There's a new accessory for your Build-A-Bear Workshop
However, the accessory is all too real. The toy retailer is hiring Lehman to explore "a broad range of potential strategic alternatives to enhance long-term shareholder value," but you know how it goes. That "broad range" of possibilities eventually gets narrowed down to a fire sale mandate.
Next on Discovery: bears in hibernation
What happened here? Well, Build-A-Bear investors knew what they were getting into. Kids were lining up to overpay for the privilege of birthing their own bears a few years ago, but customized playthings can prove faddish with the fickle. Once the lines started thinning, there was little reason to believe that the chain could catch stuffed lightning in a bottle twice.
And oh, the crowds were thinning, all right. Build-A-Bear had already warned that comps for the current quarter would come in at a crushing 7% to 9% decline over a year ago. The company also lowered its profit targets, blaming higher advertising costs for part of the shortcoming. Think about that damaging combination. Even with ramped-up marketing campaigns, the registers still weren't ringing.
I think I'll name this bear Desperate.
More faddish action
The company did what it could. It went beyond its original bears, striking licensing deals with companies that were also looking to market to kids. Tacking on trendy stuffed creations like Disney
Build-A-Bear also tried to skew older, with bears tied to Harley-Davidson
No, Build-A-Bear Workshop isn't on life support. It's still profitable. It may not be as popular as it used to be, but kids' eyes still grow large once inside and in-store birthday parties continue (perhaps booked by parents who are slow to the seismic trend changes). It's a pity that the company couldn't go out on top, though. As it stands, it may have a hard time finding a suitor who feels that the trendy company may get even cheaper with every passing moribund quarter.
Disney to the rescue, again
Private equity loves bargains, but this is a situation that requires a more creative infusion than your typical specialty retail renaissance. Disney would be a good fit here, even if it did ultimately hand over its Disney Stores chain to Children's Place
Then again, Children's Place would be another good fit after breathing new life into Disney's retail business. Blending toys with apparel is a logical mix. It may be a stretch, but Macy's
Either way, even if the company isn't explicitly stating as such, start kissing Build-A-Bear Workshop goodbye as a standalone public company. Those investment-banker accessories have a funny way of never letting go until the stuffing is complete.
Disney and DreamWorks Animation are Stock Advisor recommendations. Try a stuffed portfolio with a free 30-day trial subscription.
Longtime Fool contributor Rick Munarriz would like a nickel for every time that a company goes in for "strategic alternatives" when it's really just putting itself on the block. He does own shares in Disney and DreamWorks Animation. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.