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## LETTER TO SHAREHOLDERS 

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Since my first day at Build-A-Bear Workshop, Inc. in June 2013, I could tell this was a special company. From the gracious passing of the baton from the dynamic founder, Maxine Clark, after 16 years at the helm, to the employee passion for the brand, it is clear that this is a company with heart. 

As you may know, “heart” has been an important part of the company since its very beginning. The now iconic Heart Ceremony that occurs at the “Stuff Me” station in all of our stores around the world has been a part of the creation of more than 125 million furry friends — and certainly even more smiles. 

That heart has taken this company from a spark of an idea in 1997 to a $400 million dollar business in less than a decade. Heart has made the brand a household name that immediately conjures up great memories for kids of all ages. And, heart has given this organization the tenacity to fight through the early days of a turn-around in a tough economy. 

## In 2013, we stayed true to our stated three-pronged strategy: 

1) Optimizing our real estate, 

2) Resetting our consumer value equation and, 

3) Rationalizing expenses. 

I am encouraged by the progress in the year, delivering four consecutive quarters of improved operating results. Our annual consolidated comparable store sales increased by 5.1%, retail gross margin expanded by 220 basis points and we had a $13 million shift in profitability with adjusted net income of $3 million from an adjusted net loss of $10 million in 2012. 

With this momentum, the strength of the brand and the emerging path to sustainable long-term profitability for retail, I believe we have a tremendous opportunity to expand our business model. 

We have the opportunity to see our strong brand through a fresh set of eyes, the way our consumers do as we attain skills sets that will allow us to monetize the existing brand equity via new profit and revenue streams. 

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This next step in our plan will, no doubt, take heart  — but that is something I know we have. 

As we turn the page to 2014 and beyond, I would like to thank our board, in particular Mary Lou Fiala, our non-executive chair, and, of course, Maxine, for their support and guidance. I would also like to say “thank- you” for the years of service that Lou Mucci and Ginger Kent have provided the company as board members, as they will be stepping down from their positions this year. Finally, I would like to extend my appreciation to our associates, partners and investors. Your passionate commitment to the Build-A-Bear brand and business is key to our success. 

Our objective is to continue with our overall strategies, to deliver sustainable long- term profitability and, thereby, increase shareholder value throughout the fiscal year. Because of our strong plan and strong brand, we are optimistic about our outlook for fiscal 2014 and beyond. 

Best Regards, 

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