Keegan Cox

Keegan Cox inquired about any customer trade-down towards lower-priced products like Mini Beans during the government shutdown-related slowdown, the spending patterns of kids versus adult customers, and the company's strategy and competitive outlook for wholesaling Mini Beans in other retail environments.

Answer

CFO Voin Todorovic acknowledged a slowdown in October due to the government shutdown and a tough comparison to a strong Bluey license launch last year, but noted a rebound in November with record Black Friday sales. He stated that while Mini Beans are growing, high-priced items like "jumbos" are also selling well, indicating no clear trade-down, with strong dollar per transaction and conversion rates. CEO Sharon John added that wholesaling Mini Beans leverages the brand's halo effect and equity, positioning them as quality, branded products that stand out against generic plush competition in new retail environments.

Keegan Cox inquired about the impact of the government shutdown on customer spending, specifically if there was a trade-down to lower-priced items like Mini Beans, and the spending patterns between kids and adult customers. He also asked about the company's interest in wholesaling Mini Beans to other retailers and competing in the broader plush market.

Answer

CFO Voin Todorovic confirmed a slowdown in October due to the government shutdown and a tough comparison to last year's Bluey launch, but noted a rebound in November. He stated that strong sales of both Mini Beans and high-priced 'giants' indicate appeal to diverse consumers, with dollar per transaction and conversion remaining strong. CEO Sharon John emphasized that Mini Beans, approaching 3 million units sold, leverage the strong brand equity to offer a quality, branded product beyond the workshop walls, creating a significant opportunity in wholesale channels and the broader plush market.

Keegan Cox of D.A. Davidson Companies questioned the implied slowdown in the second-half guidance, asking if it suggested weaker margins. He also inquired about the momentum with new partner-operated locations and any differences in the customer base compared to corporate stores.

Answer

CFO & President Voin Todorovic clarified that the guidance reflects tougher year-over-year comparisons and nearly $16 million in headwinds from tariffs and labor costs, despite which the company expects to approach or beat last year's record profitability. Chief Operations & Experience Officer J. Christopher Hurt added that partner momentum is strong, driven by the brand's global power, social media reach, and significant user-generated content, which creates a consistent guest experience worldwide.

Keegan Cox from D.A. Davidson Companies inquired about the strong performance of company-operated retail stores relative to expectations and asked for more details on the partners involved in the partner-operated store model.

Answer

CFO Voin Todorovic stated that all four key retail metrics were positive, highlighting that domestic store traffic increased 3% while national traffic declined 3%. President & CEO Sharon Price John added that Build-A-Bear is a destination brand, with most visits planned for special occasions. Chief Operations & Experience Officer J. Christopher Hurt identified partners such as Great Wolf Lodge, Carnival Cruise Line, and major international toy distributors, stressing that partners are carefully selected to uphold the brand's unique experience.

Keegan Cox from D.A. Davidson asked about the expected gross margin headwinds and tailwinds for WD-40 Company's fiscal year 2026 guidance. He also questioned the remaining growth runway for the Asia-Pacific distributor market, noting its significant contribution to recent growth.

Answer

Sara Hyzer, VP and CFO, stated that the FY2026 guidance accounts for both headwinds and tailwinds, noting stable cost inputs and potential tailwinds from conservative oil price assumptions. She highlighted ongoing cost-saving initiatives in supply chain optimization and sourcing as key benefits. Steve Brass, President and CEO, emphasized a 'very, very long runway' for growth in Asia-Pacific distributor markets, citing strong performance in regions like Indonesia, while acknowledging potential short-term lumpiness due to inventory management.

Keegan Cox from D.A. Davidson inquired about the anticipated gross margin headwinds and tailwinds factored into WD-40 Company's fiscal year 2026 guidance and sought insight into the remaining growth potential within the Asia-Pacific distributor market.

Answer

Sara Hyzer, VP and CFO, indicated expected gross margin stability from cost inputs, a potential tailwind from conservative oil price assumptions, and benefits from ongoing cost-saving and supply chain optimization initiatives. Steve Brass, President and CEO, emphasized a "very, very long runway" for growth in Asia-Pacific distributor markets, citing strong performance in key regions like Indonesia, while acknowledging potential short-term lumpiness due to inventory management.

Keegan Cox from D.A. Davidson Companies questioned the initial customer response to the July price increases, asked for clarification on the adjusted EBITDA margin guidance, and inquired about the company's cash sufficiency for the remainder of the year.

Answer

CFO Yves LePendeven stated that early e-commerce data shows no negative impact on unit volumes from the price hikes, and wholesale POS data does not show a meaningful dip. He clarified the mid-to-high single-digit adjusted EBITDA margin guidance is for the second half of 2025, with Q4 expected to be stronger than Q3. Regarding liquidity, he cited the recent credit amendment, covenant waivers, and the new ATM filing as providing flexibility while the company focuses on refinancing its debt.

Keegan Cox sought clarification on the timing of price increases relative to tariff announcements, the drivers behind better-than-expected Q1 gross margins, and the financial impact timeline for the announced 20% workforce reduction.

Answer

CEO Cynthia Williams confirmed the price increases were planned prior to the tariff announcements. CFO Yves Le Pendeven attributed the strong gross margin performance to broad-based minor improvements across product margins and inventory reserves, rather than a single factor. Cynthia Williams detailed that the workforce reduction occurred in two main phases (March and May), with the majority already complete, and the resulting cost savings will be realized throughout the remainder of 2025.

Keegan Cox from D.A. Davidson Companies asked about potential customer order pull-forward due to tariffs, the reasons for the quarterly inventory build, and the outlook considering recent employment data.

Answer

President of Branded Products Jake Himelstein noted minimal tariff impact due to a made-to-order model, while CEO Michael Benstock confirmed there was no significant pull-forward. CFO Mike Koempel explained the inventory build was a strategic move in the Healthcare segment to support second-half sales and avoid prior-year stock-outs. Management indicated that hiring in key client sectors like healthcare and technology remains strong, mitigating concerns from broader employment reports.