Build-A-Bear Workshop, Inc. (NYSE:BBW) reported mixed first-quarter fiscal 2026 results, with earnings beating expectations, but revenue missing estimates as softer store traffic and weaker e-commerce demand pressured sales.
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Revenue Misses, Earnings Beat
Revenue fell 2.4% year over year to $125.3 million, below the analyst estimate of $129.6 million.
Adjusted EPS came in at $1.03, ahead of the 75-cent estimate, while GAAP diluted EPS rose to $1.45 from $1.17 a year earlier.
The company lowered its fiscal 2026 revenue outlook to $530 million to $550 million, below the $554.1 million estimate, citing weaker direct-to-consumer trends and a more uncertain consumer environment.
However, Build-A-Bear raised its pre-tax income forecast to $72 million to $78 million, helped by an approximately $13 million tariff refund.
Pre-tax income rose to $23.9 million from $19.6 million, with margin expanding to 19% from 15.3%. Adjusted pre-tax income was $16.9 million, excluding a $7 million tariff refund, while adjusted EBITDA was $20.8 million.
Store Traffic and E-Commerce Pressure Sales
Net retail sales declined 5.1% to $113.5 million, and consolidated e-commerce demand fell 26.1%.
Commercial and international franchise revenue rose 34.1% to $11.8 million, supported by commercial revenue growth to $10.9 million from $7.6 million.
Gross margin improved to 63.8%, helped by the tariff refund and price increases, while SG&A rose to 44.8% of revenue on higher costs and investments.
Management said domestic store traffic declined 7% in the quarter and trailed broader U.S. retail traffic trends. The company said fewer visits from teens and adults hurt results, although customers who did visit stores spent more, helped by higher units per transaction and pricing actions.
Cash, Inventory and Buybacks
Build-A-Bear ended the quarter with 669 global experience locations, up from 662 at the end of the previous quarter.
Cash and cash equivalents totaled $26.2 million, down from $44.3 million a year earlier, while inventory rose 7.7% to $77.8 million.
The company returned $14.2 million to shareholders through $11.4 million of buybacks and $2.9 million of dividends. It repurchased another $3.3 million of stock after quarter-end and had $47 million remaining under its $100 million authorization.
Back-Half Recovery In Focus
Management expects second-quarter results to be weaker than the first quarter, citing continued pressure from traffic, e-commerce, and macroeconomic uncertainty.
Chief Operating Officer and CEO-elect Chris Hurt described fiscal 2026 as a "tale of two halves," with tougher first-half comparisons and expected support from easier comparisons, seasonal opportunities, and growth initiatives later in the year.
Build-A-Bear continues to expect at least 50 net new experience locations, commercial revenue growth of at least 20%, capital expenditures of $22 million to $25 million, and depreciation and amortization of about $16 million.
Product trends were mixed, with some licensed launches underperforming, while Mini Beans, Promise Pets and Frosted Animal Cookies showed strong demand.
Wholesale, international, and tourist locations remain key growth priorities, including Walmart, Germany and the planned Orlando Icon Park store.
BBW Price Action: Build-A-Bear shares were tradingt 0.33% higher at $37.95 at the time of the publication on Thursday.
Photo by Manoj Jethani via Shutterstock
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