Build-A-Bear Workshop (NYSE:BBW) Q3 2026 Earnings Call December 04, 2025 09:00 AM ET Company ParticipantsKeegan Cox - Research AssociateSharon John - CEOVoin Todorovic - CFOChris Hurt - COOGary Schnierow - VP of Investor Relations and Corporate FinanceConference Call ParticipantsGreg Gibas - VP and Senior Research AnalystEric Beder - CEO and Senior Research AnalystSteve Silver - Senior Equity Research AnalystOperatorGreetings. Welcome to Build-A-Bear Workshop third quarter 2025 earnings call. At this time, ...

Build-A-Bear Workshop (NYSE:BBW) Q3 2026 Earnings Call December 04, 2025 09:00 AM ET Company ParticipantsKeegan Cox - Research AssociateSharon John - CEOVoin Todorovic - CFOChris Hurt - COOGary Schnierow - VP of Investor Relations and Corporate FinanceConference Call ParticipantsGreg Gibas - VP and Senior Research AnalystEric Beder - CEO and Senior Research AnalystSteve Silver - Senior Equity Research AnalystOperatorGreetings. Welcome to Build-A-Bear Workshop third quarter 2025 earnings call. At this time, ...

Build-A-Bear Workshop (NYSE:BBW) Q3 2026 Earnings Call December 04, 2025 09:00 AM ET Speaker6Greetings. Welcome to Build-A-Bear Workshop third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to Gary ...

Core Insights - Build-A-Bear Workshop, Inc. (BBW) is experiencing significant growth in its Commercial arm, which is diversifying revenues and profitability beyond traditional retail locations [2][5] - The company reported an 18.3% increase in Commercial revenues and a 15.2% rise in combined Commercial and International franchise revenues in Q2 of fiscal 2025 [2][9] - The partner-operated model is a key driver of this growth, allowing for high-margin wholesale revenues with minimal capital expenditure [3][4] Revenue Growth - Commercial revenues grew by 18.3% in Q2, while total partner and franchise revenues increased by 15.2% [9] - The Commercial segment has expanded at a 63% compound annual growth rate from fiscal 2020 to 2024 [2] Business Model - The partner-operated model requires low capital investment and leverages existing infrastructure, contributing to higher gross margins [3][4] - With 157 partner-operated stores now representing 25% of Build-A-Bear's 627 global locations, this model is scaling faster than corporate stores [3] Future Outlook - Management anticipates at least 60 net new locations in fiscal 2025, primarily through partners [5] - The success of the Commercial arm indicates a structural shift towards a hybrid consumer-products brand, potentially rivaling the retail business in margin contribution [5] Competitive Position - Build-A-Bear has outperformed competitors, with a 50.8% stock price increase over the past year compared to the industry's 7.3% growth [6] - The company's forward 12-month price-to-earnings ratio is 12.79, lower than the industry average of 17.84, indicating a potential valuation opportunity [7][10] Financial Estimates - The Zacks Consensus Estimate for current financial-year sales and earnings per share suggests year-over-year growth of 7.4% and 6.9%, respectively [11] - Current quarter sales are estimated at $124.28 million, with a year-over-year growth estimate of 4.06% [12]

Core Insights - Build-A-Bear Workshop is successfully targeting adults, leveraging nostalgia to diversify its portfolio and enhance customer engagement [3][12][14] - The company reported record-breaking revenue of $252.6 million in the first half of fiscal 2025, marking a nearly 12% increase year-over-year [3][4] - Build-A-Bear's stock has risen approximately 60% year-to-date, nearing a $1 billion market cap, despite challenges faced by other retailers [4][10] Financial Performance - The company raised its outlook following effective tariff mitigation strategies, including increased inventory management [4][8] - Build-A-Bear's diverse revenue streams, including new products and demographics, have contributed to its financial resilience [10][11] Market Position and Strategy - The company has expanded beyond traditional retail locations, establishing a presence in cruise ships, amusement parks, and hospitality [5][6] - Build-A-Bear's ability to discreetly raise prices through constant product innovation has helped mitigate tariff impacts [10][11] Consumer Engagement - A recent survey indicated that 92% of adults still own their childhood teddy bears, highlighting the brand's strong nostalgic appeal [14][16] - The experiential nature of Build-A-Bear's offerings fosters deep emotional connections with consumers, enhancing brand loyalty [16][17] Future Outlook - Analysts suggest that Build-A-Bear's international expansion presents significant growth opportunities, with high returns on capital [11] - The brand's focus on personalization and creating memorable experiences positions it well in a competitive retail landscape [9][18]

Financial Data and Key Metrics Changes - The company reported record revenue of over $128 million, an increase of 11.9% year-over-year [6][20] - Pretax income grew by 30.6% to nearly $20 million, with an EPS increase of 42.7% to $1.17 [6][20] - The pretax margin rate for Q1 was 15%, compared to 3% in Q1 2019, indicating significant improvement [6][8] Business Line Data and Key Metrics Changes - Net retail sales increased by 10.9% to $119.6 million, with strong performance across all segments [20] - E-commerce demand rose by 0.5%, while commercial revenue, primarily from wholesale sales, grew by 28.3% [22][20] - The Mini Beans collectibles line expanded by 30% year-over-year, with total sales reaching nearly 2 million units [16] Market Data and Key Metrics Changes - Domestic store traffic increased by 3%, significantly outperforming the U.S. national traffic, which declined by 3% [21][20] - The company ended the quarter with over 600 locations, with 30% of those outside the United States [9][10] Company Strategy and Development Direction - The company is focused on three strategic initiatives: expanding experiential retail footprint, advancing digital transformation, and leveraging brand strength through investments [9][14] - Plans include opening at least 50 net new locations in 2025, primarily operated by international partners [25][13] - The company aims to enhance inventory management systems to better respond to market trends and consumer demands [14][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic and geopolitical challenges, reiterating revenue guidance for 2025 [8][18] - The company expects to report record revenue for the year, maintaining strong profitability with double-digit pretax margins [18][26] - Management highlighted the importance of a clean balance sheet and strong cash flow in supporting long-term growth initiatives [9][18] Other Important Information - The company returned over $7 million in capital to shareholders through dividends and share repurchases [6][20] - Inventory at quarter-end was $72.3 million, reflecting an increase due to accelerated purchases of core products [25] Q&A Session Summary Question: How will the company capitalize on movie-related events? - Management noted strong relationships with major film creators and the ability to leverage popular characters like Stitch for broader appeal beyond children [34][35] Question: How will the new inventory management system improve responsiveness to trends? - The new system will enhance real-time inventory visibility and allow for better movement of stock between e-commerce and physical stores, improving responsiveness to demand spikes [38][39] Question: How did the retail stores perform compared to expectations? - Retail stores exceeded expectations with positive traffic, conversion rates, and average unit retail, indicating effective execution by the team [47][48] Question: Who are the partners for operated stores and are there plans for more? - Partners include well-known firms in various markets, and the company is in negotiations for new partnerships while maintaining high standards for partner operations [51][54] Question: What is the impact of tariffs on the updated guidance? - The updated pretax income guidance reflects less than $10 million in tariff impacts, with ongoing efforts to mitigate costs through diversified sourcing [62][63]

Financial Data and Key Metrics Changes - The company reported record revenue of over $128 million, an increase of 11.9% year-over-year [5][17] - Pretax income grew by 30.6% to nearly $20 million, with an EPS increase of 42.7% to $1.17 [5][20] - The pretax margin rate for Q1 was 15%, compared to 3% in Q1 2019, indicating significant improvement [5][6] Business Line Data and Key Metrics Changes - Net retail sales increased by 10.9% to $119.6 million, with strong performance across all segments [17] - E-commerce demand rose by 5%, while commercial revenue, primarily from wholesale sales, grew by 28.3% [19] - The Mini Beans collectibles line expanded by 30% year-over-year, with total sales reaching nearly 2 million units [13] Market Data and Key Metrics Changes - Domestic store traffic increased by 3%, significantly outperforming the U.S. national traffic, which declined by 3% [18][45] - The company ended the quarter with over 600 locations, with 30% of these outside the United States [8] Company Strategy and Development Direction - The company is focused on three strategic initiatives: expanding experiential retail, advancing digital transformation, and leveraging brand strength through investments [7][12] - Plans include opening at least 50 net new locations in 2025, primarily operated by international partners [22][11] - The company aims to maintain its revenue guidance while updating pretax income guidance to a range of $61 million to $67 million, inclusive of current tariff rates [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic and geopolitical challenges, citing a clean balance sheet and strong cash flow [6][15] - The company anticipates continued momentum into Q2 and robust plans for the remainder of 2025, expecting record revenue and strong profitability [15][25] Other Important Information - The company returned over $7 million in capital to shareholders during the quarter [5][17] - Inventory at quarter-end was $72.3 million, reflecting an increase due to accelerated purchases of core products [21] Q&A Session Summary Question: How will the company capitalize on movie-related events? - The company maintains strong relationships with major film creators and has evolved its product lines to appeal to a broader audience, including collectible items for teens and adults [32][34] Question: How will the new inventory management system improve responsiveness to trends? - The new system will enhance inventory visibility and allow for better management of stock levels, enabling the company to respond more effectively to trends [36][37] Question: How did the company’s operated stores perform compared to expectations? - The company reported positive performance across all metrics, with traffic up 3% and conversion rates improving, indicating successful execution of marketing strategies [44][45] Question: Who are the partners for operated stores and are there plans for more? - The company partners with well-known firms in various markets, ensuring they can deliver the Build A Bear experience effectively [48][49] Question: What is the impact of tariffs on the updated guidance? - The updated pretax income guidance reflects less than $10 million in tariff impacts, with ongoing efforts to mitigate costs through diversified sourcing [60][61]