Build-A-Bear's Q2 2025: Contradictions Emerge on Mini Beans, Partner Stores, Tariff Strategy, and E-Commerce

The above is the analysis of the conflicting points in this earnings call

Date of Call: August 28, 2025

Financials Results

• Revenue: $124.2M, up 11.1% YOY
• EPS: $0.94 per diluted share, up 46.9% YOY
• Gross Margin: 57.6%, up 340 bps YOY

Guidance:

• FY25 revenue growth raised to mid- to high-single digits.
• FY25 pretax income guided to $62M–$70M, assuming current tariff rates persist.
• Net new unit growth increased to at least 60 locations (from 50); majority partner-operated, mainly international.
• Expect fifth consecutive year of record results, assuming stable economy and tariffs.
• Tariff headwind now expected to be < $11M net of mitigation in FY25 (about $1M hit in Q2).
• Additional ~$5M headwind from medical and labor costs; total FY25 headwinds near $16M.
• Second-half comparisons are tougher due to record Halloween last year.

Business Commentary:

* Record Financial Performance: - Build-A-Bear Workshop reported record revenues of over $124 million for Q2 2025, up 11%, and over $252 million for the first half of the year, growing more than 11%. - The growth was driven by a long-term focus on expanding the brand's global reach and leveraging its powerful brand equity to drive innovative initiatives.

• Global Expansion and Retail Footprint:
• The company opened 14 net new experience locations, with 86% being international, expanding to 32 countries.

• The expansion is attributed to a strategic focus on partner-operated and franchise models, allowing for rapid and cost-effective growth.

• Digital Transformation and E-commerce Growth:

• E-commerce demand increased by 15.1%, driven by strong consumer response to key product launches.

• The focus on social media initiatives and engaging consumer content has enhanced brand awareness and driven online sales.

• Tariff Challenges and Strategic Mitigation:

• Tariffs impacted the cost of goods sold, with an expected $11 million negative impact for fiscal 2025.
• The company mitigated tariff exposure by pulling forward inventory and managing costs, demonstrating strategic adaptability to external challenges.

Sentiment Analysis:

• Management reported “the best second quarter and first half results in Build-A-Bear’s history,” raised full-year revenue and pretax income guidance, and said they “anticipate record results for the fifth consecutive year,” despite known tariff and cost headwinds.

Q&A:

• Question from Eric Martin Beder (SCC Research): How are consumers responding to selective price increases amid tariffs?
  Response: Selective, strategic price moves with maintained entry price points show minimal pushback; traffic and transactions rose, and higher AUR offset lower UPT.

• Question from Eric Martin Beder (SCC Research): How should we think about maturation and impact of partner-operated stores?
  Response: Capital-light partner-operated model—often shop-in-shops—has strong runway; partners are adding locations and stores comp as they mature, especially internationally.

• Question from Gregory Thomas Gibas (Northland Securities): Update on Mini Beans sales YOY and wholesale distribution progress?
  Response: Mini Beans revenue rose ~80% YOY; priced ~$10; expanding via wholesale (e.g., Hudson, Applegreen, international partners) and launching first licensed Mini Beans (Sanrio).

• Question from Gregory Thomas Gibas (Northland Securities): What drove stronger e-commerce demand?
  Response: E-commerce grew 15.1% on favorable launch timing and lower discounts; ongoing talent and gifting initiatives aim to sustain growth within an omnichannel strategy.

• Question from Keegan Tierney Cox (D.A. Davidson): The implied 2H slowdown—does it mean weaker margins, and why?
  Response: Tougher 2H comps and higher tariff/labor headwinds (~$16M total, including Vietnam tariffs) temper growth; nonetheless, guidance raised with pretax of $62–$70M.

• Question from Keegan Tierney Cox (D.A. Davidson): Momentum with new partners and any customer differences vs. U.S. corporate stores?
  Response: Momentum is strong; the experience replicates globally with broad brand appeal aided by social media and UGC; customer response is consistently positive across markets.

• Question from Steven Silver (Argus Research): With a strong balance sheet, why not expand company-operated stores internationally?
  Response: Open to case-by-case investments, but prefer partners for local expertise and ROI; currently operate corporately in Canada and the U.K., with partners driving broader expansion.