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Build-A-Bear Workshop Earnings Highlights: Record Q2 Performance Amid Strategic Expansion

by Team Lumida
August 30, 2024
in Equities
Reading Time: 8 mins read
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Build-A-Bear Workshop Earnings Highlights: Record Q2 Performance Amid Strategic Expansion
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Summary

Build-A-Bear’s Q2 2024 results showcase the company’s successful execution of its multi-year strategy to drive sustained profitable growth. Despite challenges in web demand, the company’s diversified business model and strategic initiatives led to solid performance. CEO Sharon Price John emphasized:

“These results, coupled with strong third quarter-to-date trends and robust back half plans, support the reiteration of our full year guidance.”

Main Themes

  • Guidance: Reiterated full-year guidance, expecting mid-single-digit revenue growth and pretax income growth
  • New Product Announcements: Successful launch of Mini Beans collectibles, selling over 1.5 million units since introduction
  • Market-moving information: Web demand down 28.2% in Q2, but up strong double digits quarter-to-date in Q3
  • Economic outlook: Continued focus on managing wage and inflationary pressures

Insights

Build-A-Bear’s strategic evolution is centered on three key pillars:

  1. Global retail scaling through experience locations
  2. Comprehensive digital transformation
  3. Fiscal focus to enable strategic investments and shareholder returns

The company’s expansion into new markets, particularly through partner-operated and franchise models, has accelerated store growth. By the end of fiscal 2024, Build-A-Bear expects to have opened nearly 90 net new locations over two years.

Market Opportunity

Build-A-Bear is actively expanding its consumer base beyond children, tapping into a growing multi-generational appeal. The company reports that teen and adult business now represents approximately 40% of total retail sales, driven by collectibles, trim products, licensing, and gifting.

Market Commentary

The company is capitalizing on the growing interest in Halloween seasonal products, aligning with trends reported by the National Retail Federation. Build-A-Bear has strategically increased its Halloween offerings, inventory depth, and launch timing to capture this market opportunity.

Customer Behaviors

Build-A-Bear is seeing strong traction with its Halloween product line, particularly online. The company accelerated its Halloween launch due to high consumer interest, resulting in record quarter-to-date sales. The reintroduction of the popular 2008 Pumpkin Kitty led to a viral event and quick sellouts.

Capex

While specific capital expenditure figures were not provided, the company noted its capital-light expansion strategy through partner-operated and franchise models, allowing for significant global growth without substantial capital investment.

Economy Insights

Despite negative reported national retail traffic trends, Build-A-Bear’s unique retail experience has remained resilient. The company’s store traffic outpaced national trends, though slightly down for the quarter, offset by increased store conversion.

Industry Insights

Build-A-Bear’s success with its Mini Beans collectibles demonstrates the potential for plush toy manufacturers to expand beyond traditional make-your-own concepts. This opens up wholesale opportunities and provides a model for brand extension in the toy industry.

Key Metrics

Financial Metrics:

  • Total revenues: $111.8 million, up 2.4% YoY
  • Pretax income: $11.5 million, up 10.2% YoY
  • Diluted EPS: $0.64, up 12.3% YoY
  • Gross margin: 54.2%, up 50 basis points YoY

KPIs:

  • 17 net new locations opened in Q2, 23 year-to-date
  • Commercial revenue up 44.8% YoY
  • Mini Beans collectibles sold over 1.5 million units since launch

“We added a total of 17 net new locations for the quarter and 23 for the first half across all three business models, corporately operated, partner-operated and franchise which keeps us on track with our guidance to open at least 50 new experience locations for the fiscal year.” – Sharon Price John, CEO

Competitive Differentiators

  1. Unique experiential retail model
  2. Multi-generational appeal (40% of retail sales from teens and adults)
  3. Global expansion through capital-light partner-operated and franchise models
  4. Successful product diversification (e.g., Mini Beans collectibles)
  5. Strong brand recognition (ranked #1 toy retailer by Newsweek)

Key Risks

  1. Dependence on seasonal and licensed products
  2. Potential impact of economic downturns on discretionary spending
  3. Challenges in web demand and digital transformation
  4. Supply chain and inventory management complexities
  5. Competition in the toy and experiential retail sectors

Analyst Q&A Focus Areas

Analysts focused on:

  1. International expansion opportunities and potential growth
  2. Web demand recovery and digital transformation progress
  3. Halloween product success and inventory management
  4. New store growth cadence and geographic breakdown
  5. Potential for business acceleration or acquisitions

Build-A-Bear Workshop Summary:

Build-A-Bear’s record Q2 performance and strong Q3 momentum demonstrate the effectiveness of its strategic initiatives. The company’s focus on global expansion, product diversification, and omnichannel integration positions it well for continued growth. Investors should watch for the success of the Halloween product line, progress in digital transformation efforts, and the pace of new store openings, particularly in international markets. The company’s ability to maintain its growth trajectory while managing inflationary pressures and potential economic headwinds will be crucial in the coming quarters.

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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

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‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
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