Build-A-Bear Workshop NYSE: BBW reported lower first-quarter fiscal 2026 revenue as weaker store and online traffic offset growth in its commercial segment, while management reduced its full-year revenue outlook and pointed to a more cautious consumer environment.
The company also used the call to mark a leadership transition. Sharon John, who has served as chief executive officer for 13 years, said her last day as CEO will be June 11. Chris Hurt, currently chief operating officer and CEO-elect, will take the helm. John said Hurt has played a central role in global retail operations, location expansion and the company’s product and brand go-to-market strategy.
First-quarter sales decline as traffic softens
Build-A-Bear posted total revenue of $125.3 million, down 2.4% from the prior year. Hurt said the company had expected revenue to be approximately flat year over year based on trends through mid-March, but traffic and results weakened as the quarter progressed.
Hurt said management believes part of the softness reflects “a broader macro shift,” citing cautious consumer sentiment, geopolitical concerns and related price increases. He said the company still saw strength around key occasions, including its best Valentine’s Day in North American history and a solid Easter performance.
Chief Financial Officer Voin Todorovic said the direct-to-consumer segment declined as transactions fell, primarily because of reduced store traffic. Domestic traffic was down 7%, lagging U.S. national retail traffic trends, while e-commerce demand declined 26.1% as web traffic remained soft. Average unit retail and units per transaction increased, helping lift dollars per transaction when customers did engage with the brand.
The commercial segment, which primarily represents wholesale revenue, continued to grow. Todorovic said commercial revenue, combined with international franchise revenue, rose 34.1% in the quarter.
Tariff refund boosts profit and gross margin
Gross margin was 63.8%, up 700 basis points from a year earlier. Todorovic said the increase included a 560-basis-point benefit from a $7 million tariff refund related to prior-year costs, along with 140 basis points from higher average unit retail, partially offset by occupancy cost deleverage.
SG&A expenses were $56.1 million, or 44.8% of revenue, compared with 41.7% a year earlier. Todorovic attributed the increase to higher wage rates, talent investments, inflationary pressures and the timing of longer-range investments.
Pre-tax income was $23.9 million, compared with $19.6 million a year earlier. Excluding the $7 million tariff benefit related to fiscal 2025, adjusted pre-tax income was $16.9 million. Earnings per share were $1.45, and adjusted earnings per share were $1.03.
At quarter-end, Build-A-Bear had $26.2 million in cash, down $18.1 million from the prior year, which Todorovic said was mainly due to tariff payments and elevated capital expenditures tied to strategic investments. Inventory was $77.8 million, up $5.6 million, driven by tariffs embedded in product costs and inventory needed to support expected sales activity in the back half of the year.
Guidance lowered for revenue, raised for pre-tax income
Build-A-Bear lowered its fiscal 2026 revenue guidance to a range of $530 million to $550 million, representing roughly flat revenue to 4% growth year over year. The company had previously guided for mid-single-digit revenue growth.
Management said the updated outlook reflects first-quarter results, second-quarter-to-date trends and a more conservative view of macroeconomic and geopolitical conditions. Hurt said the company expects the second quarter to be weaker than the first, with easier comparisons and planned growth in the third and fourth quarters.
The company raised its pre-tax income outlook to $72 million to $78 million, reflecting $13 million of IEEPA tariff refunds previously paid, partially offset by the impact of lower expected revenue. Excluding roughly $7 million of tariff refunds tied to prior-year costs, Build-A-Bear expects adjusted pre-tax income of $65 million to $71 million.
Todorovic said the outlook assumes the current Section 122 tariffs and related costs of about $10 million, along with a 10% tariff rate for the remainder of the fiscal year. He added that second-quarter profitability is expected to decline year over year.
Management emphasizes expansion, wholesale and product strategy
Hurt said Build-A-Bear’s longer-term growth strategy continues to rest on four pillars: organic growth, location expansion, wholesale and outbound brand licensing, and gifting and personalization.
On organic growth, Hurt said some first-quarter launches resonated with older collectors, or “kidults,” including the Fresh Frosted Animal Cookies collection, which sold through most products in less than two weeks. He also highlighted the Promise Pets collection, which more than doubled sales year over year, and the Mini Beans line, which has sold nearly 4 million units since launch across all channels.
The company plans several product initiatives in the back half of the year, including a Halloween collection in August, the October kickoff of its year-long 30th anniversary celebration and a refreshed Harry Potter collection in December tied to the premiere of a new HBO series.
Build-A-Bear opened seven net new locations in the first quarter and continues to expect at least 50 net new experience locations this year, most operated by international partners. The company added the Philippines as a new market, bringing its international footprint to 37 countries, up from 19 two years ago. Hurt said Germany has become the company’s fastest-expanding market after re-entry late last year.
In the U.S., the company opened additional Build-A-Bear and Hello Kitty and Friends workshops at Mall of America and American Dream, with early results outpacing expectations. It also continues to plan a multi-level ICON Park location in Orlando later this year.
On wholesale, Hurt said Build-A-Bear launched into 1,500 Walmart locations with its Mini Beans collection and opened a Los Angeles showroom to support wholesale accounts. Todorovic said the company still expects commercial segment revenue to grow by at least 20% for the year.
Despite the lower revenue outlook, Todorovic said Build-A-Bear still expects fiscal 2026 to be one of the strongest years in the company’s history, with potential for record revenue, solid pre-tax income margins and continued capital returns. The company returned $14.3 million to shareholders in the first quarter through dividends and share repurchases.
About Build-A-Bear Workshop NYSE: BBW
Build-A-Bear Workshop, Inc operates a specialty retail business focused on interactive “workshop” experiences that allow customers to create customized stuffed animals. Through its in-store and online platforms, the company offers a wide range of plush toys, apparel, accessories and sound modules, enabling guests to personalize each creation. In addition to its core bear products, Build-A-Bear has expanded its portfolio to include licensed characters from leading entertainment and media franchises.
Founded in 1997 by Maxine Clark and headquartered in St.
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