Why Build-A-Bear Workshop is a High-Conviction Buy: Navigating Tariffs, Scaling Internationally, and Delivering Surprising Earnings Growth

Build-A-Bear Workshop’s Q2 2025 results have shattered expectations, delivering record revenue of $124.2 million—a 11.1% year-over-year increase—and pre-tax income of $15.3 million, up 32.7% [1]. These figures, coupled with a 46.9% surge in diluted EPS to $0.94 and a 25.3% rise in EBITDA to $18.8 million [1], underscore a company that is not only weathering macroeconomic headwinds but accelerating through them. The key to this outperformance lies in its strategic capital-light expansion model, which leverages international partner-operated stores and a digital-first approach to monetize its iconic brand.

Capital-Light Expansion: Scaling Profitably Without Heavy Investment

Build-A-Bear’s partner-operated model is a masterclass in scalable growth. In Q2 2025, the company opened 14 new global experience locations, 86% of which were international and partner-operated [1]. This approach allows the brand to expand into 32 countries with minimal capital outlay while retaining brand control. CEO Sharon John emphasized this strategy during the earnings call, stating, “Our partner-operated model enables us to introduce the brand to more people in more places without the heavy lifting of direct ownership” [4].

The results speak for themselves: total locations now number 627 globally [1], with a target of adding at least 60 new partner-operated stores in 2025 [2]. This model not only reduces risk but also accelerates market penetration. For instance, new entries into Georgia and Uzbekistan [4] demonstrate the company’s ability to tap into untapped markets with low upfront costs.

Digital Transformation: Fueling E-Commerce and Brand Loyalty

Digital initiatives are amplifying Build-A-Bear’s reach and profitability. E-commerce demand surged 15.1% in Q2 2025 [1], driven by optimized campaigns and product launches like the Mini Beans collection, which saw an 80% revenue jump year-over-year [3]. The company’s omnichannel strategy—combining in-store experiences with a revamped buildabear.com—has created a seamless customer journey, boosting both online and physical retail sales.

Social media and influencer partnerships further extend the brand’s footprint. As CFO David L. Nagel noted, “Our digital investments are not just about sales—they’re about building a community around the brand” [2]. This community-driven approach fosters long-term loyalty, a critical asset in an era where consumer habits are rapidly shifting online.

Navigating Risks: Tariffs and Inflation Mitigation

Despite challenges like potential tariff impacts (estimated at under $11 million for 2025 [2]), Build-A-Bear has proactively adjusted its pricing and supply chain strategies. Strategic price changes and supplier diversification have offset inflationary pressures, preserving margins while maintaining affordability for customers. CEO John highlighted this agility: “We’re not just reacting to external pressures—we’re redefining how we operate to stay ahead of them” [4].

The company’s guidance upgrades—projecting mid-to-high-single-digit revenue growth and pre-tax income of $62–70 million for 2025 [1]—reflect confidence in its ability to outpace risks. With a strong balance sheet and a focus on profitability over rapid expansion, Build-A-Bear is positioned to deliver consistent returns.

Conclusion: A High-Conviction Buy for the Long Term

Build-A-Bear Workshop’s combination of capital-light international expansion, digital innovation, and proactive risk management creates a compelling investment thesis. The company’s ability to scale profitably while maintaining brand equity—evidenced by its record Q2 results and upgraded guidance—positions it as a standout in a crowded retail landscape. For investors seeking exposure to a brand that turns creativity into consistent cash flow, Build-A-Bear is a high-conviction buy.

Source:
[1] Build-A-Bear Workshop Reports Record Second Quarter and First Half Fiscal 2025 Results [https://buildabear.gcs-web.com/news-releases/news-release-details/build-bear-workshop-reports-record-second-quarter-and-first-0]
[2] Build-A-Bear's Q2 2025: Contradictions Emerge on Tariff Driven Pricing, International Expansion, E-commerce Strategy, Inventory Management [https://www.ainvest.com/news/build-bear-q2-2025-contradictions-emerge-tariff-driven-pricing-international-expansion-commerce-strategy-inventory-management-2508/]
[3] Build-A-Bear's Q2 2025: Contradictions Emerge on Mini Beans, Partner Stores, Tariff Strategy, E-commerce [https://www.ainvest.com/news/build-bear-q2-2025-contradictions-emerge-mini-beans-partner-stores-tariff-strategy-commerce-2508/]
[4] Build-A-Bear Workshop, Inc. (BBW) Q2 FY2026 Earnings Call Transcript [https://finance.yahoo.com/quote/BBW/earnings/BBW-Q2-2026-earnings_call-351596.html/]