OUR THREE-PRONGED STRATEGY Optimize Real Estate Reset Consumer Value Equation Rationalize Expenses RESULTS RESULTS RESULTS 2013 ANNUAL REPORT 6 BUILD-A-BEAR WORKSHOP, INC.  In 2012, we faced the situation of 22% of North American traditional stores having  negative four-wall contribution. We developed  a multi-dimensional approach which  included expanded plans to close stores,  primarily in multi-store markets in which we  could transfer a portion of sales to other stores  in the same markets, while also aggressively  renegotiating the rent structures of our stores.  To elevate our store experience, we introduced  a new design that added key technological  elements which are highly relevant to today’s  generation of kids. We also selectively  downsized the square footage of key stores.  During the economic downturn, we had  tactically increased discounts and price  promotions as a means to bring traffic to our  stores. In 2012, optimization models showed  that the highest ROI’s were associated with  brand building programs that focused on our experience and new product offerings.  Therefore, in 2013, we set in motion a plan to reset the consumer value equation, use  discounts more strategically and to elevate and  integrate marketing across all consumer touch  points with a focus on enhancing our brand. While our topline sales have stabilized over  recent years, we faced the need to reduce our  expense structure and expand retail gross  margin in order to return to profitability. On the selling, general and administrative  (SG&A) expense side, we renegotiated  agreements with our vendors and suppliers,  adjusted store labor models to more closely  align with overall traffic patterns and reduced  expenses as we closed stores. To improve retail  gross margin, we strategically modified our  pricing structure, began the process to value  engineer our product design and initiated an end-to-end review of our supply chain.  By the end of the year, over 90% of North  American stores were profitable and,  reversing a multi-year decline, our store  productivity improved with sales per square  foot increasing by 9% to $381. Consolidated  net retail sales decreased by 0.4% with 28 fewer stores. During the year, discounts in North America  decreased by 30% while comparable store  sales increased by 5.7%. Organic growth in the base business drove 70% of the  comparable stores sales improvement with the balance due to real estate  optimization activities. For fiscal year 2013, we reduced SG&A  (excluding management transition, store  closing and asset impairment expenses)  as a percent of total revenues by 170 bps to 41.0% and increased retail gross margin as a percent of net retail sales by 220 bps to 41.1%.  * Excluding management transition, store closing and asset impairment expenses 70 % of North America comparable store sales improvement from organic growth. SG&A Expenses as a Percentage of Total Revenues*  North America Sales per Square Foot in Dollars Consolidated Net Retail Sales in Millions Retail Gross Margin as a Percentage of Net Retail Sales  $354 $381 $350 2011 2013 2012 41.5% 41.0% 42.7% 2011 2013 2012 $387.0 $374.6 $373.2 2011 2013 2012 39.9% 38.9% 41.1% 2011 2013 2012 - 30 % discounts versus prior year + 5 .7 % North America  consolidated  comparable  store sales