Build-A-Bear Workshop, Inc. Q3 FY2025 earnings call

• Year-to-date, Build-A-Bear achieved record revenue and pretax income, reaffirming full-year guidance despite tariff headwinds. • Fiscal 2025 is on track to be the first with over half a billion dollars in revenue. • Expanded experiential retail footprint with 24 net new experience locations, 70% outside the US, bringing total locations to 651 in 33 countries. • Advanced digital transformation by appointing Carmen Flores as SVP of Ecommerce and Digital Experiences to drive personalized, tech-powered engagement. • Leveraged brand equity with PreStuffed plush and mini beans, with mini beans seeing over 60% growth in the third quarter and 3 million units sold. • Strong holiday performance, including best Black Friday in company history, with holiday merchandising and marketing driving stronger conversion and higher dollars per transaction.

For the third quarter, total revenues were $122.7 million, a 2.7% increase. Net retail sales were $112.3 million, up 2.5%. Ecommerce demand declined 10.8% primarily due to challenging comparisons, while commercial revenue (wholesale sales to partner operators) grew 4.2% for the quarter and 15.3% year-to-date. Year-to-date, revenue grew over 8% to over $375 million and pretax income increased by 15% to almost $46 million. Retail sales contribute a significant portion, with commercial revenue also playing a growing role.

• Reaffirmed full-year guidance, with fiscal 2025 revenue expected to exceed half a billion dollars. • Commercial segment expected to grow over 20% for the full year, implying at least 30% growth in the fourth quarter. • Midpoint of pretax income guidance for the fourth quarter implies about $20 million in pretax income. • Remaining tariff impact for the last quarter of the year is less than $6 million. • Continues to return capital to shareholders, with $26.1 million returned year-to-date and $70 million remaining under repurchase authorization.

• Tariff headwinds, which reduced gross profit by about $4 million in the third quarter and are expected to have a remaining impact of less than $6 million in the fourth quarter. • Macro environment challenges affecting traffic, sales, and consumer spending. • External factors like government shutdowns impacting short-term sales and traffic.

Q: Button up on the tariff piece and future mitigation?

A: Voin Todorovic noted they're working with Asia partners to reduce costs, selectively increasing prices, managing promotions, and benefiting from Chinese rate reductions from 30% to 20% next year. Sharon Price John added strategic initiatives like growing store count outside US help diversify and mitigate tariff impact.

Q: Talk about promotional activity and mini beans sales?

A: Voin Todorovic said promotional activity is managed more stringently with lower discount rates. Sharon Price John highlighted mini beans approaching 3 million sales, 60% growth in Q3, sold in various retailers and partner locations, and successful partnerships like with Sanrio.

Q: Licensed products and mall locations leverage?

A: Sharon Price John said licensed products like Wicked have broad appeal but are varied in consumer reaction. Regarding mall locations, having multiple Build-A-Bear locations in malls leverages destination-driven marketing and foot traffic, benefiting lease terms and partnership discussions.

Q: Government shutdown impact and mini beans opportunity?

A: Voin Todorovic mentioned slowdown in October due to government shutdown and previous license impact, but rebounded in November. Sharon Price John noted mini beans carry brand equity, selling in various channels and having potential in wholesale spaces with branded appeal.