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Build-A-Bear swings to Q4 profit; narrows full-year loss

BY Dan Berthiaume

St. Louis — Build-A-Bear Workshop swing to a profit in the fourth quarter as net income rose to $5.4 million, compared to a loss of $36.5 million a year earlier.

Consolidated net retail sales for the quarter totaled $106.3 million, while operating 28 fewer stores at quarter’s end compared to $116.1 million in the year ago period.

Same-store sales decreased 2.2%, including a 2.8% decline in North America and a 0.1% decline in Europe.

For the full fiscal year, the chain reported a net loss was $2.1 million, an improvement from a net loss of $49.3 million in fiscal 2012. Net retail sales were $373.2 million, compared to $374.6 million in fiscal 2012. Consolidated same-store store sales increased 5.1% and included a 5.7% increase in North America and a 2.9% increase in Europe.

“In a highly promotional retail environment and with fewer stores, we increased gross margin and operating profit leading to a $4.3 million improvement in adjusted net income as compared to the fourth quarter last year ,” said Sharon Price John, CEO of Build-A-Bear Workshop. “We continued to make progress on our turnaround plans to drive our company to sustainable long term profitability.”

Looking ahead, Build-A-Bear plans to close 10-15 North American stores and shift some sales to other store in existing markets while selectively upgrading stores with key features from its new interactive format. The company expects to strategically open new stores on an opportunistic basis.

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Sobey’s to sell 30 Canadian stores for $391 million

BY Dan Berthiaume

Stellarton, Canada — Sobey’s Inc. has entered binding purchase and sale agreements with Overwaitea Food Group and Federated Co-operatives Limited that will see Sobeys sell 22 of the 23 stores it is required to divest as part of its consent agreement with the Competition Bureau related to its purchase of Canada Safeway.

In addition, Sobeys has signed a binding letter of intent with Federated for the sale of its Price Chopper location in Winnipeg, which the company is also required to divest as part of its October consent agreement.

Through the negotiation of these transactions, Sobeys also agreed to include an additional seven stores in British Columbia in the package to be acquired by Overwaitea. This was done to create a divestiture package that meets the needs of both Sobeys and Overwaitea.

Proceeds of about $391 million will be used to repay bank debt. The total annual sales from these stores are approximately $627 million. Both agreements have received approval from the Competition Bureau and Sobeys anticipates the deals will close in March or early April 2014. The sale of the Price Chopper location remains subject to finalization of an asset purchase agreement with the purchaser and approval from the Competition Bureau.

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Jos. A. Bank to acquire Eddie Bauer for $850 million

BY Dan Berthiaume

Hampstead, Md. — Jos. A. Bank Clothiers Inc. is buying the parent company of Eddie Bauer in a cash-and-stock deal valued at $825 million. The deal is the latest chapter in Jos A. Bank’s ongoing takeover battle with Men’s Wearhouse. Last fall, Jos. B. Bank tried and failed to buy rival Men’s Wearhouse for $2.3 billion. Men’s Wearhouse then began pursuing Jos. A. Bank.

Jos. A. Bank said it has entered into a deal with Everest Topco LLC to buy Everest Holdings LLC, Eddie Bauer’s parent company. Everest Topco is part of Golden Gate Capital. Based in Bellevue, Wash., Eddie Bauer operates approximately 370 stores

The combined company is expected to have more than $2.1 billion in revenue in 2014. The two brands will run independent of each other after the transaction is complete.

Under the terms of the deal, Jos. A. Break said it can get out of the agreement if it receives an unsolicited takeover bid that its board decides “would reasonably be expected to” create more value than the Eddie Bauer acquisition. The terms leave the door open to a higher offer from Men’s Wearhouse.

Jos. A. Bank can end the deal by paying a breakup fee of less than 3% of its own market value based on Men’s Wearhouse’s current tender offer, or roughly $48 million.

In a statement, Men’s Wearhouse said that it is evaluating its options with respect to Jos. A. Bank.

Jos. A. Bank said Eddie Bauer was one of the first acquisition candidates it considered when the company began an intensive process of evaluating potential acquisitions in 2012. The retailer also said it engaged in several discussions to purchase Eddie Bauer before making a purchase offer for Men’s Wearhouse in September 2013.

For the year ended Dec. 31, 2013, Eddie Bauer has estimated its revenue to be between $885 million and $895 million. While the two brands will be run independently, the combined company is expected to benefit from significant synergies, including approximately $25 million in process and infrastructure savings expected to be realized in 2015.

In 2014, the combined company is expected to generate in excess of $2.1 billion in revenue, and in 2015, revenue is expected to be in excess of $2.2 billion.

"We have long admired the Eddie Bauer brand and its widespread appeal among those with active lifestyles and excitement about the outdoors, a large and growing customer base that overlaps significantly with ours,” said Robert N. Wildrick, chairman of Jos. A. Bank. “Based on the success of Eddie Bauer’s turnaround and the outstanding opportunities a combination of our companies provides, we believe this transaction ideally positions Jos. A. Bank for the future, and Golden Gate’s investment in our company and participation on our board is a strong endorsement of our plan."

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