Build-A-Bear Workshop, Inc. (BBW) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals mixed signals: positive aspects include increased guidance for revenue and pretax income, strong commercial revenue growth, and strategic pricing diversification. However, concerns arise from declining e-commerce demand, increased SG&A expenses, and inventory buildup. The Q&A highlights efforts to mitigate tariff impacts and expand product offerings, yet vague management responses on tariffs and licensed product sales tails introduce uncertainty. Overall, the sentiment is neutral due to balanced positive and negative factors, with no strong catalyst for significant stock price movement.

Key Financial Performance

Revenue (Q3 2025) Revenue grew nearly 3% to almost $123 million year-over-year. The increase was attributed to strategic and operational advancements, as well as leveraging the Build-A-Bear brand's multigenerational appeal.

Pre-tax Income (Q3 2025) Pre-tax income declined $2 million to nearly $11 million year-over-year, inclusive of about a $4 million negative tariff impact.

Revenue (First 9 months of 2025) Revenue grew more than 8% to over $375 million year-over-year. The growth was driven by strategic initiatives and operational advancements.

Pre-tax Income (First 9 months of 2025) Pre-tax income increased by 15% to almost $46 million year-over-year, inclusive of about $5 million in a negative tariff impact.

Earnings Per Share (EPS) (First 9 months of 2025) EPS grew more than 24% year-over-year, supported by strong revenue and pre-tax income growth.

Gross Margin (Q3 2025) Gross margin was 53.7%, a decline of 40 basis points year-over-year, primarily reflecting the impact of tariffs.

SG&A Expenses (Q3 2025) SG&A was $55.3 million or 45.1% of total revenues, compared to 43.3% last year. The increase was due to higher store-level compensation, medical benefits, higher minimum wage requirements, and general inflationary pressures.

E-commerce Demand (Q3 2025) E-commerce demand declined 10.8% year-over-year, primarily due to a strong license product launch in the prior year and timing of web launches shifting revenue between quarters.

Commercial Revenue (Q3 2025) Commercial revenue grew 4.2% year-over-year. The timing of shipments negatively impacted the quarter, but year-to-date commercial revenue increased 15.3%.

Inventory (Q3 2025) Inventory at quarter-end was $83.3 million, an increase of $12.5 million year-over-year. The increase was driven by accelerated purchases to mitigate tariff rate changes and support the growth of the commercial segment.

You have reached the limit Upgrade to access full content

Get started

Operating Highlights

Mini Beans collection: Approaching 3 million units sold with over 60% growth in the third quarter. Expanded distribution into independent retailers.

Seasonal products: Strong Halloween collection with double-digit increase in 2025 sales compared to 2024. New fan favorite Posable Bat generated over 3 million social views.

Holiday offerings: Introduced Gingerbread Axolotl, Timeless Teddy in Santa gear, and seasonal Mini Beans. Reinforced Build-A-Bear as a holiday tradition with Merry Mission animated feature film.

Global expansion: Added 24 net new experience locations, 70% outside the U.S., bringing total locations to 651 across 33 countries. Reentered Germany with new locations in Berlin, Frankfurt, and Stuttgart.

Co-branded stores: Expanding Build-A-Bear Hello Kitty and Friends workshop concept to American Dream and Mall of America in early 2026.

Asset-light model: Doubled the number of partner-operated locations since Q2 2023, now representing over 25% of total units.

Digital transformation: Appointed Carmen Flores as SVP of E-commerce and Digital Experiences to enhance consumer engagement and drive digital business.

Brand equity leverage: Leveraging multigenerational brand appeal to expand addressable market. Teens and adults now represent about 40% of sales.

Capital allocation: Returned over $26 million to shareholders through dividends and buybacks in the first 9 months of 2025.

You have reached the limit Upgrade to access full content

Get started

Risk or Challenges

Tariff Impact: The company faced a $4 million negative tariff impact in the third quarter and a $5 million impact year-to-date, with an expected total impact of less than $11 million for the year. This has reduced gross profit and pretax income.

Labor and Medical Costs: Higher store-level compensation, including medical benefits and higher minimum wage requirements, contributed to increased SG&A expenses, representing a headwind of approximately $5 million for the year.

E-commerce Performance: E-commerce demand declined 10.8% in the third quarter due to challenging comparisons from a strong license product launch last year and timing shifts in web launches.

Inventory Management: Inventory increased by $12.5 million due to accelerated purchases to mitigate tariff rate changes and support commercial segment growth, which could pose risks if demand does not meet expectations.

Macroeconomic Environment: The company is navigating a challenging macroeconomic environment, which has impacted consumer behavior, including a slowdown in October sales.

Regulatory and Inflationary Pressures: General inflationary pressures and regulatory changes, such as tariffs and labor costs, have increased operational expenses and reduced profitability.

You have reached the limit Upgrade to access full content

Get started

Guidance & Outlook

Revenue Expectations: Build-A-Bear is positioned to deliver fiscal 2025 revenue of over $0.5 billion for the first time in the company's history. The annual revenue guidance implies about 2% growth in the fourth quarter.

Margin Projections: Top-tier store contribution margins are expected for the fifth consecutive year. Gross margin for the year is impacted by tariffs, with a total tariff impact of less than $11 million expected for 2025.

Capital Expenditures: The company has allocated resources to support the growth of its commercial segment and mitigate tariff impacts. Inventory levels have been increased to support demand and growth strategy.

Market Trends and Business Segment Performance: The asset-light commercial segment is expected to achieve its fourth straight year of growth exceeding 20%. Commercial revenue is projected to grow by more than 20% for the full year, with at least 30% growth in the fourth quarter.

Strategic Plans and Future Implications: Expansion of experiential retail footprint with at least 60 net new locations in 2025, including international growth in countries like Germany, Colombia, and South Africa. Digital transformation efforts are being advanced with a focus on e-commerce and AI-driven personalized interactions. Expansion of the Mini Beans collection and co-branded experiential stores like Build-A-Bear Hello Kitty and Friends workshops are planned for early 2026.

You have reached the limit Upgrade to access full content

Get started

Shareholder Return Plan

Dividends returned to shareholders: More than $26 million returned to shareholders through dividends and buybacks in the first 9 months of fiscal 2025.

Total shareholder returns since 2021: Over $160 million returned to shareholders since the beginning of fiscal 2021.

Share buybacks: Part of the $26 million returned to shareholders in the first 9 months of fiscal 2025 was through share buybacks.

Remaining repurchase authorization: Approximately $70 million remains under the Board-approved repurchase authorization.

You have reached the limit Upgrade to access full content

Get started

Key Q&A

Q:What are the opportunities to reduce tariff impacts next year, and how can the company mitigate these costs?

A:The company had about $11 million in tariff expenses for 7 months this year. Next year, the first 5 months will have tougher comparisons due to tariffs. The company is working with Asian partners to reduce costs, selectively increasing prices, and managing promotions and discounts to mitigate tariff impacts. Additionally, Chinese tariff rates will decrease from 30% to 20% next year, providing some relief.

Q:How is the diversification in pricing, such as Mini Beans and higher-priced items like Giant Furry Friends, impacting the business?

A:The company is focusing on diversification, with 40% of sales coming from teens and adults. Mini Beans, priced at $10, are collectible and often purchased in multiples. Higher-priced items like Glisten ($100) and partnerships like Swarovski have expanded pricing latitude. This strategy appeals to a broader customer base and increases accessibility while maintaining brand value.

Q:What was the promotional activity in the quarter, and how does it compare year-over-year?

A:Promotional activity was managed more stringently, with lower discount rates compared to previous quarters. The company focuses on enhancing customer experiences and driving ticket value rather than relying on promotions, which has helped expand merchandise margins over the years.

Q:What are the trends and demand for Mini Beans, and how is the company progressing with new SKU introductions?

A:Mini Beans sales are approaching $3 million, with a 60% increase in the last quarter. The company is selling Mini Beans in external retailers and partner-operated locations, including international markets. New characters, seasonal products, and licensed partnerships like Sanrio have been successful, showcasing the potential beyond the traditional Build-A-Bear experience.

Q:How do licensed products tied to high-profile movie launches perform, and what is the sales tail for these products?

A:Licensed products tied to movies, like Wicked, contribute to sales but are not the sole driver of events like Black Friday. The sales tail varies widely depending on the movie's success. Sequels like Wicked allow for better preparation and longer sales tails, while new films carry more unpredictability.

Q:What is the rationale behind expanding to a second Build-A-Bear location in large malls, and does it provide leverage in lease terms?

A:Expanding to a second location in large malls like American Dream and Mall of America enhances Build-A-Bear's presence and foot traffic, which benefits mall partners. This expansion aligns with the company's role as a destination-driven retailer, contributing to in-person shopping trends and providing leverage in lease discussions.

Q:Did the government shutdown impact customer spending, and was there a shift towards lower-priced products like Mini Beans?

A:The government shutdown and other factors like the absence of last year's Bluey launch caused a slowdown in October traffic. However, the company saw growth in both lower-priced Mini Beans and higher-priced items, with strong dollar-per-transaction and conversion rates. The company remains on track for a record year.

Q:What is the company's perspective on competition in the plush market and the Mini Beans opportunity in other retailers?

A:The company is focused on its own growth, achieving record results for five consecutive years. Mini Beans, with their strong brand equity, are seen as a unique offering in the plush market. Expanding into wholesale channels and new retail environments presents significant opportunities for growth.

Q:Review of Unclear Management Responses

A:Management avoided providing specific guidance on 2026 tariff impacts, using general statements about ongoing efforts to mitigate costs and manage margins. Additionally, the response to the sales tail of licensed products tied to movies was vague, emphasizing unpredictability without detailed data or examples.

You have reached the limit Upgrade to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

BBW Transcript

Build-A-Bear Workshop, Inc. (BBW) Q3 2025 Earnings Call Transcript

Unknown12-5

Build-A-Bear Workshop, Inc. (BBW) Q3 2026 Earnings Call Transcript

Positive12-4

The earnings call shows strong revenue growth and increased guidance for revenue and pretax income. Despite a slight decline in gross margin due to tariffs, management has plans to mitigate these impacts, including cost reductions and price adjustments. The diversification in pricing strategy and expansion plans, alongside promising Mini Beans sales, indicate positive business momentum. While management was vague on some future impacts, the overall sentiment from the Q&A is positive, with analysts responding well to strategic initiatives. Given these factors, a positive stock price movement is expected.

Build-A-Bear Workshop, Inc. (BBW) Q2 2025 Earnings Conference Call Transcript

Positive8-28

The earnings call highlights strong financial performance with record revenue guidance and improved margins, alongside successful product launches and international expansion. The Q&A reveals strategic pricing and expansion plans, with strong e-commerce growth and positive partner-operated store momentum. Despite some challenges in the second half, the overall sentiment is positive, driven by optimistic guidance and strategic initiatives.

Build-A-Bear Workshop, Inc. (NYSE:BBW) Q1 2025 Earnings Call Transcript

Positive5-30

The earnings call reveals strong financial performance with significant revenue and EPS growth, improved margins, and a robust shareholder return plan. Although there are concerns about tariffs and inflationary pressures, the company's strategic initiatives, such as global expansion and digital transformation, are promising. The Q&A section highlights positive analyst sentiment, with successful partnerships and inventory management improvements. Despite some uncertainties, the optimistic guidance and strategic growth plans suggest a positive stock price movement over the next two weeks.

BBW Report

BUILD-A-BEAR WORKSHOP INC 10-Q

10-Q

2024-12-12

BUILD-A-BEAR WORKSHOP INC 10-Q

10-Q

2024-09-12

BUILD-A-BEAR WORKSHOP INC 10-Q

10-Q

2024-06-13

BUILD-A-BEAR WORKSHOP INC 10-K

10-K

2024-04-18

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.