Build-A-Bear misses revenue estimates and cuts guidance, shares plunge 26%

Build-A-Bear Workshop, Inc. reported its fiscal 2026 second-quarter results on Thursday, with revenue down 7.2% year-over-year to $115.291 million, missing the market expectation of $121.067 million.

Adjusted diluted earnings per share were 70 cents, in line with the 70-cent estimate. GAAP diluted EPS was also 70 cents, down from 94 cents in the same period last year.

Shares fell after the results as investors digested the revenue miss, lowered full-year guidance, and softer traffic trends.

• Build-A-Bear shares are testing key support. Why is BBW hitting new lows?

Margins and core sales weaken

Net income fell to $8.76 million from $12.37 million in the prior-year period, while pre-tax profit declined to $11.6 million from $15.3 million. Pre-tax margin narrowed to 10.1% from 12.3%, and EBITDA dropped to $15.2 million from $18.8 million.

Net retail sales decreased 7.1% to $106.5 million, with e-commerce demand down 15.6%. Commercial and international franchise revenue combined fell 9% to $8.8 million.

Consolidated gross margin contracted 340 basis points to 54.2%, reflecting weaker rent leverage and higher promotional activity.

Tariffs and related costs were approximately $1 million in both periods.

Cash, buybacks, and store growth

Build-A-Bear added a net five new experience stores in the quarter, bringing the total to 674.

Cash and equivalents fell to $14 million from $39.1 million in the prior-year period, while capital expenditures rose to $8.6 million from $3.4 million.

The company spent $5.6 million to repurchase 155,118 shares and paid $2.9 million in dividends. It had $43.2 million remaining under its $100 million share repurchase authorization.

Guidance cut reflects tariff and wholesale pressure

Build-A-Bear lowered its fiscal 2026 revenue outlook to $500 million–$525 million, down from $530 million–$550 million, and below the market consensus of $539.349 million.

The company expects pre-tax profit of $60 million–$68 million.

The outlook includes $13 million in IEEPA tariff refunds and $10 million–$11 million in tariff and related costs.

Excluding approximately $7 million related to prior-year costs, Build-A-Bear expects adjusted pre-tax profit of $53 million–$61 million.

Conference call: product and traffic context

Management said softer traffic and summer products that strayed too far from Build-A-Bear's core customization experience weighed on results.

Early in the third quarter, traffic and sales improved following the Halloween product launch, though still slightly below prior expectations.

Management also noted that a multi-million-dollar Walmart program from last year will not repeat, and other wholesale opportunities are developing more slowly than expected.

Build-A-Bear currently expects commercial revenue to be roughly flat with fiscal 2025.

The company still expects to add at least 50 net new experience stores, with capital expenditures of approximately $25 million, depreciation and amortization of $17 million, and a tax rate of about 24%.

BBW shares: down 25.83% to $29 as of Thursday's close.