Earnings Call Transcript - BBW Q3 2023

Gary Schnierow, Investor Relations

Good morning. Thank you for joining us. With me today are Sharon Price John, CEO; and Voin Todorovic, CFO. For today's call, Sharon will begin with a discussion of our third-quarter performance and update the progress we've made on our key priorities. After Voin will review the financials in more detail and provide our guidance. We will then open the call to take your questions. Please note the call is being recorded and broadcast live via the Internet. The earnings release is available on the Investor Relations portion of our corporate website. A replay of both our call and webcast will be available later today on the IR site. I will remind everyone that forward-looking statements are inherently subject to risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including those set forth in the Risk Factors section of the company's annual report on Form 10-K. We undertake no obligation to revise any forward-looking statements unless required by law. Also during this call, we may discuss non-GAAP financial measures, which adjust our GAAP results to eliminate the impact of certain items, which management believes can be useful in evaluating the company's performance. The presentation of non-GAAP financial measures should not be considered in isolation or a substitute for results prepared in accordance with GAAP. If non-GAAP measures are presented, you will find information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in the company's earnings release.

Sharon Price John, CEO

Thank you, Gary. Good morning, and thank you for joining us for Build-A-Bear's Third Quarter 2023 Earnings Call. We are pleased to again report strong results as we continue to execute against our strategic initiatives to evolve our business model by leveraging the power of the Build-A-Bear brand. As noted in this morning's press release, while we have revised our guidance to reflect some unexpected softness in the business starting in the latter part of October and continuing into November, we intend to stay focused on delivering our fourth-quarter plans during the remainder of the most critical holiday shopping period as we continue to expect to deliver our third consecutive record-breaking year. Our results represent the best-ever third quarter and first nine months revenue and pretax income in Build-A-Bear history. Specifically, for the third quarter, revenues increased nearly 3% to over $107 million and pretax income increased almost 5% to $10 million. For the first fiscal nine months of 2023, revenues increased 4% to almost $337 million and pretax income increased 12% to $40 million. We attribute our meaningful expansion and profitable growth over the past few years to the successful execution of our strategy and business model evolution. Note that the $337 million in revenue we generated over the first nine months of fiscal 2023 approximates the $339 million in revenue recorded for the entire fiscal 2019, the last pre-pandemic year. Additionally, this revenue is at a significantly improved level of profitability, generating $40 million in pretax income over the 2023 fiscal nine-month period as compared to less than $2 million in the 2019 fiscal year. As a reminder, the three key strategic initiatives we have focused on that have contributed to our results, such as those noted above, are: one, the evolution and expansion of our experienced location footprint; two, the acceleration of our comprehensive digital transformation; and three, the investment to support initiatives that leverage our significant brand equity to drive incremental growth. Some of the recent progress we've made across each of these initiatives include: first, Build-A-Bear experience locations are a critical part of what makes our valuable point of difference in the marketplace. We cultivate memorable and shareable one-to-one experiences with guests through our exclusive bear-building process. We do this while capturing first-party and loyalty club data, enabling us to directly communicate with guests to drive further engagement and repeat purchases. Substantially, all of our stores are profitable and deliver on average greater than 25% annual store-level contribution margin. These top-tier unit economics, along with independent research showing an opportunity for additional Build-A-Bear Workshops, have led us to our recent domestic and international strategic market expansion. This store expansion utilizes a variety of business models, including corporately operated, partner operated and franchised stores. Last year, we saw net new unit growth of 13 corporate and partner-operated stores. Through the first nine months of fiscal 2023, we opened 21 new stores and expect to end the year with 30 new corporate and partner-operated locations. Additionally, our existing international franchise partners have also started reinvesting in the brand's location expansion with the expectation of seven new franchise-operated locations by the end of this fiscal year, on top of the 63 that were opened at the end of our first quarter. Demonstrating both the business model evolution and global opportunity in the third quarter, we opened our first location in Italy. It is a store-in-store utilizing our partner-operated model. Recall, our partner-operated stores require little to no direct investment, producing high returns on capital. The new location is in conjunction with the Milan opening of the Toy Store chain, handling a longtime successful partnership for Build-A-Bear in their London location. We believe the strong initial success of this store further supports the potential broad geographic appeal of the brand. While expecting more stores in Italy, we are also in discussions for additional Continental European expansion. Our second strategic initiative is a comprehensive digital transformation that touches nearly every aspect of our company and is designed to elevate our business efficiency, increase consumer engagement, and build incremental opportunities like gifting and personalization programs while extending the lifetime value of guests, both in stores and online to ultimately increase overall sales and profitability. More recent examples include upgrades in our corporate-wide business system, further integration of our website, CRM and loyalty program, as well as the current rollout of our new PRS system and other integrated in-store technology. Our third key strategic initiative is our increased investment to support growth. As we continue to generate favorable returns on capital, we are focused on driving our growth by leveraging the power of the Build-A-Bear brand. In addition to the capital associated with our footprint expansion and digital evolution, we have also been investing in content, product, and concept innovation. Given our broad multigenerational audience, some of these initiatives take advantage of the increasingly publicized trends. Examples in the third quarter include launching a productive and creative Halloween collection appealing to kids and adults who often look for unique items in our age-gated Bear Cave e-commerce site. Additionally, at the New York Toy Fair, we celebrated Build-A-Bear's first-time nomination for a plush Toy of the Year with one of our series of popular team-centric TikTok trend animals, the Axolotl. Also as a part of our ongoing entertainment and content strategy, at the New York Toy Fair, we premiered our new documentary, Unstopped, a Build-A-Bear story. This star-studded film is available on demand through major digital platforms and chronicles the amazing 25-plus year journey of the company's evolution from a mall-based retailer for kids to a global iconic brand. During the quarter, we also pre-marketed the early November release of our first-ever animated theatrical film, Glisten and the Merry Mission. The movie, based on the characters and storyline of our multi-year top-selling holiday plush collection that has generated over $150 million in revenue since its launch, features Glisten the Magical Snow Deer that faces Christmas, voiced by multi-Grammy nominated Leona Lewis and other top talent like Teddy Chase as Santa. While the film was originally expected to be distributed directly to streaming platforms as a holiday marketing catalyst, we were delighted to strike a partnership with Cinemark for a limited theatrical release in overlapping geography, featuring a unique multifaceted consumer engagement program, including in-theater stuffing events and co-marketing with a free children's movie ticket with the purchase of a furry friend at select Build-A-Bear Workshops. The movie launched in approximately 250 theaters and while we strategically scaled down screens through Thanksgiving due to the competitive film landscape, we are returning to distribution across the country for this weekend just as we kick off our core December Christmas marketing efforts. This film is also scheduled to roll out across several digital platforms in the U.S., Canada, the U.K. and Australia starting tomorrow. Of note, the collective marketing and PR initiatives associated with this effort have already generated over 4 billion media impressions, likely increasing our top-of-mind awareness as we move into the critical holiday season. So while we are excited about our content as a pure entertainment vehicle, much of the strategic value is as a marketing tool designed to bring our entire consumer-facing communications to life. We believe our content will enhance and expand consumer engagement while supporting and even inspiring our product offering, ultimately driving sales. In the case of Merry Mission, assets ranging from the art style to the tagline of the film, 'It's about believing,' are optimized across multiple consumer touchpoints ranging from our Merry Mission music video and app to a holiday activation in our Roadblock Build-A-Bear Tycoon game with over 12.5 million players to transforming our Build-A-Bear Workshops into temporary Santa's workshop, inclusive of our beloved Bear Builders donning elf costumes. In fact, as a final example of our ongoing investment in new and innovative concepts, we launched, supported by a dedicated commercial, our first animatronic interactive Make-Your-Own-Build-A-Bear called the Bear-lien Bear, inspired by the featured teddy bear in the Glisten and the Merry Mission movie. This unique Bear-lien Bear comes to life with blinking eyes, wiggling ears and sounds during the stuffing process, responding to the child's voice and touch as they explain 'I Bear-lien.' Over the next two months, which typically represent the vast majority of our fourth quarter, we are intensely focused on delivering yet another record-breaking year for the company. We believe the combination of our integrated holiday marketing program informed by Glisten and the Merry Mission combined with a broad gifting message and a cadre of proven licenses from San Rio to Stitch provides meaningful tools to drive sales throughout December. Separately, as a reminder, unlike many traditional retailers, redemptions of gift cards given as stocking stuffers drive ongoing traffic even the week after Christmas. In closing, while our sales were negatively impacted simultaneously with the widely reported consumer spending softness during the last two weeks of our fiscal third quarter, which continued into early November, our web business was further challenged due to the disruption caused by a new platform implementation during the period. However, we are encouraged to see that our overall trend has started to show some improvement as we head into December. And as we look beyond the current macroeconomic situation, we continue to expect to execute against our top priority and to the future, including the evolution of our experienced location footprint, the acceleration of our digital transformation while still returning cash to shareholders, and continued investment in our strategic growth initiatives to leverage the power of the Build-A-Bear brand. Our mission to add a little more heart to life is never more evident than during the holidays. And I would like to take this moment to thank our associates, partners, and guests as we enter this magical season.

Voin Todorovic, CFO

Thank you, Sharon, and good morning, everyone. It's good to speak with you again today and share our results for fiscal third quarter and nine months of 2023. Our performance was highlighted by growth across all segments, expansion in gross profit margin and an increase in pretax income versus last year. We attribute our ability to report ongoing positive results in a challenging retail environment to the increasing resonance and strength of the Build-A-Bear brand and the successful execution of our strategic initiatives as Sharon previously mentioned. Even with an increase in SG&A from higher wages due to inflation plus investments in marketing and talent for growth, we have continued to expand our margins, deliver a record profit and return capital to shareholders. Specifically, over the past eight quarters, we have paid two special dividends and repurchased more than 1 million shares returning $86 million to shareholders. To put this in perspective, this return of capital to shareholders represents more than 20% of our current market capitalization. Turning to a more detailed review of the third quarter. Total revenues were $107.6 million, up 2.9% year-over-year. Net retail sales increased 1.2% year-over-year with positive contributions from both stores and e-commerce. Store sales benefited from transaction growth offset by a decline in dollars per transaction. E-commerce demand increased 7.1% for the period. Total North American sales increased while U.K. sales decreased. We opened a net nine corporate stores year-over-year, including five stores in the quarter. Commercial revenue, which primarily represents wholesale sales to our partner operators and international franchise revenue, rose a combined 36.2% versus the prior year. Our partners opened 20 stores over the trailing 12 months ending with 85 locations and our franchisees opened a net four locations over the past 12 months ending with seven. Gross profit margin was 52.7%, an improvement of 70 basis points compared to last year. Benefiting from merchandise margin expansion reflective of expected lower freight costs and leverage of distribution costs. Gross profit also benefited from growth in margin expansion in our commercial and franchise segment. SG&A expenses were $46.6 million or 43.3% of total revenues compared to $44.4 million or 42.5% of total revenue in the 2022 third quarter. The 80 basis point increase in SG&A was driven by higher wages at the store level from inflationary pressures as well as the addition of talent plus investments in marketing to support future growth. As a reference, our SG&A rate is 700 basis points lower than in the third quarter of 2019. Higher gross profit dollars plus interest income more than offset the increase in SG&A and led to pretax income growth of 4.7%. EPS, aided by a lower share count and offset by an increase in tax rate, was $0.53 per diluted share, a 3.9% increase. Turning to our results for the first nine months of our fiscal 2023. Total revenues were $336.9 million, up 4.3% year-over-year. As Sharon noted, our first nine months revenue was just shy of our entire fiscal 2019 revenue. Our store traffic also outpaced reported national traffic for the first nine months of the year. Our store traffic growth, while it has recently moderated, remains positive and continues to outpace reported national traffic for November. E-commerce demand is down approximately 2% for the first nine months. Although the third quarter was positive, this was below our expectations. Over the last nine months, we have seen volatility in that demand largely due to new platform implementation as we remain focused on the evolution of our digital business. Additionally, the timing of new product launches as compared to last year contributed to the e-commerce demand fluctuations for the first nine months. Commercial and international franchise revenue rose a combined 40.7% versus the prior year. Gross profit margin was 53.5%, a 210 basis point improvement compared to last year, driven by merchandise margin expansion, reflective of expected lower freight expense and leverage of distribution costs as well as growth and margin expansion in our commercial and franchise segment. SG&A expenses were $140.5 million or 41.7% of total revenues compared to $130.3 million or 40.4% of total revenues in the 2022 third quarter. The 130 basis point increase in SG&A was driven by higher wages at the store level from inflationary pressures as well as the addition of talent and investments in marketing to support future growth. Pretax income grew 12.5% to $40.2 million for the nine months. Higher gross profit dollars plus interest income more than offset the increase in SG&A and led to pretax margin expanding 80 basis points to 11.9% of total revenue. EPS was $2.10 per diluted share, an 18% increase reflecting a lower share count offset by an increase in the tax rate. With respect to the balance sheet, at the quarter end, we had cash and cash equivalents of $24.8 million, an increase of $12.8 million compared to the same period last year. This was after returning $37 million to shareholders through dividend payments and share repurchases over the last 12 months. Inventory at quarter end was $64.5 million, declining $23.9 million or 27% from the end of the third quarter last year and in line with our expectations. Keep in mind, last year's third quarter inventory was intentionally elevated to avoid potential supply chain disruption. We remain comfortable with our inventory level and composition as we begin the fourth quarter and continue to expect to finish the year below last year's $70.5 million level. Turning to the outlook. Given the most recent challenges in the retail environment, we are revising our fiscal 2023 guidance. The full details of our guidance are included in the press release, but I will highlight two key metrics. Total revenues to now increase in the range of 3% to 5% growth compared to the previous guidance of 5% to 7%. And pretax income to now grow 5% to 10% as compared to the previous guidance of 10% to 15%. Please keep in mind that December and January have historically accounted for a significant portion of our fourth-quarter revenue and our outlook assumes no further material changes in the macroeconomic and geopolitical environment or relevant foreign currency exchange rates. In closing, I would like to thank all our store and warehouse associates as well as corporate teams for contributing to a record result, which even with the revised guidance has positioned us for our third consecutive record-breaking year in 2023.

Michael Baker, Analyst

So I just want to clarify the fourth-quarter outlook. So you said that December and January assume no change in the macro environment and understanding those are big months. I guess what I'm trying to understand is does the implied fourth-quarter guidance assume any pickup from the weakness you saw in October and November? I think you had said that you're already starting to see it come back a little bit as we head into December. But does that full fourth quarter need any kind of pickup over the next couple of months relative to what you saw in October and November?

Voin Todorovic, CFO

So thanks, Mike, for the question. Definitely, as we talked about our results and our finish to Q3 was softer than what we expected. And as we mentioned in our November results only in the month have continued at that pace. But like later in November, and as we said right now as we are entering into December, our trends have reversed. So we are contemplating that as we are projecting for our Q4 and fiscal year results in our guidance. When we think about some of those, and clearly, there are multiple things to consider. Definitely, there are some challenges that we called out from our web perspective that's not performing in line with our expectations. We also talked about our U.S. business has been stronger than our U.K. business. So there is a little bit more to that guidance than just necessarily extrapolating the current trends. But we believe based on what we are seeing in recent days, in the last couple of weeks, that we are properly accounting for that step in our projection for the rest of the year.

Michael Baker, Analyst

Okay, I have two follow-up questions. First, when you mentioned that the last few weeks have improved, does that imply that the Black Friday weekend went well for you? Secondly, regarding the web issue you mentioned, could you provide more details about what occurred, the extent of its impact, and how we should view it moving forward? Are you confident in understanding what the problem was?

Voin Todorovic, CFO

Yes. So Black Friday for us was good, not great. Definitely, we have seen sequential improvement when you are comparing our business versus prior year versus earlier in November. So there were some positive things. And again, some differences between different geographies, definitely, our U.S. business was better than other geographies, and we are seeing more of a positive improvement in that business compared to some of the other regions. When we think about the web business, we have been working on our digital evolution and digital transformation, and that's an ongoing process. And with some of the implementations, we had some challenges that impacted our business. We believe like that we are working on some of those initiatives to fix some of those things in place. Then that's going to be, over time, resolved. But we also talked about some of the product launches and timing. And so definitely, some of those things and how people are shopping we are still seeing more traffic that's coming to our stores, even though our web traffic is down, but like we are one of those retailers that like people are coming and we are driving more visits in our stores, and that's definitely reflected in our year-to-date results. But definitely, there is some room for improvement on the web because being down 2% on a year-to-date basis is definitely behind our expectations.

Sharon Price John, CEO

Right. Mike, I’d like to add a bit more clarification. When implementing technology upgrades, it's not necessarily linked to something we're doing wrong or need to fix. There’s a phase where, as we set up a new platform or adjust processes, we can expect some fluctuations in results while we become accustomed to the new technology. This also applies to the introduction of a new POS system, which can lead to periods of downtime as we deploy it across the entire enterprise. That's why, when we evaluate situations like this, we acknowledge the potential for disruption, particularly around September and October, which typically sees less seasonal demand and allows us to minimize disruption. We need to maintain our focus on continuous digital transformation, as there are numerous new opportunities to optimize our business. I anticipate ongoing evolution in our capabilities in this area. Voin noted that we experienced some volatility as well. Our web business tends to over-represent certain core licensed products, particularly those geared towards adults. We noticed some fluctuations there, partially due to timing and partially due to performance issues with some key licenses that have consistently delivered for us. On the positive side, our core holiday product has shown strong results, contributing significantly to the recovery we’ve seen in recent weeks. We are trying to manage the various factors at play and are mindful of our guidance.

Greg Gibas, Analyst

Wondering if you could comment on any operating metric trends that you're seeing, specifically average revenue per customer versus maybe overall traffic customer count trends?

Sharon Price John, CEO

Yes, our traffic continues to exceed the national average, with over 80% of visits to Build-A-Bear planned in advance, demonstrating brand loyalty. This trend is supported by diverse location strategies, including tourist spots and malls, where visits are also often planned. However, we have noticed a slight decline in dollars per transaction, which could be linked to a slowdown in consumer spending, as well as our strategy involving the Birthday Treat Bear promotion. This offer allows customers to purchase a bear during their birthday month for their age, and while it affects the transaction amount, it serves as our top customer acquisition tool. The integration of our POS system with our loyalty program and CRM helps us track lifetime value over time. So, while there's some softness in transaction value, it's driven by our strong traffic.

Greg Gibas, Analyst

That's helpful. As a follow-up, it's great to see the growth in e-commerce demand outpacing overall performance, and the expectation for an increased number of stores this year is at the high end of the previous range. My question has two parts: first, what are your expectations for the e-commerce business heading into the holiday season compared to the performance at your locations? Do you anticipate continued outperformance like in Q3? Secondly, where do you see promising new brick-and-mortar locations? The pace of openings is accelerating, and you expect to open 30 new stores this year. Should we anticipate a similar range next year, around 20 to 30? Any insights you can share would be appreciated.

Sharon Price John, CEO

Overall, the guidance we provided still reflects our most profitable year ever, and we anticipate a record-breaking year for 2023. Both revenue and pretax figures have set records through the first nine months of this quarter. We want to clarify that the adjustment in guidance does not indicate we expect to decline this year; we are still projected to grow. This includes anticipating increases in our web and North American stores as well as our retail presence. Growing our store count is part of this growth strategy, and we are pleased with our expectation of reaching 30 new stores by the year’s end. As mentioned during the call, we are also planning for additional stores and hope to share more details about store count by the next call when we outline our guidance for 2024. Furthermore, we expect growth in Continental Europe, particularly due to our successful partnership with Hamley's in Milan.

Steven Silver, Analyst

It's also reiterating it's great to see that the guidance for the new location adds trending to the higher end of the previous range. It's also great to see the positive impact that the expanding footprint is having on company gross margins. Just trying to get a sense, without looking for any guidance for 2024, just given the fact that it looks like your pipeline for new locations may have brought some of those opportunities forward to launching in the second half of 2023. I'm just trying to get a sense as to your time frame for the potential for some of these newer location openings to contribute to 2024 results or maybe it's a little bit slower of a build. And then also maybe if there's anything you could speak to just in terms of the broader macro trends that you might be seeing in some of these markets where some of these opportunities were chosen to be moved forward given all the retail challenges out there.

Sharon Price John, CEO

We expect to see positive contributions from the stores as soon as we open them and initiate our marketing efforts. Looking at the calendar, there will be times when we'll be marking anniversaries of stores opened in the previous year. Typically, our plan is for these stores to perform well right from the start. Given that we are nearly 100% profitable, most stores do succeed or we quickly address issues. We have a solid store process that reinforces our confidence in the projections we've provided over the years, which include both corporately operated and partner-operated stores, along with an increasing number of franchise locations. This is a crucial aspect of our business model. As mentioned earlier, the Build-A-Bear workshop experience is central to how we build valuable relationships with our customers. Additionally, the integration of our digital technology, customer relationship management, and loyalty strategy are essential to our overall strategy. The expansion of our store presence is followed by the advancement of our digital transformation, which ties everything together. Concerning the macroeconomic environment, we have shared as much information as we have; reports indicate some macro softness in various sectors, starting in our fiscal third quarter and extending into early November. We observed some shifts and trends as we approached the Black Friday and Cyber Monday period. Entering December, which is a crucial month for us, we are pleased to have a bit more momentum as retail toys comprise a significant portion of our quarterly results.

Unknown Analyst, Analyst

My question really is about the Glisten movie and the release of it early and then the pulling back of it due to the competitive movie slate. That, coupled with the results that can you attribute to sales or the sales results that you can attribute specifically to that movie. Can you discuss that a little bit more?

Sharon Price John, CEO

Thank you, Nancy. It's important to note that when we create content and entertainment, we primarily aim to enhance and integrate our characters, storylines, and intellectual property with our marketing efforts to engage consumers more effectively. The original Glisten and the Merry Mission movie were inspired by our best-selling product line, particularly Glisten, which has been our top-selling product during the holiday season since its launch, totaling over $150 million in sales without any character story enhancements. We envisioned this initiative as a marketing tool, expected to thrive in a streaming or digital space starting tomorrow, which is exciting. The collaboration between Cinemark and Build-A-Bear is exceptional because both are located in many malls, creating a natural transition for kids to visit Build-A-Bear before going to the movies. We often do this, even with our licensed films, using that moment to host stuffing events in theaters nearby to generate early excitement for the holiday season. We've already achieved over 4 billion impressions leading into this key shopping period, and the sales of the products linked to the film are quite positive. The main goal is to elevate Build-A-Bear's visibility as we approach our biggest sales opportunity in December. Families visiting malls and planning Build-A-Bear purchases present a significant opportunity. Furthermore, there were several major films released in mid-November, and we worked closely with our partner to manage this situation. We're excited to launch nationwide this coming weekend before transitioning to digital to promote in-home viewing.

Zach Miller, Analyst

So I wanted to go back to the guidance. I think the implied fourth quarter at the midpoint is something like little over 3% revenue growth. So can you just help us with what's embedded in that from when we look at new store contribution versus same-store sales?

Voin Todorovic, CFO

Thank you for the question, Zach. Regarding the guidance, you are correct that the midpoint of the new range indicates mid-3s in total revenue growth. We don’t specifically address comparable store sales, but we have opened some new locations, which diversifies our store mix. It’s important to note that with partner-operated locations sold on a wholesale basis, we don’t receive the full retail revenue. Consequently, the growth rate for those sales will not match that of retail sales. Additionally, we have noticed some weakness in our U.K. market, and different regions have shown varying performance levels. We're also seeing softer performance in our e-commerce business than we had anticipated for the late part of Q3 and so far this quarter.

Unknown Analyst, Analyst

Got it. And I guess without getting a specific number, I mean, generally, are you guys expecting positive comps in the fourth quarter? Or does the guide contemplate negative comps there?

Voin Todorovic, CFO

I mean just like if you think about low versus high end, like you can get to the different numbers, we are considering how some of the challenges from the macro environment, how prominent they were or like especially late in October and it was a big shift. So we are just trying to be cautious. And as we still have some big weeks ahead of us, and we just want to make sure that if these big weeks, if the traffic and things normalize, you know like it's one outcome versus if you know you have the opposite. So we are trying to kind of like walk that middle line and just based on the information that we have control things that are within our control and execute and stay focused on profitability, stay focused on things that are directly within our control. And I think that's part of the reason we are able to grow even in the smaller numbers, still our profit and expand our profit, both from that margin as well as a pretax margin perspective.

Sharon Price John, CEO

I think that Voin's point about controlling what we control, I think that that is a great note here because that is what we have done to the best of our ability over the past few years that have resulted in continuous profitable growth for the company. And there is a cautious optimistic attitude embedded in this guidance. I think that given that there was a broad consumer pullback in the last two weeks of the quarter for us in the last two weeks of October, that we did our best to pause and respond, which is what we do quite well. And now we're seeing that momentum shift for us. But it really is just a matter of looking at the macro data and being as transparent as we can with the community.

Michael Baker, Analyst

Okay. I figured I'd just ask one more follow-up on what you said about the dollars per transaction. You said it could be related to a slowdown in consumer but also could be related to the birthday treat situation. If I can push on that, I assume you have data showing that kind of stuff. So maybe I can ask it this way. Within the non-birthday sales, are you seeing anything in terms of lower dollars per transaction? And would that be a function of people trading down to lower cost bears or maybe fewer attachments? Or any other way just to take out the impact of the birthday thing and figure out what you're seeing in terms of dollars per transaction, as because I think that's sort of an important metric to gauge consumer health?

Voin Todorovic, CFO

Let me elaborate on that, Michael. The Birthday Treat Bear plays a significant role in acquiring new customers, although the dollar amount per transaction for this product is lower than our average for other items. If its growth continues as projected, as Sharon mentioned earlier, we see this as effective profitable marketing. We are able to gain more customers while still maintaining profitability and enhancing their long-term value. However, this is just one factor contributing to the decrease in our average dollar per transaction. While our transaction numbers have increased, the average transaction amount has declined. The Count Your Candles program and the Birthday Bear are influencing this reduction. Additionally, it's somewhat complex to analyze the other transactions, as it relates closely to consumer confidence and their spending decisions. We’ve noted a year-over-year decline in certain metrics and shifts in behavior. Nonetheless, we are concentrating on increasing transactions as it positively impacts our overall business; we want to encourage foot traffic in our stores. We will persist in this effort, continually providing great experiences and aiming to upsell more. Ultimately, I would prefer having customers visit our stores even if they spend less rather than not visiting at all.

Michael Baker, Analyst

I have one more quick question. Do you think the restart of student loan repayments contributed to the weakness in October? It seems that things may be improving toward the end of November, so I'm not sure if your customers are adjusting their budgets due to the resumption of those payments. Do you believe student loans impacted what you observed in October?

Sharon Price John, CEO

I believe the change in consumer sentiment during the last two weeks of October, which has been widely reported, is likely due to a variety of factors. It's possible that it plays a role, but I cannot directly link that to our performance as I don’t have data to support that. However, it may be part of what consumers are considering regarding their shopping behavior, including their choices and the price points they are willing to accept. All these factors could affect consumer confidence, but it would be difficult for me to connect that directly to Build-A-Bear. Thank you, operator, and thanks to everyone really for joining us today on our third-quarter call. I did want to let you know that later today, Build-A-Bear is honored to be participating in the closing bell ceremony here at the New York Stock Exchange where we're having this call today. We will be following that bell ringing with the 100th anniversary Wall Street Christmas tree lighting celebration, which we look forward to kick off this amazing holiday season. And the performance tonight will be featuring our own Glisten and Merry Mission theme song. So as you kick off your holiday season as well, we would like to wish you and your families a wonderful, wonderful holiday.

Operator, Operator

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines and walk off the webcast at this time and enjoy the rest of your day.