Build-A-Bear Workshop Q2 Earnings Call Highlights

Build-A-Bear Workshop (NYSE:BBW) reported lower second-quarter revenue and profit as weaker store traffic and an underperforming summer trend assortment weighed on results, prompting the retailer to reduce its full-year revenue and pre-tax income outlook. Chief Executive Officer Chris Hurt said the company had expected fiscal 2026 to have a more difficult first half followed by improving comparisons and performance in the second half. While management still expects the back half to be stronger than the first half, Hurt said second-quarter results came in below projections because summer products did not resonate as expected and macroeconomic conditions continued to pressure traffic. “We have moderated our direct-to-consumer expectations for the balance of the year,” Hurt said. The company also reduced its outlook for its commercial segment, which includes wholesale and partner-related operations.

Second-Quarter Results Decline From Prior-Year Levels Second-quarter revenue totaled $115.3 million, down 7.2% from the prior year, primarily reflecting lower direct-to-consumer sales. Pre-tax income fell 24.1% to $11.6 million from $15.3 million a year earlier. For the first half of fiscal 2026, Build-A-Bear reported revenue of $240.6 million and pre-tax income of $35.5 million. Adjusted pre-tax income was $28.5 million excluding a $7 million refund tied to IEEPA tariffs related to 2025 costs. Chief Financial Officer and Chief Administrative Officer Voin Todorovic said direct-to-consumer transactions declined mainly because of lower store traffic. Average unit retail also declined, though that was partly offset by an increase in units per transaction. Domestic store traffic lagged broader U.S. traffic trends, he said. E-commerce demand declined 15.6% year over year as web traffic remained soft, although demand improved sequentially from the first quarter. Total direct-to-consumer revenue remained 3% above its 2024 level, according to the company. Gross margin declined 340 basis points to 54.2%, reflecting occupancy-cost deleverage and increased promotional activity. SG&A expense was $51.4 million, or 44.6% of revenue, compared with 45.4% a year earlier, aided primarily by lower incentive compensation expense.

Summer Assortment Missed Expectations Hurt said the company faced difficult comparisons following a strong summer 2025, when direct-to-consumer revenue rose 11% and web demand increased 15%. That prior-year performance was aided by Build-A-Bear’s Fruit Stand collection, Sanrio Sweet Shop offerings and movie-related products including a How to Train Your Dragon launch. This year, Build-A-Bear increased product experimentation with concepts such as Slushie Plushie, Beary Goods and Mashimals. Hurt said those products were less customizable and did not generate the consumer response the company expected. “The reality is, we pushed it too far,” Hurt said during the question-and-answer session. He said the products were not as dressable and did not support the full customization experience that customers seek from the brand. Management said the quarter reinforced the importance of Build-A-Bear’s core customization offerings. The dressable Chummy Shark sold out during the quarter, while the company’s Promise Pets intellectual property continued to generate above-average dollar-per-transaction results due to clothing and accessory attachment rates. The company used promotions to move through underperforming summer trend inventory, Todorovic said, contributing to the lower gross margin and average unit retail. He added that discount levels nevertheless remained low and dollar per transaction increased.

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