BUILD-A-BEAR WORKSHOP INC

Previous wording

Build-A-Bear Workshop, Inc. a Delaware corporation, was formed in 1997 as a mall-based, experiential specialty retailer. Build-A-Bear has evolved to become a beloved multi-generational brand focused on its mission to “add a little more heart to life” where guests of all ages make their own “furry friends” in celebration and commemoration of life moments. Guests create their own stuffed animals by participating in the stuffing, dressing, accessorizing, and naming of their own teddy bears and other plush toys based on the Company’s own intellectual property and in conjunction with a variety of best-in-class licenses. The hands-on and interactive nature of our more than 500 company-owned, partner-operated and franchise experience locations around the world, combined with Build-A-Bear’s pop-culture appeal, often fosters a lasting and emotional brand connection with consumers, and has enabled the Company to expand beyond its retail stores to include e-commerce sales on www.buildabear.com and non-plush branded consumer categories via out-bound licensing agreements with leading manufacturers, as well as the creation of engaging content via Build-A-Bear Entertainment (a subsidiary of Build-A-Bear Workshop, Inc.). Over the last 27 years, Build-A-Bear has become a brand with high consumer awareness, positive affinity, and strong retail influence by leveraging our brand strength to grow our brick-and-mortar retail footprint beyond traditional malls through a range of store sizes, formats and locations including tourist destinations. We are also growing through our websites, which focus on gift-giving, collectible merchandise, and licensed products. In addition to growing our corporately-managed store and e-commerce footprint, we are also growing through third-party operated and franchised stores, particularly for our international expansion. Our ongoing digital transformation, which touches our e-commerce business, consumer loyalty program and digital marketing and content, has led to omni-channel growth over the past several years. Build-A-Bear's pop-culture appeal has played a key role in growing our total addressable market beyond children by adding teens and adults with entertainment and sports licensing, collectible and gifting offerings, as well as by introducing new products and adding categories beyond plush.

Current wording

We were formed in 1997 as a mall-based, experiential specialty retailer. Build-A-Bear has evolved to become a beloved multi-generational brand focused on its mission to “add a little more heart to life” where guests of all ages make their own “furry friends” in celebration and commemoration of life moments. Guests create their own stuffed animals by participating in the stuffing, dressing, accessorizing, and naming of their own teddy bears and other plush toys based on the Company’s own intellectual property and in conjunction with a variety of best-in-class licenses. The hands-on and interactive nature of our more than 600 company-owned, partner-operated and franchise experience locations around the world, combined with Build-A-Bear’s pop-culture appeal, often fosters a lasting and emotional brand connection with consumers, and has enabled the Company to expand beyond its retail stores to include e-commerce sales on www.buildabear.com and non-plush branded consumer categories via out-bound licensing agreements with leading manufacturers, as well as the creation of engaging content via Build-A-Bear Entertainment (a subsidiary of Build-A-Bear Workshop, Inc.). Over the last 28 years, Build-A-Bear has become a brand with high consumer awareness, positive affinity, and strong retail influence by leveraging our brand strength to grow our brick-and-mortar retail footprint beyond traditional malls through a range of store sizes, formats and locations including tourist destinations. We are also growing through our websites, which focus on gift-giving, collectible merchandise, and licensed products. In addition to growing our corporately-managed store and e-commerce footprint, we are also growing through third-party operated and franchised stores, particularly for our international expansion. Our ongoing digital transformation, which touches our e-commerce business, consumer loyalty program and digital marketing and content, has led to omni-channel growth over the past several years. Build-A-Bear's pop-culture appeal has played a key role in growing our total addressable market beyond children by adding teens and adults with entertainment and sports licensing, collectible and gifting offerings, as well as by introducing new products and adding categories beyond plush.

Previous wording

We primarily operate through a vertical retail channel with corporately-managed stores that feature a unique combination of experience and product in which guests can “make their own 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 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. Additionally, we offer products in non-plush consumer categories via outbound licensing agreements with leading manufacturers.

Current wording

We primarily operate through a vertical retail channel with corporately-managed, partner-operated, and franchise locations that feature a unique combination of experience and product in which guests can “make their own stuffed animals.” We also operate buildabear.com, which both serves as an information and communications tool to plan a store visit as well as an e-commerce site that focuses 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 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. Additionally, we offer products in nonplush consumer categories via outbound licensing agreements with leading manufacturers.

Previous wording

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 our partner-operated and franchise store models, and grow our e-commerce business. By leveraging our brand strength and owned intellectual properties through the creation of engaging short-form and long-form content for kids and adults, we endeavor to develop a circle of continuous engagement to increase purchase occasions and to continue to broaden the consumer base beyond children by adding tweens, teens and adults with entertainment and sports licensing, plus collectible and gifting offerings.

Current wording

Our strategy includes leveraging our brand strength to continue to evolve our brick-and-mortar retail footprint with a versatile range of formats and locations, including tourist destinations, expand into international markets primarily via our partner-operated and franchise store models, and grow our e-commerce business. By leveraging our brand strength and owned intellectual properties through the creation of engaging short-form and long-form content for kids and adults, we endeavor to develop a circle of continuous engagement to increase purchase occasions and to continue to broaden the consumer base beyond children by adding tweens, teens and adults with entertainment and sports licensing, plus collectible and gifting offerings.

Previous wording

As of November 2, 2024, we had 362 corporately-managed stores globally and 4 seasonal locations, 123 partner-operated locations operating through our "third-party retail" model in which we sell our products on a wholesale basis to other companies that execute our retail experience, and 80 international franchised stores, all under the Build-A-Bear Workshop brand. In addition to these stores, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements.

Current wording

As of May 3, 2025, we had 369 corporately-managed stores globally, 148 partner-operated locations operating through our "third-party retail" model in which we sell our products on a wholesale basis to other companies that execute our retail experience, and 87 international franchised stores, all under the Build-A-Bear Workshop brand. We also operate a limited number of seasonal locations. In addition to these stores, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements.

Previous wording

Selected financial data attributable to each segment for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

Selected financial data attributable to each segment for the thirteen weeks ended May 3, 2025 and May 4, 2024 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

Build-A-Bear Workshop offers interactive entertainment experiences via both physical and e-commerce engagement, targeting a range of consumer segments and purchasing occasions through digitally-driven, diversified omnichannel capabilities. We operate a vertical retail channel with stores that feature a unique combination of experience and product in which guests can "make their own stuffed animals" by participating in the stuffing, dressing, accessorizing, and naming of their 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 licensed properties. Over the last 27 years, Build-A-Bear has become a brand with high consumer awareness and positive affinity. We believe there are opportunities to leverage this brand strength, pop-culture status and multi-generational appeal and generate incremental revenue and profits through licensing our intellectual properties through content and entertainment development for kids and adults while also offering products at wholesale and in non-plush consumer categories through outbound licensing agreements with leading manufacturers.

Current wording

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 locations that feature a unique combination of interactivity and product in which guests can “make their own stuffed animals” by participating in the stuffing, dressing, accessorizing and naming of their own teddy bears and other stuffed animals along with the now-famous "Heart Ceremony" that helps to make the experience memorable by bringing the furry friend to "life." 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”, an age-gated adult-focused “Bear Cave” microsite. Our retail stores also act as “mini distribution centers” that provide efficient omnichannel support for our digital demand. The primary consumer target for our retail stores is families with children while our e-commerce sites focus on collectors and gift givers that are primarily tweens, teens and adults. 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.

Previous wording

We believe that the initiatives and investments that were put in place prior to the pandemic, and in many cases, we accelerated during the pandemic, are driving improved results, as we delivered growth in total revenues and profit in fiscal 2023. To continue to drive revenue and profit growth, we remain focused on our strategic priorities, which are centered primarily on three key areas:

Current wording

We believe that the initiatives and investments that were put in place prior to the pandemic, and in many cases, we accelerated during the pandemic, are driving improved results, as we delivered growth in total revenues and pretax profit in fiscal 2022, 2023 and 2024. To continue to drive revenue and profit growth, we remain focused on our strategic priorities, which are centered primarily on three key areas:

Previous wording

As of November 2, 2024, 51% of our corporately-managed stores were in an updated Discovery format. We also 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. The future of our retail store fleet may include expansion into more non-traditional locations, including concourse format shops and by expansion in other locations outside of traditional malls.

Current wording

As of May 3, 2025, 52% of our corporately-managed stores were in an updated Discovery format. We also 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. The future of our retail store fleet may include expansion into more non-traditional locations, including concourse format shops and by expansion in other locations outside of traditional malls.

Previous wording

Through our third-party retail model, there were 123 stores in operation at the end of the third quarter of 2024 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Girl Scouts of the USA. 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 from us 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.

Current wording

Through our third-party retail model, there were 148 stores in operation at the end of the first quarter of 2025 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Girl Scouts of the USA. 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 from us 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.

Previous wording

Our first franchisee location was opened in November 2003. All franchised stores have similar signage, store layout, merchandise characteristics and guest experience as our corporately-managed stores. As of November 2, 2024, we had 5 master franchise agreements, which typically grant franchise rights for a particular country or group of countries, covering an aggregate of 8 countries.

Current wording

Our first franchisee location was opened in November 2003. All franchised stores have similar signage, store layout, merchandise characteristics and guest experience as our corporately-managed stores. As of May 3, 2025, we had five master franchise agreements, which typically grant franchise rights for a particular country or group of countries, covering a total of eight countries.

Previous wording

*Total revenues.*Consolidated revenues increased 11.0%, primarily driven by a $9.1 million or 9.1% increase in Net Retail sales and a $2.6 million or 43% increase in Commercial revenue when compared to the third fiscal quarter of 2023. The increase in net retail sales was driven primarily by growth at existing stores. The increased commercial revenue was due to higher sales from our wholesale customers that was driven by new wholesale customers and opening 38 third-party retail stores since the third quarter of 2023.

Current wording

*Total revenues.*Consolidated revenues increased $13.7 million or 11.9%, primarily driven by a $11.7 million or 10.9% increase in Net Retail sales and a $1.6 million or 27% increase in Commercial revenue when compared to the first fiscal quarter of 2024. The increase in net retail sales was driven primarily by growth at existing stores. The increased commercial revenue was due to higher sales to our wholesale customers, including sales to new wholesale customers resulting from the opening of 51 third-party retail stores since the first quarter of 2024.

Previous wording

Net retail sales for the thirteen weeks ended November 2, 2024 were $109.5 million, compared to $100.4 million for the thirteen weeks ended October 28, 2023. The components of the improved performance are as follows (dollars in thousands):

Current wording

Net retail sales for the thirteen weeks ended May 3, 2025 were $119.6 million, compared to $107.9 million for the thirteen weeks ended May 4, 2024. The components of the improved performance are as follows (dollars in thousands):

Previous wording

The higher retail revenue performance was primarily the result of an increase at existing stores andnew stores partially offset by the impact of the calendar shift (53 rd week shift), the effect of store closures and a decline in web demand.

Current wording

The higher retail revenue performance was primarily the result of an increased sales at existing stores and sales atnew stores partially offset by the effect of store closures.

Previous wording

Commercial revenue was $8.6 million for the thirteen weeks ended November 2, 2024 compared to $6.0 million for the thirteen weeks ended October 28, 2023. The $2.6 million increase is primarily due to increased sales volume from our wholesale accounts through our partner-operated third-party retail model.

Current wording

Commercial revenue was $7.6 million for the thirteen weeks ended May 3, 2025 compared to $6.0 million for the thirteen weeks ended May 4, 2024. The $1.6 million increase is primarily due to increased sales volume from our wholesale accounts through our partner-operated third-party retail model.

Previous wording

International franchising revenue was $1.3 million for the thirteen weeks ended November 2, 2024 compared to $1.1 million for the thirteen weeks ended October 28, 2023. The change is primarily the result of the timing of product shipments.

Current wording

International franchising revenue was $1.2 million for the thirteen weeks ended May 3, 2025 compared to $0.9 million for the thirteen weeks ended May 4, 2024. The change is primarily the result of the timing of product shipments and the opening of 10 franchise stores since the first quarter 2024.

Previous wording

*Retail gross margin.*Retail gross margin dollars increased $6.5 million to $59.4 million from $52.9 million for the thirteen weeks ended October 28, 2023. The retail gross margin rate increased 160 basis points compared to the prior year driven by lower merchandise, freight and occupancy costs compared to the third quarter of fiscal 2023.

Current wording

*Retail gross margin.*Retail gross margin dollars increased $9.5 million to $68.0 million from $58.5 million for the thirteen weeks ended May 4, 2024. The retail gross margin rate increased 270 basis points compared to the prior year driven primarily by improved merchandise margin compared to the first quarter of fiscal 2024.

Previous wording

*Selling, general and administrative.*SG&A expenses were $148.4 million, or 42.9% of consolidated revenue, for the thirty-nine weeks ended November 2, 2024, compared to $140.5 million, or 41.7% of consolidated revenue, for the thirty-nine weeks ended October 28, 2023. The increase in overall expense was driven by higher wage rates, expense timing and general inflationary pressures.

Current wording

*Selling, general and administrative.*SG&A expenses were $53.6 million, or 41.7% of consolidated revenue, for the thirteen weeks ended May 3, 2025, compared to $47.6 million, or 41.5% of consolidated revenue, for the thirteen weeks ended May 4, 2024. The increase was driven by higher wage rates, increased healthcare costs and general inflationary pressures.

Previous wording

*Interest income, net.*Interest income was $0.1 million for the thirteen weeks ended November 2, 2024 compared to interest income of $0.3 million for the thirteen weeks ended October 28, 2023.

Current wording

*Interest income, net.*Interest income was $0.2 million for the thirteen weeks ended May 3, 2025 compared to interest income of $0.4 million for the thirteen weeks ended May 4, 2024.

Previous wording

Provision for income taxes. Income tax expense was $9.5 million with a tax rate of 24.1% for the thirty-nine weeks ended November 2, 2024, as compared to $9.6 million with a tax rate of 24.0% for the thirty-nine weeks ended October 28, 2023. In the first thirty-nine weeks of fiscal 2024 and 2023, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting. In the fourth quarter of fiscal 2023, the Company reversed the valuation allowance on deferred tax assets expected to be realized in the U.K. The Company remains in a full valuation in certain other foreign jurisdictions.

Current wording

Provision for income taxes. Income tax expense was $4.3 million with a tax rate of 22.0% for the thirteen weeks ended May 3, 2025 as compared to $3.6 million with a tax rate of 23.8% for the thirteen weeks ended May 4, 2024. In the first quarter of fiscal 2025, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and the foreign-derived intangible income deduction. In the first quarter of fiscal 2024, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting. In addition, in the first quarter of fiscal 2025 and 2024, the Company remains in a full valuation allowance in certain foreign jurisdictions.

Previous wording

EBITDA for the thirteen weeks ended November 2, 2024 increased $3.4 million, or 25.3% to $16.7 million from $13.3 million for the thirteen weeks ended October 28, 2023. The increase was driven by gross profit driven by increased retail and commercial margins partially offset by higher SG&A expenses.

Current wording

EBITDA for the thirteen weeks ended May 3, 2025 increased $4.9 million, or 26.7% to $23.1 million from $18.3 million for the thirteen weeks ended May 4, 2024. The increase was driven by gross profit driven by increased retail and commercial margins partially offset by higher SG&A expenses.

Previous wording

Our operating results for one period may not be indicative of results for other periods, and may fluctuate significantly because of a variety of factors, including, but not limited to: (1) changes in general economic conditions (including as a result of the pandemic) and consumer spending patterns; (2) changes in store operations in response to the pandemic apart from its effect on the general economy, including temporary store closures required by local governments; (3) increases or decreases in our existing store and e-commerce sales; (4) fluctuations in the profitability of our stores; (5) the timing and frequency of the sales of licensed products tied to major theatrical releases (including the cancellation or delay of such releases due to the pandemic or other external factors) and our marketing initiatives, including national media and other public relations events; (6) changes in foreign currency exchange rates; (7) the timing of new store openings, closings, relocations and remodeling and related expenses; (8) changes in consumer preferences; (9) the effectiveness of our inventory management; (10) the actions of our competitors or mall anchors and co-tenants; (11) seasonal shopping patterns and holiday and vacation schedules; (12) disruptions in store operations due to civil unrest; and (13) weather conditions.

Current wording

Our operating results for one period may not be indicative of results for other periods, and may fluctuate significantly because of a variety of factors, including, but not limited to: (1) changes in general economic conditions and consumer spending patterns; (2) increases or decreases in our existing store and e-commerce sales; (3) fluctuations in the profitability of our stores; (4) the timing and frequency of the sales of licensed products tied to major theatrical releases (including the cancellation or delay of such releases due to the pandemic or other external factors) and our marketing initiatives, including national media and other public relations events; (5) changes in foreign currency exchange rates; (6) the timing of new store openings, closings, relocations and remodeling and related expenses; (7) changes in consumer preferences; (8) the effectiveness of our inventory management; (9) the actions of our competitors or mall anchors and co-tenants; (10) seasonal shopping patterns and holiday and vacation schedules; (11) disruptions in store operations due to civil unrest; and (12) weather conditions.

Previous wording

Because our retail operations include toy products which have sales that historically peak in relation to the holiday season as part of our revenue model, our sales have historically been highest in our fourth quarter. The timing of holidays and school vacations can impact our quarterly results. We cannot provide assurance that this will continue to be the case. In addition, for accounting purposes, the quarters of each fiscal year consist of 13 weeks, although we will have a 14-week quarter approximately once every six years. For example, the 2023 fiscal fourth quarter was 14 weeks.

Current wording

Because our retail operations include toy products which have sales that historically peak in relation to the holiday season as part of our revenue model, our sales have historically been highest in our fourth quarter. The timing of holidays and school vacations can impact our quarterly results. We cannot provide assurance that this will continue to be the case. In addition, for accounting purposes, the quarters of each fiscal year consist of 13 weeks, although we will have a 14-week quarter approximately once every six years. Our most recent 14-week quarter was the 2023 fiscal fourth quarter.

Previous wording

As of November 2, 2024, we had a consolidated cash balance of $29.0 million, 79% of which was domiciled within the U.S. Historically, our cash requirements have been primarily for the relocation and remodeling of existing stores in our new design, opening of new stores, investments in information technology infrastructure and working capital. Over the past several years, we have met these requirements through capital generated from cash flow provided by operations. Additionally, during 2024 we have used cash on-hand to invest in short-term, highly liquid investments with original maturities of three months or less resulting in interest income of $0.7 million during the thirty-nine weeks ended November 2, 2024.

Current wording

As of May 3, 2025, we had a consolidated cash balance of $44.3 million, 79% of which was domiciled within the U.S. Historically, our cash requirements have been primarily for the relocation and remodeling of existing stores in our new design, opening of new stores, investments in information technology infrastructure and working capital. Over the past several years, we have met these requirements through capital generated from cash flow provided by operations. Additionally, during 2025 we have used cash on-hand to invest in short-term, highly liquid investments with original maturities of three months or less resulting in interest income of $0.2 million during the thirteen weeks ended May 3, 2025.

Previous wording

Operating Activities. Cash provided by operating activities decreased $5.2 million for the thirty-nine weeks ended November 2, 2024, as compared to the thirty-nine weeks ended October 28, 2023. This decrease in cash from operating activities was primarily driven by increased cash spent on inventory purchases in anticipation of the uncertainty in cost due to potential tariffs and higher accounts receivable resulting from higher commercial revenue offset by increases in payables and accrued expenses.

Current wording

Operating Activities. Cash provided by operating activities increased $17.4 million for the thirteen weeks ended May 3, 2025, as compared to the thirteen weeks ended May 4, 2024. This increase in cash from operating activities was primarily the result of a decrease in accounts receivable resulting from lower receivables from commercial accounts and an increase in accounts payable and accrued expenses. These increases were partially offset by higher cash spent on inventory purchases due to accelerated purchases in anticipation of the uncertainty in cost due to potential tariffs.

Previous wording

Investing Activities. Cash used in investing activities decreased $1.6 million for the thirty-nine weeks ended November 2, 2024, as compared to the thirty-nine weeks ended October 28, 2023. This decrease in cash used in investing activities was primarily driven by lower spending on capital expenditures.

Current wording

Investing Activities. Cash used in investing activities increased $0.5 million for the thirteen weeks ended May 3, 2025, as compared to the thirteen weeks ended May 4, 2024. The increase in cash used in investing activities was primarily driven by increased spending on capital expenditures.

Previous wording

Capital Resources: We have a revolving credit and security agreement with PNC Bank, as agent, that provides for a secured revolving loan in aggregate principal of up to $25.0 million, subject to a borrowing base formula. As of November 2, 2024, borrowings under the agreement would bear interest at (a) a base rate determined under the agreement, or (b) the borrower's option, at a rate based on SOFR, plus in either case a margin based on average undrawn availability as determined in accordance with the agreement. As of November 2, 2024, our borrowing base was $25.0 million. As a result of a $250,000 letter of credit outstanding against the line of credit, approximately $24.7 million was available for borrowing as of November 2, 2024. We had no outstanding borrowings as of November 2, 2024.

Current wording

Capital Resources: We have a revolving credit and security agreement with PNC Bank, as agent, that provides for a secured revolving loan in aggregate principal of up to $25.0 million, subject to a borrowing base formula. As of May 3, 2025, borrowings under the agreement would bear interest at (a) a base rate determined under the agreement, or (b) the borrower's option, at a rate based on SOFR, plus in either case a margin based on average undrawn availability as determined in accordance with the agreement. As of May 3, 2025, our borrowing base was $25.0 million and the Company had no outstanding borrowings as of the end of the quarter.

Previous wording

Most of our corporately-managed retail stores are located within shopping malls and all are operated under leases classified as operating leases. Our leases in North America tend to be shorter term leases to provide flexibility in aligning stores with market trends. During fiscal 2023 and into fiscal 2024, lease extensions began to have longer terms as we have secured longer contracts with more favorable terms. Our leases typically require us to pay personal property taxes, our pro rata share of real property taxes of the shopping mall, our own utilities, repairs and maintenance in our store, a pro rata share of the malls’ common area maintenance and, in some instances, merchant association fees and media fund contributions. 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 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.

Current wording

Most of our corporately-managed retail stores are located within shopping malls and all are operated under leases classified as operating leases. Our leases in North America tend to be shorter term leases to provide flexibility in aligning stores with market trends. Beginning infiscal 2023, lease extensions began to have longer terms as we have secured longer contracts with more favorable terms. Our leases typically require us to pay personal property taxes, our pro rata share of real property taxes of the shopping mall, our own utilities, repairs and maintenance in our store, a pro rata share of the malls’ common area maintenance and, in some instances, merchant association fees and media fund contributions. 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 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.

Previous wording

Capital spending through thethirty-nine weeks ended November 2, 2024 totaled$9.6 million for information technology projects and new store openings, and we expect to spend approximately $18 to $20 million on capital expenditures in fiscal 2024.

Current wording

Capital spending through thethirteen weeks ended May 3, 2025 totaled$2.9 million for information technology projects and new store openings, and we expect to spend approximately $20 to $25 million on capital expenditures in fiscal 2025.

Previous wording

Total inventory at quarter end was $70.8 million, an increase of $6.3 million or 10% from the end of the fiscal 2023 third quarter. We accelerated the acquisition of our core products in anticipation of the uncertainty in cost due to potential tariffs. We are comfortable with the level and composition of our inventory.

Current wording

Total inventory at quarter end was $72.3 million, an increase of $8.3 million or 13% from the end of the fiscal 2024 first quarter. Beginning in the second half of fiscal 2024 and continuing into the first quarter of fiscal 2025, we accelerated the acquisition of our core products in anticipation of the uncertainty in cost due to potential tariffs. We are comfortable with the level and composition of our inventory.

Previous wording

We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. As of November 2, 2024, we had purchase obligations totaling approximately $99.7 million, of which $29.0 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.

Current wording

We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. As of May 3, 2025, we had purchase obligations totaling approximately $100.7 million, of which $26.7 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.

Previous wording

Weutilized $23.0 million in cash to repurchase 832,944 shares during the thirty-nine weeks ended November 2, 2024, compared to using$15.2 million in cash to repurchase 672,734 shares during the thirty-nine weeks ended October 28, 2023. Since the end of the third fiscal quarter, we utilized $0.2 million in cash to repurchase 5,288 shares leaving $97.0 million available under the September 2024 Stock Repurchase Program.

Current wording

Weutilized $4.2 million in cash to repurchase 108,502 shares during the thirteen weeks ended May 3, 2025, compared to using $9.2 million in cash to repurchase 343,406 shares during the thirteen weeks ended May 4, 2024.

Previous wording

Global inflation is well above recent levels and global interest rates have risen in an effort to curb inflation. The impact of inflation on the Company's business operations was seen throughout fiscal 2023 and continued to adversely affect our business in fiscal 2024, mainly through rising store labor costs. However, we continue to take mitigating actions, such as select strategic price increases on highly sought-after products and leveraging distribution costs. We expect the inflationary pressures experienced thus far in fiscal 2024 to continue throughout the rest of fiscal 2024, specifically through wage increases. 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 2024 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, tension between China and Taiwan, and the Israel-Hamas conflict. We cannot provide an estimate or range of impact that such inflation may have on 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 if we elect to maintain higher inventory reserves to mitigate anticipated higher costs.

Current wording

The impact of inflation on the Company's business operations was seen throughout fiscal 2024, predominately through rising store labor costs. However, we continue to take mitigating actions, such as select strategic price increases on highly sought-after products and leveraging distribution costs. We expect the inflationary pressures experienced in fiscal 2024 to continue into fiscal 2025, specifically through wage increases and tariffs on inventory purchases. 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 2025 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, tension between China and Taiwan, and the Israel-Hamas conflict. We cannot provide an estimate or range of impact that such inflation may have on 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 if we elect to maintain higher inventory reserves to mitigate anticipated higher costs.