Build-A-Bear Faces Challenges But Plans Aggressive Expansion
Build-A-Bear Workshop, the popular toy retailer, is facing potential challenges ahead despite recent successes. While the company has seen significant growth and expansion, it must navigate issues such as slowing foot traffic at shopping malls and the possibility of collectibles losing popularity.
Despite these potential hurdles, Build-A-Bear has been proactive in its strategies. The company has managed to control price hikes so far but plans to implement them selectively rather than universally. This approach aims to balance the impact of inflation, which has been above the Federal Reserve's 2% target for several years, on non-essential items like Build-A-Bear's products.
In the past five years, Build-A-Bear has not outperformed tech giants such as Palantir, Nvidia, or Microsoft in terms of value growth. However, the toy company has found success in diversifying its customer base. Adults and teens now account for 40% of its business, a significant shift from its traditional focus on children. This expansion has been supported by licensing deals with nostalgic brands like Hello Kitty, Pokémon, and Harry Potter, which appeal to older demographics.
Build-A-Bear's financial performance has been robust. In the second quarter, the company's revenue grew by 11% to a record $124.2 million. Despite the impact of tariffs, which are expected to cost the company $11 million this year, Build-A-Bear has managed to front-load component imports and raise its full-year guidance. The company's stock has also soared, rising 76% in the last year and nearly 2,000% in the last five years, outpacing many tech companies.
Looking ahead, Build-A-Bear Workshop plans to open 60 stores this year, 10 more than initially planned, despite the fading of many mall brands. This expansion strategy suggests the company's confidence in its business model and its ability to adapt to changing market conditions. While challenges lie ahead, Build-A-Bear's proactive approach and diversification strategies position it well to navigate the future.
