believe there are opportunities to leverage the strength of the Build-A-Bear brand and the emotional connection that

consumers have with our brand to generate incremental revenue and profits by adding revenue streams including outbound branded licensing and entertainment. In 2019, we put agreements in place that cover multiple areas in entertainment that include music with Warner Music Group’s Arts Music division, films with Sony Pictures Worldwide Acquisitions and Build-A-Bear radio on iHeart media. In addition, we continued to further develop outbound licensed programs leveraging the power of the Build-A-Bear brand and other owned intellectual properties. We also continued to expand our initiatives to sell pre-stuffed plush products for corporate promotions or to other companies for resale.

Continued Focus on Delivering Long-Term Profitability Improvement

We remained focused on the execution of our stated strategies summarized above as well as disciplined expense management and on-going investments to upgrade our processes, systems and infrastructure with the goal of achieving long-term profitability improvement.

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 ChinaVietnam and Vietnam.China. Our stuffed animalplush 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 product category and country where we have stores.there are Build-A-Bear Workshop locations. 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 also believe we comply with American Society for Testing and Materials (ASTM-F963), European Toy Safety Standards (EN71), China National Toy Standards (GB6675/GB5296.5), China Compulsory Certification (CCC), Australian/New Zealand Standard (AS/NZS 8124), Canadian Consumer Product Safety Act Toys Regulation (CCPSA), Chile Standard on Safety of Toys NCh 3251 and India Safety of Toys (IS:9873). Our products are tested through independent third-party testing labs for compliance with toy safety standards. Packaging and labels for each product indicate the age grading for the product and any special warnings in accordance with guidelines established by the CPSC or other applicable authority. We require our supplier factories to be compliant with the International Council of Toy Industries (ICTI) Ethical Toy Program certification or with other third partycomparable third-party social compliance programs. The ICTI Ethical Toy Program process is a social compliance program to promote ethical manufacturing in the form of fair labor treatment, as well as employee health and safety in the toy industry supply chain worldwide. In order to obtain this certification, each factory completes a rigorous evaluation performed by an accredited ICTI agent on an annual basis.

The average time from product conception to the arrival in stores is approximately 12 months, including approximately 90 to 120150 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 items.styles. 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 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 near Columbus,in Groveport, Ohio which(near Columbus) that serves the majority of our stores in the United StatesU.S. and Canada. 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 Europe, we contract with a third-party distribution center in Selby, England under an agreement that ends in January 2025, to fulfill our store and e-commerce fulfillment needs. This agreement contains clauses that allow for termination if certain performance criteria are not met. In Asia, we contract withfor office space and a third-party distribution center in Shanghai, China, which is currently on a month-to-month extension while negotiations for an agreement are on-going, which have been slowed as a result ofwith the COVID-19 pandemic.office space contract ending in August 2023 and the distribution center contract ending in April 2024.

Transportation from the warehouses to stores is managed by several third-party logistics providers. In the United States,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. All items in our assortment are eligible for distribution, depending on allocation and fulfillment requirements, and we typically distribute merchandise and supplies to each store once every other week or once a week on a regular schedule, which allows us to consolidate shipments in order to reduce distribution and shipping costs. Back-up supplies, such as stuffing for the plush animals, are often stored in limited amounts at regional pool points.

On March 26,

During fiscal 2020, we announcedintroduced "Buy Online, Ship From Store" and "Buy Online, Pick Up In Store" for orders placed in the temporary closureU.S. and "Click and Collect" for orders placed in the U.K. These ongoing programs allow our brick and mortar locations to operate essentially as mini distribution centers allowing us to leverage the geographic proximity of our warehousestores, available inventory and e-commerce fulfillment center in Ohio as we reviewed our processes relatedlabor to workplace safety and assessed the scope of the Ohio statewide "stay at home" order, including social distancing and sanitation practices recommended by the Centers for Disease Control and Prevention and Ohio state health and regulatory authorities. The Ohio warehouse was reopened on April 1, 2020 following the review and reconfiguration of workflow and workspaces to further promote social distancing and minimize interaction as orders are fulfilled. Our third-party warehouse in Selby, England, implemented with our guidance, updated policies to be in compliance with local social distancing guidelines.fulfill digital demand.

Employees

As of February 1, 2020January 28, 2023, we had approximatelyapproximately 1,000 full-time and 3,3003,200 regular part-time employees in the U.S., Canada, the U.K., Ireland, Denmark and China.Ireland. The number of part-time employees at all locations fluctuates depending on our seasonal needs. None of our employees areis represented by a labor union, and we believe our relationship with our employees is good.

As a result of the COVID-19 pandemic, on March 26, 2020, the Company announced the furlough of over 90% of its workforce and pay reductions of 20% for those employees not placed on temporary leave, including the Company's executive officers and each of its named executive officers, both effective March 29, 2020.

Competition

WeAs our company has diversified and evolved, we view our competition through a number of categories. For our retail stores, we view the Build-A-Bear Workshop store experience as a distinctive combination of entertainment and retail with limited direct competition. Since we develop proprietary products, we compete indirectly with a number of brands that sell stuffed animals or premium children’s toys in the United States, including, but not limited to, Ty, Fisher Price, Mattel, Ganz, Hasbro, Commonwealth and Vermont Teddy Bear. In the U.K., we compete with a number of retailers including The Entertainer Toy Shop, Smyths Toys Superstores and Hamleys Toy Store. Since we sell a product that integrates merchandise and experience, we also view our competition as any company that competes for family time and entertainment dollars, such as movie theaters, amusement parks and arcades, other mall-based entertainment venues and online entertainment. With the majority of our stores currently operating in traditional shopping malls, we also compete with other mall-based retailers, including various apparel, footwear and specialty retailers, for prime mall locations.

We are aware of several small companies that operate “make your own” teddy bear and stuffed animal stores or kiosks in retail locations, but we believe none of those companies offer the breadth of assortment nor depth of experience or operate as a national or international retail company.

Since our signature products, teddy bears and other stuffed animals, are included in the toy category, we compete indirectly with a number of companies that sell plush products or premium children’s toys, including, but not limited to, Ty, Mattel, Hasbro, Lego, Ganz, and Steiff. We also compete with toy retailers including online and mass merchandisers such as Amazon, Walmart or Target as well as specialty stores such as The Entertainer Toy Shop, Smyths Toys Superstores and Hamleys.

As our gift-giving and affinity business has grown, our competitors include diverse retail and online companies such as Vermont Teddy Bear, Funko, or 1-800 Flowers. Since we sell a product that integrates merchandise and experience, we also view our competition as any company that competes for family time and entertainment dollars, such as movie theaters, amusement parks and arcades, other mall-based entertainment venues, party venues and online entertainment.

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. Our patents do not expire until the years 2032 and 2033.

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

Availability of Information

We are subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, we file periodic reports and other information with the Securities and Exchange Commission (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 practicablepractical after we electronically file such material with, or furnish it to, the SEC. 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,415 South 18th Street, St. Louis, Missouri 63114.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. Information on our website is not incorporated by reference into, and does not constitute a part of, this Annual Report on Form 10-K.

We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. The risks, uncertainties and other factors set forth below may cause our actual results, performances or achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occur, our business, financial condition or results of operations may be adversely affected.

Risks Related to Our BusinessMACROECONOMIC AND INDUSTRY RISKS

The COVID-19 pandemic could continue to materially adversely affect our business, financial condition, results of operations and cash flows, and our ability to access current

Given the interactive retail experience, our store based workforce comes into close contact with our customers as part of their day-to-day responsibilities. This contact increases the likelihood that members

The ultimate magnitude of COVID-19, including the extent of its

Consumer interests can change rapidly, and our success depends on the ongoing effectiveness of our marketing and online initiatives to build consumer affinity for our brand and drive consumer demand for our products and services.

We continue to update and evaluate our supply chain,marketing initiatives, which are focused on building our brand, sharing relevant product news, executing timely promotions and adapting to rapidly changing consumer preferences. Our future growth and profitability will depend in large part upon the effecteffectiveness and efficiency of governmental regulations imposedour integrated marketing and advertising programs, access to leading entertainment relationships resulting in response to the pandemic, as well as uncertainty regarding alllicensing relationships in a profitable manner and future marketing and advertising efforts that we undertake, including our ability to:

Our planned marketing expenditures may not result in increased total sales or generate sufficient levels of the foregoing. We cannot at this time predict the full impact of the COVID-19 pandemic, but itproduct and brand awareness, which could also have a larger material adverse effect on our business, financial condition resultsand profitability. Additionally, we have shifted a number of operations and cash flows beyond what is discussed within this Annual Report on Form 10-K for the year ended February 1, 2020.our marketing programs to digital outlets which may not continue to be as effective as our more traditional, historical programs.

We depend upon the shopping malls and tourist locations in which weour stores are located to attract guests to our stores and a declineguests. 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 our storeswe are located. Traffic to tourist locations in general may be reduced by the COVID-19 pandemic, which might disproportionally affect our business relative to other retailers that have located in more traditional settings or that have a greater mix of online sales ordering. We rely on the ability of the malls’ anchor tenants, generally large department stores, and on the continuing popularity of malls and tourist locations as shopping destinations to attract high levels of consumer traffic. We cannot control the development of new shopping malls nor the closure of existing malls, the addition or loss of anchors and co-tenants, the availability or cost of appropriate locations within existing or new shopping malls or the desirability, safety or success of shopping malls. Additionally, in recent years, there has

been a trend of consumers preferring to purchase products from online merchants rather than traditional brick and mortar stores, and whileWhile we have had significant growth in our e-commerce sales compared to pre-pandemic levels and continue with positive growth and are workinginitiatives intended to develop and strengthen our online business, we continue to depend heavily onthe majority of our sales atare generated from our physical store locations. Consumer traffic may also be reduced due to factors such as the economy, civil unrest, actual or threatened acts of terrorism toor other crime in 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.

In particular, COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, especially when congregating in areas that attract dense crowds, such as shopping malls. As a result, our landlords have temporarily closed certain of the malls in which our stores operate and we have temporarily closed our owned and operated stores in the United States, Canada, the United Kingdom, Ireland and Denmark. On March 17, 2020, we temporarily closed all owned and operated stores in the United States, Canada, the United Kingdom, Denmark and Ireland as a result of the COVID-19 pandemic and the governments' recommendation to restrict crowds and social gatherings. The full extent and duration of such temporary closures and their impacts over the longer term remain uncertain and are dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19 and the extent and effectiveness of further containment actions that may be taken.

A decline 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.

Since purchases of our merchandise are dependent upon discretionary spending by our guests, our financial performance is sensitive to changes in overall economic conditions that affect consumer spending. Consumer spending habits are affected by, among other things, prevailing economic conditions, levels of employment, salaries and wage rates, consumer confidence and consumer perception of economic conditions. A slowdown in the U.S., Canadian or European economies or in the economies of the countries in which our franchisees operate or uncertainty as to the economic outlook could reduce discretionary spending or cause a shift in consumer discretionary spending to other products. For example, the potential adverse effects of COVID-19 across geographies and Brexit in the U.K. market may be underestimated and the actual effects are dependent on many factors that may be beyond the control of the authorities in the countries in which we operate including the United States, the U.K. and the European Union (“EU”). The potential adverse effects of any of these factors would likely 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. In addition, economic uncertainty can affect the credit and capital markets and might impact our access to capital resources at an affordable cost to meet our needs. These capital market conditions may affect the renewal or replacement of our credit agreement, which was originally entered in fiscal 2000 and has been extended annually since then and currently expires December 31, 2020. The Company's liquidity may be negatively impacted if stores do not resume normal operations and the Company may be required to pursue additional sources of financing to meet its financial obligations. Obtaining such financing is not guaranteed and is largely dependent on market conditions and other factors. Further actions may be required to improve the Company's cash position, including but not limited to, monetizing Company assets including the Company owned warehouse in Ohio, inventory, implementing further employee furloughs, investigating government relief programs, and foregoing capital expenditures and other discretionary expenses. In addition, the impacts of COVID-19 may result in store impairments charges in 2020, affecting our profitability.

If we are unable to maintain compliance with covenants under our credit facility, we may become unable to borrow under that facility. In addition, global economic conditions may make it more difficult to obtain new lending facilities.

Our liquidity position is dependent upon our ability to borrow under our current credit facility. As of February 1, 2020, total borrowing availability under our credit agreement was $20.0 million. Although we have not borrowed on our credit facility as of April 13, 2020 and have approximately $23.8 million in operating cash as of such date, failure to meet our debt covenants under the credit facility may require us to seek waivers or amendments of the debt covenants, alternative or additional sources of financing, or to reduce expenditures in order to maintain access to capital under the facility. Due to the impacts of COVID-19 and the closure of our owned and operated stores, our financial performance in the first quarter of fiscal 2020 will be negatively impacted. As a result, it is likely that we will be unable to comply with certain covenants in our existing line of credit. We are in discussions with our current lender and we are exploring other options to access alternative liquidity sources which may include other lenders, various government assistance programs and monetization of existing Company assets. However, given the capital market conditions, it has become more difficult to obtain new credit facilities. In addition, the Company believes that its current cash balance, along with the actions taken as discussed in this Report, provides it with sufficient liquidity for the next 12 months.

WeGlobal or regional health pandemics or epidemics, including COVID-19, could negatively impact our business, financial position and results of operations.

Our profitability could be able to operate our international corporately-managed locations profitably.adversely affected by fluctuations in petroleum products prices.

In additionThe profitability of our business depends to a certain degree upon the price of petroleum products, both as a component of the transportation costs for delivery of inventory from our vendors to our U.S. locations, we currently operate stores and as a raw material used in the U.K., Canada, Ireland, Denmarkproduction of our plush products and China. Our future successstuffing. Volatility in international markets maypetroleum prices can be impacted by differences in consumer demand, regulatorydue to many external factors that are beyond our control including political, environmental, and cultural differences, economic conditions, public health issuesfactors such as COVID-19, changeshostilities or other conflicts in foreign government policiesoil producing areas (including the current Russia-Ukraine conflict), limitations and/or disruptions in refining and regulations, changes in trading status, compliance with U.S. laws affecting operations outsidepipeline capacity, and worldwide demand for petroleum. We are unable to predict what the U.S., such asprice of crude oil and the Foreign Corrupt Practices Act, as well as other risks that we may not anticipate. Brand awareness in international markets mayresulting petroleum products will 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, wefuture. We may be unable to continuepass along to do so on a consistent basis. For example, in fiscal 2018, we recorded $3.5 million of asset impairment charges inour guests the U.K. In 2016, we opened our first corporately-managed location in China and subsequently recognizedincreased costs that would result from higher petroleum prices. Therefore, any such increase could have an impairment charge on a substantial portion of the store’s assets. In addition, the impacts of COVID-19adverse impact on our internationally corporately-managedbusiness and profitability.

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. Because we have mall-based locations, may result in store impairments charges in 2020 in thosewe see our competition as other retailers that compete for prime mall locations, affecting our profitability,including various apparel, footwear and specialty retailers. As a retailer whose signature product is a stuffed animal that is typically purchased as a toy or gift, we also compete with big box retailers and toy stores, as well as jeopardizingmanufacturers that sell plush toys. Since we offer our ability to realize our deferred tax assets which may result in additional valuation allowances.

Additionally, we conduct business globally in many different jurisdictions with currencies other than U.S. dollars. Our results could be negatively impacted by changes or fluctuations in currency exchange rates since we report our consolidated financial results in U.S. dollars. 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,guests an experience as well as merchandise, we also view our product pricing, may be negatively affected by risks associated with international manufacturingcompetition as any company that competes for our guests’ time and tradeentertainment dollars, such as movie theaters, restaurants, amusement parks and foreign currency fluctuations” below.arcades. In addition, there are several small companies that operate “make your own” teddy bear and stuffed animal experiences in retail stores and kiosks. Although we believe that none of these companies currently offer the breadth and depth of the Build-A-Bear Workshop products and experience, we cannot be certain that they will not compete directly with us in the future.

Many of our competitors have longer operating histories, significantly greater financial, marketing and other resources, and greater name recognition. We cannot be certain that we will be able to compete successfully with them in the future, particularly in geographic locations that represent new markets for us. If we fail to compete successfully, our market share and results of operations could experience restrictionsbe materially and adversely affected.

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. 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 transfer of funds todemand for our products and from foreign countries, including potentially negative tax consequences.our profit margins.

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.

We believe that our success depends in large part upon our ability to continue to attract new and repeat guests with our interactive shopping experience, and our ability to anticipate, gauge and respond in a timely manner to changing consumer preferences, includingsuch as online buying, and fashion trends including licensed relationships. We cannot be certain that there will continue to be a demand for our “make-your-own stuffed animal” interactive experience, including our store design and brand appearance, or for our stuffed animals, related apparel and accessories. A decline in demand for our interactive shopping experience, our stuffed animals, related apparel or accessories, or a misjudgment of consumer preferences, fashion trends or the demand for licensed products, including those that are associated with new movie releases, could have a negative impact on our business, financial condition and results of operations. In addition, due to COVID-19, once stores reopen,negative commentary regarding our company or the products we will likely need to modifysell may be posted on social media sites and other platforms at any time and may negatively impact our interactive shopping experience in order to comply with social distancing guidelines and could have a negative impact on the appeal of our interactive shopping experience. Such modifications may not sufficiently address the guidelinesreputation or make our shopping experience appealing. Conversely, if we do not modify to a sufficient degree to address concerns, the perception that we are not adequately addressing concerns relative to social distancing remediation may adversely affect our brand.business. 

Our future success depends, in part, on the popularity and consumer demand for brands of licensors such as Disney, LucasFilm, Marvel, HasbroNBCUniversal, Lucasfilm, Warner Bros., and The Pokémon Company.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. There can be no certainty that our access to licensed brands will continue to be successful or enable us to maintain high levels of sales in the future and the timing of future entertainment projects may not coincide with the timing of previous successes impacting our ability to maintain sales levels. 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.

Failure to successfully execute our omnichannel and brand expansion strategy and the cost of our investments in e-commerce and digital transformation may materially adversely affect our financial condition and profitability.

The retail industry continues to rapidly evolve and consumers continue to 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.

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. 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. 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.

Furthermore, 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.

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.

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. A number of our leases include a termination provision which applies if we do not meet certain sales levels during a specified period, typically in the third to fourth year and the sixth to seventh year of the lease, which may be at either the landlord’s option or ours. Although we have largely shifted our leases in North America to shorter term leases to provide flexibility in aligning stores with market trends, this strategy has risk if we renew leases at a time when commercial rental rates are higher than the rate we could have secured with a longer-term lease. Furthermore, some of our leases contain various restrictions relating to change of control of our company. Our leases also subject us to risks relating to compliance with changing shopping location rules and the exercise of discretion by our landlords on various matters within these locations. 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 haveincur expenses and charges associated with those closures that could negatively impact our profitability.

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. Further landlord consolidation may negatively impact our results of operations.

Our leases in the U.K. and Ireland also typically contain provisions requiring rent reviews every five years in which the base rent that we pay is adjusted to current market rates. These rent reviews require that base rents cannot be reduced if market conditions have deteriorated but can be changed “upwards only.” We may be required to pay base rents that are significantly higher than we have projected. As a result of these and other factors, we may not be able to operate our European store locations profitably. 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.

In addition, COVID-19 has caused public health officialsWe are subject to recommend precautionsrisks associated with technology and digital operations.

Our operations are subject to mitigatenumerous technology related risks, including risks related to the spreadfailure of the virus,computer systems that has causedoperate our point of sale and inventory systems, websites and mobile sites and their related support systems. 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 recently enact widespread temporary store closuresrisks related to computer viruses, telecommunications failures, and other disruptions. Also, we may require additional capital in the future to sustain or grow our landlordstechnological infrastructure and digital commerce capabilities.

Business risks related to temporarily close certaintechnology and digital commerce include risks associated with the need to keep pace with rapid technological change, internet security risks, risks of system failure or inadequacy, governmental regulation and legal uncertainties with respect to the malls in which our stores operate. There is significant uncertainty surrounding the ultimate durationinternet, and collection of sales or other taxes by additional states or foreign jurisdictions. If any of these closures and consumer willingness to visit shopping malls once they reopen. The impact of these temporary store and shopping mall closuresrisks occur, it could have a material adverse effect on our current rent obligations remains uncertainbusiness. 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.

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.

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. 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 maycannot be limitedcertain that this strategy will be successful. Our ability to manage our portfolio of stores in future years, in desirable locations, as well as to operate stores profitably, particularly in multi-store markets, are key factors in our ability to obtain rent abatementsachieve sustained profitable growth. We cannot be certain when or landlord concessionswhether desirable locations will become available, the number of rent otherwise payable during this period of temporary store closures.Build-A-Bear Workshop stores that we can or will ultimately open, or whether any such new or relocated stores can be profitably operated. We may decide to close other stores in the future.

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.

Our company-owned distribution center that services the majority of our stores in North America and our third-party distribution center providers used in the western U.S. and Europe may be required to close and operations may experience disruptions or may operate inefficiently.

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 locations and to our third-party retail partners. 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. For example, as noted above, in Europe, we contract with a third-party distribution center in Selby, England under an agreement that ends in January 2025. 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. These factors may also impair our ability to adequately stock our stores and fulfill e-commerce orders and could decrease our sales and increase our costs associated with our supply chain.

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.

We do not own or operate any factories that produce our skins,plush products, clothing, shoes or accessories. For the past two years,In both fiscal 2022 and fiscal 2021, we purchased approximately 80%77% of our merchandise from fourfive vendors. These vendors in turn contract for the production of merchandise with multiple manufacturing facilities, located primarilyfacilities. Prior to 2020, over 90% of merchandise received annually was produced in China, andhowever, 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 Vietnam.2022. Our relationships with our vendors generally are on a purchase order basis and do not provide a contractual obligation to provide adequate supply or acceptable pricing on a long-term basis. Our vendors could discontinue sourcing merchandise for us at any time. 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. Such disruptions may result from public health issues such as the current COVID-19COVID 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. 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.

Consumer interestsIf we are unable to effectively manage our international franchises, attract new franchisees or if the laws relating to our international franchises change, rapidly and our success depends on the ongoing effectiveness of our marketing and online initiatives to build consumer affinity for our brand and drive consumer demand for key products and services.

We continue to update and evaluate our marketing initiatives, which are focused on building our brand, sharing relevant product news, executing timely promotions and adapting to rapidly changing consumer preferences. Our future 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. We cannot ensure that our franchisees will dependbe successful in large part uponidentifying 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 effectivenessperformance of these stores. Additionally, our franchisees may experience financing, merchandising and efficiencydistribution expenses and challenges that are different from those we encounter in our corporately-managed markets. The operations and results of our integrated marketing and advertising programs, access to leading entertainment relationshipsfranchisees could be negatively impacted by the economic, public health (such as COVID), or political factors in a profitable manner and future marketing and advertising efforts that we undertake, including our ability to:

Moreover, our branding and marketing efforts could be undermined by the nature of our mall-based, interactive experience,they operate or foreign currency fluctuations. These challenges, as consumers make different choices due to the COVID-19 pandemic in order to continue social distancing practices.  The perception that our experience may not be safe, in particular for vulnerable populations,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.

The success of our branding, marketing,franchising business depends upon our ability to attract and maintain qualified franchisees with sufficient financial results. Our planned marketing expendituresresources to develop and grow their operations and upon the ability of those franchisees to successfully develop and operate their franchised stores. Franchisees may not operate stores in a manner consistent with our standards and requirements, may not hire and train qualified managers and other store personnel, may not operate their stores profitably and may not pay amounts due to us. As a result, our franchising operations may not be profitable. Moreover, our brand image and reputation may suffer. If franchisees perform below expectations, we may transfer those agreements to other parties, take over the operations directly or discontinue the franchise agreement. Furthermore, the interests of franchisees might sometimes conflict with our interests. For example, whereas franchisees are concerned with their individual business objectives, we are responsible for ensuring the success of the Build-A-Bear brand and all of our stores. In addition, we have recently terminated franchise agreements covering Mexico, Thailand and Germany resulting in increased total sales or generate sufficient levelsthe closure of productall stores in these territories.

The laws of the various foreign countries in which our franchisees operate as well as compliance with U.S. laws affecting operations outside the U.S., such as the Foreign Corrupt Practices Act, govern our relationships with our franchisees. These laws, and brand awareness, whichany new laws that may be enacted, may detrimentally affect the rights and obligations between us and our franchisees and could also have a material adverse effect on our financial condition and profitability.expose us to additional liability.

LEGAL, TECHNOLOGY AND INTELLECTUAL PROPERTY RISKS

We are subject to a number of risks related to disruptions, failures or security breaches of our information technology infrastructure. If we improperly obtain or are unable to protect our data or violate privacy or security laws or expectations, we could be subject to liability as well as damage to our reputation.

Information technology is a critically important part of our business operations. We depend on information systems to process transactions, manage inventory, operate our websites, manage consumer databases, purchase, sell and ship goods on a timely basis, and maintain cost-efficient operations. There is a risk that we could experience a business interruption, theft of information, or reputational damage as a result of a cyber-attack, such as an infiltration of a data center, or data leakage of confidential information either internally or at our third-party providers. We may experience operational problems with our information systems as a result of system failures, system implementation issues, viruses, malicious hackers, sabotage, code anomalies, “Acts of God,” human error or other causes.

Our business involves the storage and transmission of consumers’ personal information, such as personal preferences and credit card information. We invest in industry-standard security technology to protect the Company’sour data and business processes against the risk of data security breaches and cyber-attacks. Our data security management program includes identity, trust, vulnerability and threat management business processes, as well as enforcement of standard data protection policies such as Payment Card Industry compliance. 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. Internet privacy is a rapidly changing area and we may be subject to future requirements and legislation that are costly to implement and may negatively impact our results.

While we believe that our security technology and processes are adequate in preventing security breaches and in reducing cyber security risks, given the ever-increasing abilities of those intent on breaching cyber security measures and given our reliance on the security and other efforts of third-party vendors, the total security effort at any point in time may not be completely effective, and any such security breaches and cyber incidents could adversely affect our 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 customersconsumers and sales, and could have negative consequences to us, our employees, and those with whom we do business. In addition, there have been initial media reports regarding increaseddue 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 resulting from the COVID-19 pandemic becauseas a result of the increase in numbersincreased employee usage of individuals working from home.networks other than company-managed. 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 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. We have a stringent, comprehensive privacy policy covering the information we collect from our guests and have established security features to protect our consumer database and websites. While we have implemented programs and procedures designed to protect the privacy of people including children, from whom we collect information which may include information regarding their children, and we intend for 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. If we fail to fully comply, we may be subjected to liability and damage to our reputation. In addition, because our guest database primarily includes personal information of youngthe parents of children and young children frequently interact with our websites, we are potentially vulnerable to charges from parents, children’s organizations, governmental entities, and the media of engaging in inappropriate collection, distribution or other use of data collected from children. Additionally, while we have security features, our security measures may not protect users’ identities and our online safety measures may be questioned, which may result in negative publicity or a decrease in visitors to our sites. If site users act inappropriately or seek unauthorized contact with other users of the site, it could harm our reputation and, therefore, our business and we could be subject to liability. For example, the EU’sEU 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"), which became effective in May 2018, and the California Consumer Privacy Act (“CCPA”2018, as amended by the California Privacy Rights Act 2020 (collectively "CCPA"),

which became effective in January 2020, greatly increasesincrease 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. Additionally, violations of GDPR can result in fines calculated as a percentage of a company’s annual revenue and CCPA provides civil penalty violations, as well as a private right of action for data breaches. Other governments have enacted or are enactingexpected to enact similar data protection laws and are considering data localization laws that require data to stay within their borders. All of these evolving compliance and operational requirements impose significant costs and regulatory risks that are likely to increase over time.

We may not be ableA determination that there have been violations of laws relating to operate successfully if we lose key personnel, are unableour practices under communications-based laws could also expose us to hire qualified additional personnel,significant damage awards, fines and other penalties that could, individually or experience turnoverin the aggregate, materially harm our business. In particular, because of our management team.

The success ofmarketing and other promotional texts, emails and other communications we send to our business depends upon the quality of associates throughout our organization and our ability to attract and retain qualified key employees. The loss of certain key employees, our inability to attract and retain other qualified key employeesusers, communications laws that provide a specified monetary damage award or a labor shortage that reduces the pool of qualified candidatesfine for each violation (such as those described below) could have a material adverse effect on our business, financial condition and results of operations.

We are subject to risks associated with technology and digital operations.

Our operations are subject to numerous technology related risks, including risks related to the failure of the computer systems that operate our point of sale and inventory systems, websites and mobile sites and their related support systems. We are also subject to risks related to computer viruses, telecommunications failures, and similar disruptions. Also, we may require additional capitalresult in the future to sustainparticularly large awards or grow our technological infrastructure and digital commerce capabilities.

Business risks related to technology and digital commerce include risks associated with the need to keep pace with rapid technological change, Internet security risks, risks of system failure or inadequacy, governmental regulation and legal uncertainties with respect to the Internet, and collection of sales or other taxes by additional states or foreign jurisdictions. If any of these risks materialize, it could have a material adverse effect on our business.

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.

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.fines. For example, the Federal Communications Commission amended certain of its regulations under the Telephone Consumer Protection Act, or TCPA, in 2012 and 2013 in a manner that has increased our strategy includes a focus on tourist locations dueexposure to changing consumer preferences and declining traditional mall traffic and we cannot beliability for certain that this strategy will be successful. Our ability to manage our portfoliotypes of stores in future years, in desirable locations as well as operate stores profitably, particularly in multi-store markets, is a key factor in our ability to achieve sustained profitable growth. We cannot be certain when or whether desirable locations will become available, the number of Build-A-Bear Workshop stores that we can or will ultimately open, or whether any such new or relocated stores can be profitably operated. We may decide to close other stores in the future. For example, in January 2018, we closed a flagship store in Anaheim, California. This store had much larger annual sales than our typical mall-based stores. 

Additionally, in fiscal 2019 we operated 31 stores located within other retailers’ stores and 60 stores through our "third-party wholesale" model and as such are subject to the operational risks of these retailers,telephonic communication with customers, including but not limited to ineffective store operations, labor disputestext messages to mobile phones. Under the TCPA, plaintiffs seek actual monetary loss or statutory damages of $500 per violation, whichever is greater, and negative publicity; allcourts could treble the damage award for willful or knowing violations. Given the varied number of whichcommunications we send to our users, a determination that there have been violations of the TCPA, or other communications-based statutes, has exposed us to significant damage awards that could, have a negative impact on our sales and operating performance.

Our merchandise is manufactured by foreign manufacturers and we transact businessindividually or 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.

We purchase the majority of our merchandise directly from manufacturers in foreign countries, primarily in China and Vietnam. Any event causing a disruption of imports, including the imposition of import restrictions, taxes or fees, or labor strikes or lock-outs and pandemics, could adversely affectaggregate, materially harm our business. For example, our vendors in China were temporarily closed in January and February as a result of the COVID-19 pandemic, ceasing production of inventory and supplies. 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, especially China, if the instability affects the production or export of merchandise from those countries. We are currently subject to trade restrictions in the form of tariffs or quotas, or both, applicable to the products we sell as well as to raw material imported to manufacture those products. Such tariffs or quotas are subject to change. Our compliance with the regulations is subject to interpretation and review by applicable authorities. 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, could increase the cost of products we purchase from overseas vendors. The pricing of our products in our stores may also be affected by changes in foreign currency rates and require us to make adjustments that would impact our revenue and profit in various markets. Additionally, because most of our foreign subsidiaries buy their inventory in U.S. dollars, we are also exposed to risk when their functional currencies fluctuate relative to the U.S. dollar. For example, we believe that the significant movement in the British pound sterling relative to the U.S. dollar, as a result of the U.K.’s referendum vote to leave the EU in 2016 had a negative impact on our revenues and pre-tax income with most of the impact resulting from higher cost of merchandise sold - retail. The precise nature and rules of the U.K.’s future trading relationship with the EU is still uncertain as of the current date.

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 February 1, 2020, there were 92 Build-A-Bear Workshop international franchised stores. We cannot ensurepunitive class action lawsuit, containing allegations 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 operated markets, which impactbusiness violated the performance of these stores. Additionally, our franchisees may experience financing, merchandising and distribution expenses and challenges that are different from those we encounter in our existing markets. The operations and results of our franchisees could be negatively impacted by the economic, public health (such as COVID-19), or political factors in the countries in which they operate or foreign currency fluctuations. These challenges, as well as others, could have a material adverse effect on our business, financial condition and results of operations.

The success of our franchising strategy 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. Franchisees may not operate stores in a manner consistent with our standards and requirements, may not hire and train qualified managers and other store personnel, may not operate their stores profitably and may not pay amounts due to us. As a result, our franchising operations may not be profitable. Moreover, our brand image and reputation may suffer. If franchisees perform below expectations, we may transfer those agreements to other parties, take over the operations directly or discontinue the franchise agreement. For example, in 2016, we consented to the sale of the franchise in South Africa to new owners. Furthermore, the interests of franchisees might sometimes conflict with our interests. For example, whereas franchisees are concerned with their individual business objectives, we are responsible for ensuring the success of the Build-A-Bear brand and all of our stores.

The laws of the various foreign countries in which our franchisees operate as well as compliance with U.S. laws affecting operations outside the U.S., such as the Foreign Corrupt Practices Act, governs our relationships with our franchisees. These laws, and any new laws that may be enacted, may detrimentally affect the rights and obligations between us and our franchisees and could expose us to additional liability.TCPA.

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 which could result in the diminution in value of our trademarks and other important intellectual property.

Other parties have asserted in the past, and may assert in the future, trademark, patent, copyright or other intellectual property rights that are important to our business. We cannot be certain that others will not seek to block the use of or seek monetary damages or other remedies for the prior use of our brand names or other intellectual property or the sale of our products or services as a violation of their trademark, patent or other proprietary rights. Defending any claims, even claims without merit, could be time-consuming, result in costly settlements, litigation or restrictions on our business and damage our reputation.

In addition, there may be prior registrations or use of intellectual property in the U.S. or foreign countries for similar or competing marks or other proprietary rights of which we are not aware. In all such countries, it may be possible for any third-party owner of a national trademark registration or other proprietary right to enjoin or limit our expansion into those countries or to seek damages for our use of such intellectual property in such countries. In the event a claim against us werewas successful and we could not obtain a license to the relevant intellectual property or redesign or rename our products or operations to avoid infringement, our business, financial condition or results of operations could be harmed. 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.

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.

Although we require our manufacturers to meet governmental safety standards, including food safety regulations for certain locations, and our product specifications as well as submitting our products for testing, we cannot fully control the materials used by, or the workmanship of, our manufacturers. Additionally, through our agreements, our licensees are required to ensure that their manufacturers meet applicable safety and testing standards. If any of these manufacturers ship merchandise that does not meet our required standards, we could in turn experience negative publicity or be sued.

Many of our products are used by small children and infants who may be injured from usage if age grading or warnings are not followed. We may decide or be required to recall products or be subject to claims or lawsuits resulting from injuries. For example, we have voluntarily recalled six products in the past ten years due to possible safety issues. While our vendors have historically reimbursed us for certain related expenses, negative publicity in the event of any recall or if any children are injured from our products could have a material adverse effect on sales of our products and our business, and related recalls or lawsuits with respect to such injuries could have a material adverse effect on our financial position. Additionally, we could incur fines related to consumer product safety issues from the regulatory authorities in the countries in which we operate. Although we currently have liability insurance, we cannot assure you that it would cover product recalls or related fines, and we face the risk that claims or liabilities will exceed our insurance coverage. Furthermore, we may not be able to maintain adequate liability insurance in the future. While our licensing agreements typically indemnify us against financial losses resulting from a safety or quality issue from Build-A-Bear branded products sold by our licensees, such indemnification may not fully protect us financially and, whether or not it does, our brand reputation may be negatively impacted.

We may suffer negative publicity or be sued if the manufacturers of our merchandise violate labor laws or engage in practices that consumers believe are unethical.

We rely on our sourcing personnel to select manufacturers with legal and ethical labor practices, but we cannot control the business and labor practices of our manufacturers. 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.

Our profitability could be adversely affected by fluctuations in petroleum products prices.

The profitability of our business depends to a certain degree upon the price of petroleum products, both as a component of the transportation costs for delivery of inventory from our vendors to our stores and as a raw material used in the production of our animal skins and stuffing. 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. Therefore, any such increase could have an adverse impact on our business and profitability.

Our business may be adversely impacted at any time by a significant variety of competitive threats.

We operate in a highly competitive environment characterized by low barriers to entry. We compete against a diverse group of competitors. 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. As a retailer whose signature product is a stuffed animal that is typically purchased as a toy or gift, we also compete with big box retailers and toy stores, as well as manufacturers that sell plush toys. Since we offer our guests an experience as well as merchandise, we also view our competition as any

company that competes for our guests’ time and entertainment dollars, such as movie theaters, restaurants, amusement parks and arcades. In addition, there are several small companies that operate “make your own” teddy bear and stuffed animal experiences in retail stores and kiosks. Although we believe that none of these companies currently offer the breadth and depth of the Build-A-Bear Workshop products and experience, we cannot be certain that they will not compete directly with us in the future.

Many of our competitors have longer operating histories, significantly greater financial, marketing and other resources, and greater name recognition. We cannot be certain that we will be able to compete successfully with them in the future, particularly in geographic locations that represent new markets for us. If we fail to compete successfully, our market share and results of operations could be materially and adversely affected.

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 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 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.

We may be unsuccessfulsuffer negative publicity and damage to our reputation if we do not continue to evolve environmental, social, and governance initiatives in acquiring businesses or engaging in other strategic transactions, which may negatively affect our financial condition and profitability.a timely manner.

The appeal of our brand may also depend on the success of our environmental, social and governance ("ESG") initiatives, which require company-wide coordination and alignment. We are working to manage risks and costs to us, our licensees and our supply chain that are exposed to the effects of climate change as well as diminishing fossil fuel and water resources. These risks include any increased public focus, including by governmental and non-governmental organizations, on climate change and other environmental sustainability matters, including packaging and waste, emissions, and land use. We may from timereceive increased pressure to time engagepublish an ESG report or otherwise expand our disclosures in discussionsthese areas, make commitments, set targets or establish additional goals and negotiations regarding acquisitionstake actions to meet them, which could expose us to market, operational and execution costs or other strategic transactionsrisks. If we publish an ESG report or otherwise expand our ESG disclosures, the metrics we disclose whether they be based on the standards we set for ourselves or those set by others, may influence our reputation and the value of our brand. Our failure to achieve progress on any goals or objectives that we set on a timely basis, or at all, could adversely affect our business, financial condition, profitability or other aspectsperformance, and growth. By electing to publicly set and share these metrics and expand upon our disclosures, we would also face increased scrutiny related to ESG activities. As a result, we could experience damage to our reputation and the value of our business. There can be no assurance that we will be able to identify suitable acquisition targets that we believe may complement our existing business. There can also be no assurance thatbrands if we acquire afail to act responsibly in the areas in which we report. Any such harm to our reputation or any failure or perceived failure by us to adequately address ESG-related activities, including setting of metrics or enhancing disclosures, could adversely affect our business, we will be successful in integrating it into our overall operations, or that any such acquired company will operate profitably or will not otherwise adversely impact our financial condition.performance, and growth.

Risks Related to Owning Our Common Stock

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. 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:

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.

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. 

In August 2017,From time to time, we have repurchased shares under plans authorized by our Board of Directors, authorizedincluding a $20$50 million share repurchase program. The program doesadopted 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. Shares repurchased under the program will be subsequently retired. If our cash flow decreases as a result of decreased sales, increased expenses or capital expenditures or other uses of cash, we may not be able to repurchase shares of our common stock at all or at times or in the amounts we desire. As a result, the results of theany share repurchase program may not be as beneficial as expected. In addition, our credit agreements may have clauses restrictingagreement 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. 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:

If our future quarterly results fluctuate significantly or fail to meet the expectations of the investment community, thenOur relatively low market capitalization can cause the market price of our common stock could decline substantially.

The market price of our common stock is subject to volatility, which could in turn attract the interest of activist shareholders.become volatile.

During fiscal 2019,2022, the trading price of our common stock fluctuated between $2.33$12.47 and $6.24$26.87 per share, but dropped to as low as $1.02 per share after February 1, 2020.share. 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 others in the retail industry.other similar companies. In addition, the equity markets have experienced price and volume fluctuations that affect the stock price of companies in ways that have been unrelated to an individual company’s operating performance. The price of our common stock may continue to be volatile, based on factors specific to our company and industry, as well as factors related to the equity markets overall. Moreover, we believe that such volatility could attracthas attracted the interest of activist shareholders.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.

Our certificate of incorporation and bylaws and Delaware law contain provisions that may prevent or frustrate attempts to replace or remove our current management by our stockholders, even if such replacement or removal may be in our stockholders’ best interests.

Our basic corporate documents and Delaware law contain provisions that might enable our management to resist a takeover. These provisions:

These provisions may:

Not applicable.

Stores

We lease all of our store locations. As of February 1, 2020,January 28, 2023, we operated 372350 retail stores located primarily in major malls throughout the U.S., Canada, Puerto Rico, the U.K., Ireland, Denmark and ChinaIreland in our DTC segment.

Non-Store Properties

In addition to leasing all of our store locations, we own a warehouse and distribution center in Groveport, Ohio, which is utilized primarily by our DTC segment. The facility is approximately 350,000 square feet and includes our North American e-commerce fulfillment site. In August 2019,center. We lease 51,600 square feet in a building that we announced the decision to moveuse as our corporate headquarters toin downtown St. Louis, Missouri into a 51,600 square foot building with a lease of eleven years. The lease commences thirty days after delivery of premises which is expectedyears commencing in late springJune 2020. As of February 1, 2020 we continued to lease approximately 59,000 square feet for our corporate headquarters in St. Louis, Missouri which houses our corporate staff, our call center and our on-site training facilities. The lease was amended, effective January 2020, to extend the term on the full space until the end of June 2020 and then toWe also lease an approximately 9,250 square foot portion of this facility beginningour prior headquarters in Overland, Missouri with the lease commencing in July 2020 and continuing through June 2023. In the U.K., wewe 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 contractcontract 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 Europe, we contract with a third-party distribution center in Selby, England under an agreement that ends in January 2025. This agreement contains clauses that allow for termination if certain performance criteria are not met. In Asia, we contract withfor office space and a third-party distribution center in Shanghai, China, which is currently on a month-to-month extension while negotiations for an agreement are on-going, which have been slowed as a result ofwith the COVID-19 pandemic.office space contract ending in August 2023 and the distribution center contract ending in April 2024.

From time to time, we are involved in ordinary routine litigation typical for companies engaged in our line of business, including actions seeking to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. As ofInformation with respect to certain legal proceedings is set forth in Note 10 Commitments and Contingencies to the dateConsolidated Financial Statements (included in Part IV of this Annual Report on Form 10-K, we are not involved in any pending legal proceedings that we believe would be likely, individually or in the aggregate, to have a material adverse effect on our financial condition or results of operations.form 10-K) and is incorporated herein by reference.

Not applicable.

PART II

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.

Holders

As of April 13, 2020,10, 2023, the number of holders of record of the Company’s common stock totaled approximately 1,924.approximately1,963.

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.

ISSUER PURCHASES OF EQUITY SECURITIESSecurities Authorized for Issuance Under Equity Compensation Plans

 Refer to Part III, Item 12, for information related to our equity compensation plan. 

Issuer Purchases of Equity Securities

Recent Sales of Unregistered Securities

There were no sales of unregistered securities during the past three years.

Not applicable.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Annual Report on Form 10-K.

Recent Developments

For a discussion of the key trends and uncertainties that have affected our revenues, income and liquidity, See the “Revenues,” “Costs and Expenses” and “Stores” subsections of this Overview, along with “Results of Operations” below and in Item 1.A. “Risk Factors” above.

Business Overview

We are the only global company that offers an interactive “make yourBuild-A-Bear Workshop started as a mall-based, experiential specialty retailer where children and their families could create their own stuffed animal”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. 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 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.

We operate a vertical retail entertainmentchannel with stores that feature a unique combination of experience under the Build-A-Bear Workshop brand,and product in which guests participatecan “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 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 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. We have also extended our business model to develop a circle of continuous engagement by leveraging our brand strength and owned intellectual properties through the creation of engaging content for kids and adults while also offering products at wholesale and in non-plush consumer categories via outbound licensing agreements with leading manufacturers.

Our strategy includes leveraging our brand strength to continue to strategically evolve our brick-and-mortar retail footprint beyond traditional malls with a versatile range of formats and locations including tourist destinations, expand into international markets primarily via a franchise model, and broaden the consumer base beyond children by adding teens and adults with entertainment/sports licensing, collectible and gifting offerings. 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.

As of February 1, 2020,January 28, 2023, we operated 372had 350 corporate-managed stores globally, and had 92 franchised stores operating internationally under the Build-A-Bear Workshop brand. 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. There were also 6070 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.experience, and 68 franchised stores operating internationally under the Build-A-Bear Workshop brand. In addition to our stores, we sold product on our company-owned e-commerce sites.

We operate in three segments that share the same infrastructure, including management, systems, merchandising and marketing, and generate revenues as follows:

Selected financial data attributable to each segment for fiscal 20192022 and 20182021 are set forthpresented in Note 15 — Segment Information to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Our year-over-year results discussed below are impacted by prior year store closures and operating hour reductions as a result of the pandemic. 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 due to the pandemic. In April 2021, stores in the U.K. reopened as the government lifted lockdown restrictions resulting in almost 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. 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.

Our consolidated net income (loss) was $0.3$48.0 million in fiscal 2019,2022 compared to $(17.9 million)net income of $47.3 million in fiscal 2018.2021. We believe that we have a retail store concept that has broad demographic appeal which, for North American stores open for the entire year averaged net retail sales per store of $0.8$1.2 million and $0.9$1.0 million in fiscal 20192022 and 2018, respectively. With retail as a significant driver of our performance, in order to effectively measure our store operations, we use store contribution as the key performance metric. The diversification of the 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. Consolidated store contribution as a percentage of net retail sales was 15.4%, and 10.4% for fiscal years 2019 and 2018,2021, respectively. Consolidated store contribution consists of store location net retail sales less cost of product, marketing and store related expenses. Non-store general and administrative expenses are excluded as are our revenues and expenses associated with e-commerce sites, locations not open for the full fiscal year and adjustments to deferred revenue related to gift card breakage and our loyalty program. See “Non-GAAP Financial Measures” for a reconciliation of store contribution to net income. The increase in consolidated store contribution as a percent of net retail sales in fiscal 2019 was primarily due to the expansion of our retail gross margin by $7.3 million or 5.2% as a percent of total revenue and our focus on reducing store level expenses through strategic negotiations with our landlords that included rent reductions and moving toward percent of sales rent. In addition, store contribution as a percent of net retail sales increased due to a decrease in advertising expense as we shifted our focus to digital marketing and moved away from national TV advertising to a large degree. 

We entered fiscal 2020  expecting it to be another transitional year as planned to continue to implement key aspects of our longer-term strategies. Our ongoing plan was to address our retail store portfolio by diversifying locations and formats to focus on places where families shop and go for entertainment. For example, through the end of fiscal 2019 we have opened 22 full service stand-alone stores inside select Walmart locations and have several stores in seasonal and tourist locations. As part of our initiative to diversify retail formats, we had planned to continue to opportunistically place a variety of new, lower capital, flexible formats, like concourse shops, in traditional malls or in other high traffic shopping destinations to help navigate the market volatility. In addition, we have significant flexibility in our mall lease portfolio with the negotiation of favorable rent deals and short-term extensions which have resulted in now having over 70% of our leases coming up for renewal in the next three years including about 120 locations with natural lease events before the end of fiscal 2020. However, we are currently reassessing our plans in light of the impacts of the COVID-19 pandemic on our business as described in "Recent Developments" above.

We ended fiscal 20192022 with no borrowings under our bank loancredit agreement and with $26.7$42.2 million in cash, and cash equivalents and restricted cash after investing $12.4$13.6 million in capitalcapital projects throughout the year. We did notDuring the third quarter of fiscal 2022, we completed the $25.0 million stock buyback program authorized by our Board of Directors in November 2021. On August 31, 2022, we announced that our Board of Directors authorized a share repurchase any sharesprogram of up to $50.0 million, and during fiscal 2019. Although the Company has $8.82022, we had utilized $24.1 million remainingin cash to repurchase 1,533,503 shares under both stock buyback programs. Additionally, our Board of Directors declared a special cash dividend of $1.50 per share that was paid on ourApril 6, 2023, to all stockholders of record as of March 23, 2023, following a $1.25 per share repurchase authorization from August 2017, it does not plan to utilize itsspecial cash dividend declared on November 30, 2021 and paid in December 2021 in the near term to commence share repurchase in fiscal 2020.prior year.

Following is a description and discussion of the major components of our statement of operations:

Revenues

Net retail sales, commercial revenue and international franchising: See Note 3 — Revenue to the consolidated financial statements for additional accounting information.

We use net retail sales per square foot as a performance measure for our business. 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:

Costs and Expenses

Cost of merchandise sold: Cost of merchandise sold is driven primarily by our retail segment. Cost of merchandise sold – retail includes the cost of the merchandise, including royalties paid to licensors of third party branded merchandise;merchandise, store occupancy cost, including store depreciation and store asset impairment charges (if not disclosed separately due to materiality) (See Note 56 — Property and Equipment, net to the consolidated financial statements for additional accounting information regarding store asset impairment);, cost of warehousing and distribution; packaging; stuffing;distribution, packaging, stuffing, damages and shortages;shortages, and shipping and handling costs incurred in shipment to customers. Retail gross marginprofit 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. For the franchise segment, cost of merchandise includes the sale of furniture, fixtures, and supplies to our franchise partners.

Selling, general and administrative expense (“SGA”): These expenses include store payroll and benefits, advertising, credit card fees, store supplies and normal store pre-opening and closing expenses as well as central office general and administrative expenses, including costs for management payroll, benefits, incentive compensation, travel, information systems, accounting, insurance, legal and public relations. These expenses also include depreciation of central office assets as well asand the amortization of intellectual property and 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. Further, SGA expenses may include store impairment as we consider a more likely than not assessment that an individual location will close or be remodeled prior to the end of its original lease term. See Note 5 — Property and Equipment, net to the consolidated financial statements for additional accounting information regarding store asset impairment.recorded in SGA. 

Stores

Corporately-managedrporately-Managed Llocationsocations:

The number of Build-A-Bear Workshop stores in the U.S., and Canada and Puerto Rico (collectively, North America), the U.K., and Ireland and Denmark (collectively, Europe) and China for the last two fiscal years is summarized as follows:

During fiscal 2019,2022, our retail business model continued to evolve to address changing shopping patterns by diversifying our locations, formats and geographies. We are updating our store portfolio with theour Discovery format, which represented 41%45% of our store base as of February 1, 2020.January 28, 2023. During fiscal 2022, we executed 9 planned new store openings in North America, with 6 being opened under the second halfDiscovery format and 3 of fiscal 2019, we opened 16 full service, stand-alone stores inside select Walmartwhich were in tourist sites. Temporary locations resulting in a total of 22 shop-in-shops at Walmart locations at the end of the fiscal year. We also continued to open concourse shops, stand-alone retail units that occupy approximately 200 square feet, in places where families go for entertainment, including tourist destinations, as well as to convert certain existing locations, in conjunction with natural lease events, to continue to generate profit while leveraging reduced cost structure of concourse shops. Through its third-party retail model, there were 60 stores in operation 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, such as ballparks, as well as shop-in-shop arrangements within other retailers’ stores. In certain locations throughout the year, we deployed temporary stores, which generally have lease terms of two to eighteen months. These specific sites are designed to capitalize on short-term opportunities. Further, 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.

Third-Party Retail Locations:

The number of third-party retail locations opened and closed for the periods presented below is summarized as follows:

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. 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. 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. All franchised stores have similar signage, store layout and merchandise assortments as our corporately-managed stores. As of February 1, 2020,January 28, 2023, we had ninesix master franchise agreements, which typically grant franchise rights for a particular country or group of countries, covering an aggregate of 1210 countries.

The number of international, franchised stores opened and closed for the periods presented below is summarized as follows:

As of February 1, 2020,January 28, 2023, the distribution of franchised locations among these countries was as follows:

In the ordinary course of business, we anticipate signing additional master franchise agreements in the future and terminating other such agreements. We believe there is a total market potential for approximately 300 international stores outside of the U.S., Canada, the U.K., Ireland and Denmark. We source fixtures and other supplies for our franchisees from China which significantly reduces the capital and lowers the expenses required to open franchises. We are leveraging new formats that have been developed for our corporately-managed locations such as concourses and shop-in-shops with our franchisees. We expect to develop market expansion through both new and existing franchisees in the future.

Results of Operations

20192022 Overview

AlthoughOur performance continues to reflect the 2019success of our strategy which has allowed us to put the building blocks in place to develop a powerful platform to support our initiatives to deliver consistent profitable growth. 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. We delivered a full year did not unfoldpre-tax profit of $61.9 million, which was the highest in our company’s 25-year history. In response to a variety of external pressures including changes in consumer shopping habits resulting in the rapid rise of the digital economy and shifting mall traffic patterns, we remained focused on a by-quarter basis as expected, we ultimately delivered annual resultsaccelerating and expanding our key initiatives by investing in and executing plans to improve operations and profitability. We believe that included a return to profitability and a growth in total revenues. Revenue growth compared to the prior fiscal yearmajority 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 strong growth in our Commercial segment and in our e-commerce sales. An13.7% increase in total revenue to $467.9million in fiscal 2022. We ended the year with cash and cash equivalents of 81.3%$42.2 million with no outstanding borrowings on our credit facility. During the period of November 30, 2021 through April 10, 2023, we returned over $73 million in our Commercial segment was primarily the resultvalue to shareholders through $31.6 million in share repurchases and payments of expansion of our third-party retail locations to 60 locations as of February 1, 2020 from 40 locations as of February 2, 2019. The strong growth from our e-commerce channel is the result of improved segmentation models as well as targeted, digital advertising, including web-only exclusives, which increased website traffic. The return to profitability was primarily driven by an expansion of retail gross margin, a reduction of lease costs through strategic negotiations with land lords,$20.2 million special dividend in fiscal 2021 and through2022 and a reduction of advertising expense by focusing our resources on digital marketing offsetting a reduction$21.6 million special dividend in national TV advertising. 

fiscal 2023.

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. Percentages willmay not total due to immaterial rounding:

Fiscal Year Ended February 1, 2020January 28, 2023 Compared to Fiscal Year Ended February 2, 2019January 29, 2022

Total revenues. Net retail sales were $323.5$446.2 million for fiscal 20192022, compared to $397.7 million for fiscal 2021, an increase of $48.5 million or 12.2%, compared to $326.3 million for fiscal 2018, a decrease of $2.8 million or 0.9%. The componentsthe prior year. The components of this decreaseincrease are as follows:

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 was driven primarily by store closures, reduced sales at existing stores due to continued mall traffic declines, effects ofin digital sales), select strategic price increases, and lower promotional activity. The negative foreign currency translation in our European operations, and an increase in our deferred revenue related to our loyalty program as a result of a higher redemption rate on bonuses earned as part of the program. These were offset by strong e-commerce growth for the year, the opening of 16 new shop-in-shops in select Walmart locations, and an updateeffect is due to the gift card breakage rates based onBritish Pound weakening against the latest redemption data.US Dollar during fiscal 2022. This negative foreign currency effect has, in turn, decreased European revenue compared to the fiscal 2021.

CommercialCommercial revenue was $11.9$18.5 million for fiscal 20192022 compared to $6.6$11.5 million for fiscal 2018,2021, an increase of $5.3$7.0 million or 61.0% primarily due to growth in wholesale activity resultingincreased sales volume from increase inour commercial accounts through our third-party retail locations. model.

Revenue from international franchising was $3.2$3.2 million for fiscal 20192022 compared to $3.7$2.3 million for fiscal 2018.2021. This $0.5$0.9 million decreaseor 38.9% increase was primarily due to having more stores in operation in 2022 compared to the result of the closure of franchisesame period in 2021 when some franchisee locations during the year.were temporarily closed due to pandemic-related mandated government restrictions.

Retail gross margin. Retail gross margin was $146.8$234.7 million in fiscal 20192022 compared to $139.5$211.3 million in fiscal 2018, a 2021, an increase of $7.3 million.$23.4 million or 11.1% As a percentage of net retail sales, retail gross margin increaseddecreased to 45.4%52.6% for fiscal 20192022 from 42.7%53.1% for fiscal 2018,2021, or 27050 basis points as a percentage of net retail salessales. The decrease in gross margin was the result of increased air and included 160 basis points relatedocean freight costs throughout fiscal 2022 compared to the leverage of fixed occupancy costs with the remainder driven by expansion of merchandise margin.fiscal 2021.

Selling, general and administrative. Selling, general and administrative expensesexpenses were $152.0$183.9 million or 39.3% of consolidated revenue for fiscal 20192022 as compared to $157.2$167.3 million or 40.6% of consolidated revenue for fiscal 2018, a decrease2021. The increase in overall expense was driven by higher store labor costs to service the increased sales demand within the year. Additionally, the change reflects an increase in variable costs driven by sales growth initiatives inclusive of higher marketing spend, with an advertising expense increase of $5.2 million. Selling, general and administrative expenses were lower primarily due3.2 million or 19.5% compared to less negative impact of foreign currency translation, decreased consulting costs relating to compliance matters (e.g., GDPR), decreased asset impairment charges related to store fixed assets and decreased receivable write-offs. In addition, selling, general and administrative expenses were lower due to the aggressive switch to digital marketing away from national TV advertising offset byfiscal 2021, and an increase in incentive compensation resulting from the Company's profitableexpense due to our financial performance.

Interest expense (income), net. Interest For fiscal 2022, we had an immaterial amount of interest expense netcompared to an immaterial amount of interest income decreasedin fiscal 2021, resulting in an immaterial amount for fiscal 2019 as compared to fiscal 2018.difference in activity.

Provision for income taxes. The provision for income taxes was $1.313.9 million in fiscal 20192022 compared to an income tax benefit of $0.63.4 million in fiscal 20182021. The 2019$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 83.0%22.5% differed from the statutory rate of 21% primarily due to state tax income expense. 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 $7.8 million valuation allowance recorded in certain foreign jurisdictions and the $0.2 million tax impact of equity awards. The 2018 effective tax rate of 3.1% differed from the statutory rate of 21% primarily due to the valuation allowance recorded in certain foreign jurisdictions.North America. 

Non-GAAP Financial MeasuresMeasure - Earnings before Interest, Taxes, Depreciation, and Amortization

We usebelieve that earnings before interest, taxes, depreciation, and amortization ("EBITDA") provides meaningful information about our operational efficiency by excluding the term “store contribution” throughoutimpact of differences in tax jurisdictions and structures, debt levels, and capital investment. Additionally, this Annual Report on Form 10-K. Store contribution consistsmeasure is the metric used for portions of income (loss) before income tax expense, interest, general and administrative expense, excluding income from franchise and commercial activities and contribution from our e-commerce sites, locations not open for the full fiscal year and adjustments to deferred revenue related to our loyalty program and gift card breakage.Company's incentive compensation structure. This term, as we define it, may not be comparable to similarly titled measures used by other companies andmeasure is not a measure of performance presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). We use store contribution as aor an alternative to, GAAP. The most comparable GAAP measure of our stores’ operating performance. Store contributionis income before income taxes, or pre-tax income. EBITDA should not be considered in isolation or as a substitutesubstitution for net income, net income per store, cash flows provided by operating activities, cash flows provided by operating activities per store, or other income or cash flow data preparedanalysis of our results as reported in accordance with U.S. GAAP. Additionally, store-level performanceOther companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures are inherently limited in that they exclude certain expenses that are recurring in nature and are necessary to support the operation and development of our stores. We believe store contribution is useful to investors in evaluating our operating performance because it, alongfor comparisons with the number of stores in operation, directly impacts our profitability.

other companies. The following table sets forth, a reconciliationfor the periods indicated, the components of store contribution to net income (loss) for our corporately-managed stores, open throughout the entire period, located in the U.S., Canada and Puerto Rico (collectively “North America”); stores located in the U.K., Ireland and Denmark (collectively “Europe”); and China, for our consolidated store baseEBITDA (dollars in thousands).millions):

EBITDA for fiscal 2022 was $74.4 million, compared to $63.0 million for fiscal 2021, an increase of $11.4 million compared to the prior year period. 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. Over the past several years, we have met these requirements through cash generated from operations.

Operating Activities. Cash flows provided by operating activities were $21.6$47.3 million and $9.6$28.1 million in fiscal years 20192022 and 2018,2021, respectively. Cash flows from operating activities increasedincreased in fiscal 20192022 as compared to 2018fiscal 2021 primarily due to an increase in net income and lower inventory, partially offsetdriven by an increase in receivables and a decrease in accounts payable as of the end of thecash spent on inventory purchases in fiscal year and lower gift cards and deposits balances as a result of higher redemption rates.2022 compared to fiscal 2021. 

Investing Activities. Cash flows used in investing activities were $12.4$13.6 million and $11.3$8.1 million in fiscal years 20192022 and 2018,2021, respectively. Cash used in investing activities in fiscal 2019increased2022 increased as compared to fiscal 20182021 primarily driven by an increase in spending on capital expenditures related to upgrades of central office information technology systems including construction-in-progress costs for aprojects and new warehouse management system.store openings.

Financing Activities. Financing activities used cash of $0.2 million and $2.4$25.1 million in fiscal years 2019 and 2018, respectively.2022 compared to $22.5 million in fiscal 2021. Cash used in financing activities in fiscal 2019decreased2022 increased as compared to fiscal 2018 as2021, driven primarily by the Company did not borrow on its credit facility and did not repurchase shares during the year, compared to stock repurchases of $2.2our common stock for $24.1 million throughout fiscal 2018.2022, offset by the payment of a special cash dividend of $19.9 million in fiscal 2021.

Capital Resources. As of February 1, 2020,January 28, 2023, we had a cash balance of $26.7$42.2 million, of which 85%72% was domiciled within the United States.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. 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. In 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.

Most of our retail stores are located within shopping malls and all are operated under leases classified as operating leases. Our leases in North America have shifted to shorter term leases to provide flexibility in aligning stores with market trends. Our leases typically require us to paypay 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. Many leases contain incentives to help defray the cost of construction of a new store. Typically, a portion of the incentive must be repaid to the landlord if we choose to terminate the lease.lease prior to its contracted term. In addition, some of these leases contain various restrictions relating to change in control of our company. Our leases also subject us to risks relating to compliance with changing mall rules and the exercise of discretion by our landlords on various matters, including rights of termination in some cases. Rents are invoiced monthly and paid in advance.

COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, that has caused us to recently enact widespread temporary store closures and our landlords to temporarily close certain of the malls in which our stores operate. There is significant uncertainty surrounding the ultimate duration of these closures and consumer willingness to visit shopping malls once they reopen. The impact of these temporary store and shopping mall closures on our current rent obligations remains uncertain and we may be limited in our ability to obtain rent abatements or landlord concessions of rent otherwise payable during this period of temporary store closures.

Our leases in the U.K. and Ireland typically have terms of ten years and generally contain a provision whereby every fifth year the rental rate can be adjusted to reflect the current market rates. The leases typically provide the lessee with the first right for renewal at the end of the lease. We may also be required to make deposits and rent guarantees to secure new leases as we expand. Real estate taxes also change according to government time schedules to reflect current market rental rates for the locations we lease. Rents are invoiced monthly andor quarterly and paid in advance.

Capital spending in fiscal 20192022 totaled $12.4$13.6 million and was primarily used to support new store openings, refresh of store formats or the repositioning of locationsour ongoing omnichannel strategy and IT infrastructure.

In August 2017, our Board of Directors adopted a share repurchase program authorizing the repurchase of up to $20 million of our common stock. From the date of the program approval through February 1, 2020, we repurchased a total of 1.3 million shares at an average price of $8.75 per share for an aggregate amount of $11.2 million. As of February 1, 2020, we had $8.8 million of availability under the 2017 Share Repurchase Program. Because of our determination to manage our resources conservatively, we do not anticipate resuming share repurchases under the 2017 Share Repurchase Program in fiscal 2020.

We believe cash on hand will be sufficient to fund our working capital and other cash flow requirements for the near future. If additional capital is needed, we may monetize Company assets including the Company owned warehouse in Ohio, inventory, implement further employee furloughs, and forego capital expenditures and other discretionary expenses. In addition, based on historical promotional activities, such as our Pay Your Age Day events and National Teddy Bear Day, we could quickly and profitably convert inventory to cash in our stores when they reopen. 

Off-Balance Sheet Arrangements

None.

Contractual Obligations and Commercial Commitments

Not applicable.

Inflationdigital initiatives.

We do not believe that inflation has had a material adverse impact on our businesshave various contractual or other obligations, including operating results during the periods presented. However, we can provide no assurance that our business will not be affected by inflationlease commitments and obligations under deferred compensation plans. Additional information is provided in the future.notes to our consolidated financial statements. As of January 28, 2023, we had purchase obligations totaling approximately $87.5 million, of which $27.5 million are 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.

We have no off-balance sheet arrangements as of January 28, 2023.

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. 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. We expect the inflationary pressures experienced in fiscal 2022 to continue into fiscal 2023, specifically in supply chain costs and minimum wage increases but do expect to see a reduction of freight costs compared to the prior year. 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 2023 or in future years. 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 cannot provide an estimate or range of impact that such inflations may have our future results of operations. 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. In addition, ongoing inflation in product costs may result in lower gross margin rates due to the need to maintain higher inventory reserves.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the appropriate application of certain accounting policies, which require us to make estimates and assumptions about future events and their impact on amounts reported in our financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the financial statements.

We believe application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are periodically reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

Our accounting policies are more fully described in Note 2 to our consolidated financial statements, which appear elsewhere in this Annual Report on Form 10-K. We have identified the following critical accounting estimates:

Long-Lived AssetsAsset Impairments

In accordance with ASC 360-10-35, we assess the potential impairment of long-lived assets, annually orwhich include property, plant and equipment and operating lease right-of-use assets (subsequent to the adoption of ASC 842, Leases) when events or changes in circumstances indicate that the carrying value may not be recoverable. Management's judgments regarding the existence of impairment indicators are based on market conditions and financial performance. Recoverability is measured by comparing the carrying amount of an asset, or asset group, to expected future net cash flows generated by the asset, or asset group. If the carrying amount exceeds its estimated undiscounted future cash flows, the carrying amount is compared to its fair value and an impairment charge is recognized to the extent of the difference. For operating lease right-of-use assets, we determine the fair value of the lease right-of-use assets by comparing the contractual rent payments to estimated market rental rates. Fair value is calculated as the present value of estimated future cash flows for each asset group. The calculation of fair value could increase or decrease depending on changes in the inputs and assumptions used, and could fall below book value due to the impact of the coronavirus outbreak or changes in the financial performance of the asset group, future growth rate and discount rate, resulting in future impairments in 2020.

For purposes of evaluating store assets for impairment, we have determined that each store location is an asset group, inclusive of the right-of-use asset attributable to each store. Factors that we consider important which could individually or in combination trigger an impairment review include, but are not limited to, the following: (1) significant underperformance relative to historical or projected future operating results; (2) significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and (3) significant changes in our business strategies and/or negative industry or economic trends. We assess events and changes in circumstances or strategy that could potentially indicate that the carrying value of long-lived assets may not be recoverable as they occur. Due to the significance of the fourth quarter to individual store locations, we assess store performance quarterly, using therolling twelve-month results (i.e. full year’s results.fiscal year). We consider a historical and/or projected negative cash flow trend for a store location to be an indicator that the carrying value of that asset group may not be recoverable. Impairment charges related to this assessment are typically included in cost of merchandise sold – retailStore asset impairment as a component of income (loss) before income taxes in the DTC segment. See Note 4 - Leases and Note 6 - Property and Equipment, Net to our consolidated financial statements for further discussion.

During fiscal 2022, we recorded immaterial impairment charges. In fiscal 2021, we recorded no impairment charges on long-lived assets. 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.

Additionally, we consider a more likely than not assessment that an individual location will close prior to the end of its lease term as a triggering event to review the store asset group for recoverability. These assessments are reviewed on a quarterly basis. When indicated, the carrying value of the assets is reduced to fair value, calculated as the estimated future cash flows for each asset group.

In the event that we decide to close any or all of these stores in the future, we may be required to record additional impairments, lease termination fees, severance and other charges. 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-19 pandemic)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.

Revenue Recognition

For the Company’sour gift cards, revenue is deferred for single transactions until redemption including any related gift card discounts. Historically, mostThree-quarters of our gift card redemptions have occurredcards are redeemed within three years of acquisitionissuance and over the last three years, approximately 75%60% of gift cards issued have been redeemed within the first twelve months. In addition, unredeemed gift cards or breakage revenue is recorded in proportion to the customer’sour 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. The Company reviews historical gift card redemption information and considers any changes in redemption patterns as a result of the current economic environment, to assess the reasonableness of projected gift card breakage rates and patterns of redemption. The Company continues to evaluate expected breakage annually and adjusts the breakage rates in the fourth quarter of each year, or other times, if significant changes in customer behavior are detected. Future gift card usage may be different than our historical experience and as a result our estimate of cards not expected to be redeemed is subject to inherent uncertainty. If actual redemption activity differs significantly from our historical experience, our gift card liability and results of operations could be materially impacted, given the significant dollar value of gift cards outstanding. As a matter of sensitivity, a hypothetical 1% change in our gift card breakage rate in fiscal 2022 would have resulted in a change in breakage revenue of $1.0 million. 

For certain qualifying transactions, a portion of revenue transactions are deferred for the obligation related to the Company’sour loyalty program or when a material right in the form of a future discount is granted. In these transactions, the transaction price is allocated to the separate performance obligations based on the relative standalone selling price. The standalone selling price for the points earned for the Company’sour loyalty program is estimated using the net retail value of the merchandise purchased, adjusted for estimated breakage based on historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired. In regardsregard to the consolidated balance sheet, contract liabilities for gift cards are classified as gift cards and customer deposits, and contract liabilities related to the loyalty program are classified as deferred revenue and other.

See Note 3 - Revenue for additional information.

Leases

On February 3, 2019,We determine if an arrangement is a lease at inception. The right-of-use assets and liabilities are recognized at the Company adopted ASC 842, Leases. Under ASC 842, at lease commencement the Company recognizes an asset for the right to use the leased asset and a liabilitydate based on the present value of the unpaid fixed lease payments. Operating lease costs are recognized on a straight-line basis as lease expense over the lease term. The adoption of ASC 842 resulted in the recognition of right-of-use operating lease assets and operating lease liabilities of approximately $151.5 million and $176.2 million, respectively, as of February 3, 2019. The cumulative effect of adopting the standard resulted in an adjustment to retained earnings of $7.4 million upon adoption, which represents impairment charges to the right-of-use assets associated with stores whose fixed assets have been previously impaired or had indicators of impairment, and whose right-of-use-assets were determined to be above fair market value.

Fair value of the right-of-use asset was determinedpayments using a discounted cash flow analysis, considering market rentlease terms and market discount rates. our internal borrowing rate, over the lease term for those arrangements where there is an identified asset and the contract conveys the right to control its use. 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, the Company estimateswe estimate the incremental borrowing discount rate based on information available at lease commencement.a periodic basis. 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 Company is a party to a significant number of lease contracts and certain aspects of adopting ASC 842, including the estimates of the incremental borrowing rate and impairment of the right-of-use asset upon adoption, required significant management judgment. Refer to Note 4 - Leases to the consolidated financial statements for additional information regarding ASC 842.

Income Taxes

We recognize deferred tax assets resulting from tax credit carryforwards and liabilities for the expected future tax consequences ofdeductible temporary differences between thetaxable income on our income tax basis of its assetsreturns and liabilities and the consolidated financial statement carrying amounts.income before taxes under GAAP. Deferred tax assets generally represent future tax benefits to be received when tax credit or net operating lossthese carryforwards can be applied against future taxable income or when expenses previously reported in our consolidated financial statements become deductible for income tax purposes. A deferred tax asset valuation allowance is required when some portion or all of the deferred tax assets may not be realized. We consider the weight of all available evidence, both positive and negative, in assessing the realizability of the deferred tax assets by each taxing jurisdiction. WeWhen 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��sCompany’s ability to carry back its tax losses or credits for refunds, the availability of tax planning strategies, reversals of existing taxable temporary differences the availability of tax planning strategies and projections of future taxable income. In lightthe fourth quarter of thefiscal 2022, we performed an analysis of all available positive and negative impacts of COVID-19, the Company will continue to evaluate the realizability of deferred tax assets, which may result in additional valuation allowances being recorded in certain jurisdictions in 2020.evidence. As we havehad incurred a cumulative book loss in the U.K. over the three-year period ended February 2, 2019, we evaluated the realizability of our U.K.UK deferred tax assets based on an analysis of all available positive and, negative evidence.  The three-year cumulative loss is a significant piece of negative evidence. We are required to give objective historical evidence more weight than subjective evidence, such as forecasts of future income.  Accordingly,accordingly, in the fourth quarter of fiscal 2018, the Company recorded a $3.7 million valuation allowance on its U.K. deferred tax assetsassets. Although as of January 28, 2023 the U.K. has three-year cumulative income, we have maintained a full valuation allowance in the U.K. due to a lack of sustained profitability and continued to record valuation allowances againsteconomic uncertainty in the country.

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. In the future, if we prevail in matters for which accruals have been established previously or pay amounts in excess of reserves, there could be an effect on our income tax provisions in the period in which such determination is made. Tax authorities regularly examine the Company’s returns in the jurisdictions in which the Company does business. Management regularly assesses the tax risk of the company’s return filing positions and believes its U.K. deferredaccruals for uncertain tax assets in fiscal 2019.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.

Not applicable.

The financial statements and schedules are listed under Item 15(a)(1) and filed as part of this Annual Report on Form 10-K.

None.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including our certifying officers, as appropriate to allow timely decisions regarding required disclosure. Based on the foregoing evaluation, our management, including the President and Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of February 1, 2020January 28, 2023, the end of the period covered by this Annual Report.

It should be noted that our management, including the President and Chief Executive Officer and the Chief Financial Officer, does not expect that our disclosure controls and procedures or internal controls will prevent all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including the President and Chief Executive Officer and the Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of February 1, 2020January 28, 2023. Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. All internal control systems have inherent limitations, including the possibility of circumvention and overriding the control. Accordingly, even effective internal control can provide only reasonable assurance as to the reliability of financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

In making its evaluation, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013 framework). Based upon this evaluation, our management has concluded that our internal control over financial reporting as of February 1, 2020January 28, 2023 is effective.

Our independent registered public accounting firm, Ernst & Young LLP,Changes in Internal Control over Financial Reporting

There has audited the effectiveness ofbeen no change in our internal control over financial reporting as stated in its report which is included herein.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal 2019 fourth quarteryear covered by this report that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Build-A-Bear Workshop, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Build-A-Bear Workshop, Inc. and Subsidiaries’ internal control over financial reporting as of February 1, 2020,January 28, 2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)Framework) (the COSO criteria). In our opinion, Build-A-Bear Workshop, Inc. and Subsidiaries (collectively, the Company) maintained, in all material respects, effective internal control over financial reporting as of February 1, 2020,January 28, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Build-A-Bear Workshop, Inc. and Subsidiaries  as of February 1, 2020January 28, 2023 and February 2, 2019,January 29, 2022, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the period ended February 1, 2020,January 28, 2023, and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2) and our report dated April 16, 202013, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control overOver Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

St. Louis, Missouri

April 16, 202013, 2023

None.

To mitigate the financial and short-term cash impact of the novel coronavirus (COVID-19) pandemic, on April 14, 2020, the Compensation and Development Committee (the “Committee”) of the Board of Directors of the Company and each of Company’s named executive officers (the “Executive Officers”) agreed to amend the Executive Officers’ employment agreements to (i) reduce each Executive Officer’s annual base salary by 20% (the “Salary Reductions”) and (ii) defer bonus amounts owed to the Executive Officers for the fiscal year ended February 1, 2020 under the Company’s Fiscal 2019 Bonus Plan (the “Bonus Deferrals”). The Committee also approved an amendment to the Company’s Fiscal 2019 Bonus Plan providing for the Bonus Deferrals.Not applicable.

The Salary Reductions are effective from March 29, 2020 through and including the earliest of (A) December 31, 2020, (B) the date on which the Committee approves the ending of the Salary Reductions, and (C) the date on which the then-current non-Executive Officers of the Company who were employed by the Company as of March 15, 2020 and whose base salaries were reduced as a result of the COVID-19 pandemic have had their respective annual base salaries returned to at or above their respective annual base salary amounts as of March 15, 2020.

The Bonus Deferrals shall be paid by Company in a lump sum on December 31, 2020 or, if approved by the Committee, in one or more installments on or prior to December 31, 2020. In the event the employment of an Executive Officer terminates prior to payment of the Bonus Deferral due to death or disability, termination by Company without Cause, or pursuant to Employee’s right to terminate the Agreement for Good Reason, as each term is defined in such Executive Officer’s employment agreement, as amended, the Bonus Deferral for such Executive Officer will be paid at the time such bonus would have been paid pursuant to the amended employment agreement as if the Executive Officer’s employment continued until the payment date.

Other than provisions relating to the Salary Reductions and Bonus Deferrals, the remaining terms of each Executive Officer’s employment agreement remain unchanged.

On April 14, 2020, the Committee also awarded shares of time-based restricted stock to the Executive Officers as follow: Sharon John: 70,000; Jennifer Kretchmar: 41,431; and J. Christopher Hurt: 40,980.

The terms of the time-based restricted stock are as set forth in the Company’s Restricted Stock Agreement (the “Award Agreement”). Each Executive Officer’s restricted stock award vests in full on April 14, 2021 if such Executive Officer is still an employee of the Company on that date or if the Executive Officer’s employment has been terminated by the Company without Cause or the Executive has terminated his or her employment with the Company for Good Reason (as each term is defined in the Executive Officer’s employment agreement with the Company, as amended) prior to April 14, 2021. Vesting will be accelerated upon a change in control or, in certain circumstances, upon death or termination of employment with the Company due to disability, subject to the terms set forth in the Award Agreement. The time-based restricted stock carries voting and dividend rights from the date of grant.

At the recommendation of the Committee, the Board of Directors of the Company ratified and approved the above-mentioned employment agreement amendment and the award of time-based restricted stock to the President and Chief Executive Officer.

PART III

Information concerning directors, appearing in the sections titled “Directors,” “The Board of Directors and its Committees,” and “Committee Charters, Corporate Governance Guidelines, Business Conduct Policy and Code of Ethics” in our Proxy Statement (the “Proxy Statement”) to be filed with the SEC in connection with our Annual Meeting of Stockholders scheduled to be held on June 11, 2020,8, 2023, is incorporated by reference in response to this Item 10.

Business Conduct Policy

The Board of Directors has adopted a Business Conduct Policy applicable to our directors, officers and employees, including all executive officers. The Business Conduct Policy has been posted in the Investor Relations section of our corporate website at http://ir.buildabear.com. We intend to satisfy the amendment and waiver disclosure requirements under applicable securities regulations by posting any amendments of, or waivers to, the Business Conduct Policy on our website.

The information appearing in the sectionssection titled “Committee Charters, Corporate Governance Guidelines, Business Conduct Policy and Code of Ethics” in the Proxy Statement is incorporated by reference in response to this Item 10.

Executive Officers and Key Employees

Sharon Price John, 56,59, was appointed to the Board of Directors on June 3, 2013, in connection with her employment as Chief Executive Officer and Chief President Bear of the Company. Effective March 2016, she now holds the title of President and Chief Executive Officer. From January 2010 through May 2013, Ms. John served as President of Stride Rite Children’s Group LLC, a division of Wolverine World Wide,Worldwide, Inc., which designs and markets footwear for children. From 2002 through 2009, she held positions of broadened portfolio and increased responsibility at Hasbro, Inc., a multinational toy and board game company, including as General Manager & Senior Vice President of its U.S. Toy Division from 2006 to 2008 and General Manager & Senior Vice President of its Global Preschool unit from June 2008 through 2009. Ms. John also founded and served as Chief Executive Officer of Checkerboard Toys, served as Vice President, U.S. Toy Division with VTech Industries, Inc., and served in a range of roles at Mattel, Inc. She started her career in advertising, overseeing accounts such as Hershey’s and the Snickers/M&M Mars business. Ms. John serves on the Board of Directors of Jack in the Box Inc., a publicly traded restaurant company.

Eric Fencl, 57, joined Build-A-Bear Workshop

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in July 2008 as Chief Bearrister—General Counsel. Effective October 2015, he now holds the title of Chief Administrative Officer, General Counselaccompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and Secretary. Priorare required to joiningbe independent with respect to the Company Mr. Fencl was Executive Vice President, General Counselin accordance with the U.S. federal securities laws and Secretary for Outsourcing Solutions Inc., a national accounts receivable management firm from August 1998 to June 2008. From September 1990 to August 1998, he held legal positions at Monsanto Company, McDonnell Douglas Corporationthe applicable rules and Bryan Cave LLP. Mr. Fencl began his career as an auditor with Arthur Young & Company.regulations of the Securities and Exchange Commission and the PCAOB.

J. Christopher Hurt, 54, joined Build-A-Bear WorkshopWe conducted our audit in April 2015accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as Chief Operations Officer. Priorwe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to joiningprovide reasonable assurance regarding the Company, Mr. Hurt was at American Eagle Outfitters, Inc. from 2002reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to April 2015the maintenance of records that, in various senior leadership rolesreasonable detail, accurately and fairly reflect the transactions and dispositions of increasing responsibility, including Senior Vice President, North Americathe assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and Vice President/General Manager—Factory, Canada, Mexico Retail from 2011that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to April 2015, and East Zone Vice President and Regional Director from 2002future periods are subject to 2011. Before joining American Eagle Outfitters, Mr. Hurt held positionsthe risk that controls may become inadequate because of increasing responsibility at companies including Polo Ralph Lauren and The Procter & Gamble Company.changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

St. Louis, Missouri

April 13, 2023

None.

Not applicable.

PART III

Information concerning directors, appearing in the sections titled “Directors,” “The Board of Directors and its Committees,” and “Committee Charters, Corporate Governance Guidelines, Business Conduct Policy and Code of Ethics” in our Proxy Statement (the “Proxy Statement”) to be filed with the SEC in connection with our Annual Meeting of Stockholders scheduled to be held on June 8, 2023, is incorporated by reference in response to this Item 10.

Business Conduct Policy

The Board of Directors has adopted a Business Conduct Policy applicable to our directors, officers and employees, including all executive officers. The Business Conduct Policy has been posted in the Investor Relations section of our corporate website at http://ir.buildabear.com. We intend to satisfy the amendment and waiver disclosure requirements under applicable securities regulations by posting any amendments of, or waivers to, the Business Conduct Policy on our website.

The information appearing in the section titled “Committee Charters, Corporate Governance Guidelines, Business Conduct Policy and Code of Ethics” in the Proxy Statement is incorporated by reference in response to this Item 10.

Executive Officers and Key Employees

Jennifer Kretchmar

Sharon Price John, 47, joined Build-A-Bear Workshop59, was appointed to the Board of Directors on June 3, 2013, in August 2014connection with her employment as Chief ProductExecutive Officer and Innovation Bear.Chief President Bear of the Company. Effective March 2016, she now holds the title of President and Chief MerchandisingExecutive Officer. Prior to joining the Company,From January 2010 through May 2013, Ms. Kretchmar wasJohn served as President of Stride Rite Children’s Group LLC, a division of Wolverine Worldwide, Inc., which designs and markets footwear for children. From 2002 through 2009, she held positions of broadened portfolio and increased responsibility at Hasbro, Inc., a multinational toy and board game company, including as General Manager & Senior Vice President of Productits U.S. Toy Division from 2006 to 2008 and Brand Management with the Stride Rite Children’s Group of Wolverine World Wide, Inc. where since 2004 she was responsible for the global product creation strategy for a diverse portfolio of children’s footwear brands, including Stride Rite, Sperry Top- Sider®, Saucony®, Keds®, Merrell®, Robeez®, Jessica Simpson® and Hush Puppies®. Before joining Stride Rite, Ms. Kretchmar held positions of increasing responsibility at The Timberland Company, Goldbug, and the United States Department of Agriculture Foreign Service.

Voin Todorovic, 45, joined Build-A-Bear Workshop in September 2014 as Chief Financial Officer. Prior to joining the Company, Mr. Todorovic was employed at Wolverine World Wide, Inc., a leading global footwear and apparel company, where since September 2013 he served as the head of finance and operations for its Lifestyle Group, which includes a portfolio of iconic brands such as Sperry Top-Sider®, Hush Puppies®, Keds®, and Stride Rite®. From 2011 to 2013 he was Vice President—Finance and Administration of the Stride Rite Children’s Group business, operating in wholesale, direct to consumer and international franchising, and from 2010 to 2011 he wasGeneral Manager & Senior Vice President of its Global Preschool unit from June 2008 through 2009. Ms. John also founded and served as Chief Executive Officer of Checkerboard Toys, served as Vice President, U.S. Toy Division with VTech Industries, Inc., and served in a range of roles at Mattel, Inc. She started her career in advertising, overseeing accounts such as Hershey’s and the Performance + Lifestyle Group. Prior to his tenure at Wolverine World Wide he held positions of increasing responsibility at Collective Brands, Inc. and Payless ShoeSource.

The information contained in the sections titled “Executive Compensation” and “Board of Directors Compensation” in the Proxy Statement is incorporated herein by reference in response to this Item 11.

The information contained in the section titled “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated herein by reference in response to this Item 12.

Equity Compensation Plan Information

The information contained in the section titled “Related Party Transactions” in the Proxy Statement is incorporated herein by reference in response to this Item 13.

The information contained in the sections titled “Principal Accountant Fees” and “Policy Regarding Pre-Approval of Services Provided by the Independent Registered Public Accounting Firm” in the Proxy Statement is incorporated herein by reference in response to Item 14.

PART IV