Build-A-Bear Workshop (BBW 4.92%) stock has delivered a total return of nearly 15% this year, factoring in quarterly dividends. It's been a bit of a roller coaster, with shares touching an all-time high of $75.85 in mid-September before pulling back sharply in October and November. As of Dec. 10, shares were trading just under $53.
Build-A-Bear has been a great investment over the past five years, rewarding patient shareholders with a 1,300% total return. A smart business strategy focusing on expansion and diversification has powered the retailer to four consecutive years of record revenue and profits. While that trend continued through the first nine months of Build-A-Bear's fiscal 2025, there's something investors will want to keep an eye on as the calendar flips to 2026.
Image source: Getty Images.
Tariffs took a bite out of third-quarter profits
On Dec. 4, Build-A-Bear's third-quarter results sent shares tumbling nearly 16%. It was a mixed quarter, with diluted earnings per share (EPS) of $0.62 topping the average analyst estimate of $0.59. Revenue grew nearly 3% to $122.7 million, although analysts were expecting $124 million. But the thing that really seemed to rattle investors was the impact of tariffs, which the retailer mentioned early and often in its Q3 earnings release.
Pre-tax income -- Build-A-Bear's go-to metric for measuring profitability -- fell 18% to $10.7 million. The company attributed the year-over-year decline to a $4 million hit from tariffs and related costs. The drop in pre-tax income had a ripple effect: Both diluted EPS and earnings before interest, taxes, depreciation, and amortization (EBITDA) were down around 15% compared to the year-ago period.
Interestingly, Build-A-Bear's Q3 "marked the first meaningful expenses from tariffs and related costs," as the retailer was able to mitigate their impact during the first half of the year, according to CFO Voin Todorovic. But Todorovic said Build-A-Bear expects "this elevated level of impact to continue through the fourth quarter and into the next fiscal year."
NYSE: BBW
Key Data Points
Build-A-Bear's business strategy is still working
For fiscal year 2025, Build-A-Bear expects to take an $11 million hit from tariffs. The good news for investors is that's already baked into the company's guidance. In fact, Build-A-Bear reaffirmed its full-year outlook, which puts the company on track for its fifth consecutive year of record revenue and profitability if pre-tax income hits the top end of the guidance.
During the Q3 earnings call, analysts asked how the company will manage the impact of tariffs in fiscal 2026. Todorovic said Build-A-Bear will focus on the things it can control -- such as working with suppliers in Asia to reduce costs, increasing prices where it makes sense, and managing promotions and discounts "much more stringently."
Management also emphasized that Build-A-Bear will continue executing its business strategy, which focuses on diversifying its business model and revenue streams. One example is its Mini Beans collection. With sales approaching 3 million units, CEO Sharon Price John sees the proprietary line of stuffed toys as an opportunity to extend the Build-A-Bear brand's reach "through thousands of additional points of sale beyond the workshop."
Build-A-Bear has a strong plan in place to continue growing. If tariff concerns dent the stock price in 2026, investors might consider buying the dip.
