Building a bear in the retail sector is pretty easy these days. Retail suffered sharp losses on the stock market last month as investors braced for the worst. Even before Hurricane Katrina, higher gas prices threatened to swallow the lingering slivers of consumers' disposable income. That cast a dark cloud over storefronts everywhere, and that's why it's only fitting that a chain by the name of Build-A-Bear Workshop (NYSE:BBW) should try to buck the trend publicly.
"Our business is different from conventional retailers," company CEB -- yes, Chief Executive Bear -- Maxine Clark was quoted as saying in a press release this morning. "Past results show us that in times of stress and difficulty, our guests reach out to us for a fun and entertaining family break."
Hoping to distance itself from the perception that most retailers beyond Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) are doomed, Build-A-Bear points to the endearing brand experience achieved as a child comes into a Build-A-Bear store and picks out a bear that gets stuffed to life on the spot and then decked out with garb and accessories.
"And everyday is someone's birthday," Clark continued to plead. With her company's stock near a 52-week low -- actually an all-time low since the company went public last November -- singling out birthdays as an evergreen driver seems like a reach. It certainly didn't help Chuck E. Cheese parent CEC Entertainment (NYSE:CEC) when it disappointed the market back in July.
In Build-A-Bear's case, its birthday party business is crucial, but one can't deny that young girls are as fickle as they come. The moment that a trend-setting second-grader dismisses Build-A-Bear as passe and sets up camp for her next party elsewhere, classmates will follow.
That's why, in a sense, it's not a bad thing that Build-A-Bear is reaffirming its expectations for flat same-store sales growth this year. And that is noteworthy, since it's stacked over last year's huge 18% gain in comps. Build-A-Bear isn't growing in popularity at the store level, but at least it's not fading away.
The stuffed-bear vendor also announced that it's sticking to its full-year guidance issued three months ago, which means earnings will come in between $1.24 and $1.30 per share. That represents bottom-line growth of between 15% and 21% on a per-share basis (because of last year's IPO). It also means that the summer has gone as planned but doesn't take the company off the hook for its original 2005 guidance issued back in March -- that called for a 3% rise in comps, with earnings clocking in as high as $1.35 a share.
Expanding its reach will have Build-A-Bear running 200 stores by the end of the year, but it's also banking on new ways to grow its business. Next week, a restaurant will open inside its flagship store in New York City. The company has also been building out a line of sleek customized dolls to make sure that it doesn't carry all of its eggs in a stuffed teddy bear basket.
But will that be enough to make Build-A-Bear a growth stock winner? Our Motley Fool Rule Breakers newsletter service has leaned on fast-growing online retailers like Overstock.com (NASDAQ:OSTK) and Blue Nile (NASDAQ:NILE) for active stock recommendations over brick-and-mortar chains in the past. That doesn't exclude a promising and industry-disruptive physical retailer from making the cut in the future.
If Build-A-Bear comps start to inch higher and its new concepts take hold, maybe the retailer will find itself worthy. But for now, it's trading at just 15 to 16 times this year's profit targets. In the end, Build-A-Bear is priced for a bear. So does it have the gumption to Build-A-Bull?
CEC Entertainment was recommended earlier this year in our Motley Fool Hidden Gems newsletter.
Longtime Fool contributor Rick Munarriz is curious about the finger-food eatery concept. He wonders whether the kids will come out as stuffed as their bears. He does not own shares in any of the companies mentioned in this story. T he Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early
