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There are very few companies that have been able to turn around from a penny stock at the bottom of the retail collapse in shopping malls and adjust their strategy to get buy-in from leadership and come out the other side as a profitable, sustainable, emotionally anchored company. Yet that’s the remarkable story of Build-A-Bear Workshop (BBW). If you were to select a random sample of retail stocks that were popular for their mall locations, most people would gloss over Build-A-Bear. Yet five years ago, it was trading around $3, and today it is trading around $56 per share, with a price/earnings (P/E) ratio of 13.55x and a market cap of $736 million. Meanwhile, AI-fueled growth stocks like Nvidia (NVDA), Meta Platforms (META), and Tesla (TSLA) grabbed all the headlines. But over the past five years, Build-A-Bear’s 1,419% return has crushed them all. Record Earnings (Again) Build-A-Bear delivered another earnings blowout in Q2 2025. EPS came in at $0.94 versus the $0.66 estimate – a massive 42.4% beat. Revenue hit $124.2 million, crushing the $116.52 million estimate with 11.1% year-over-year growth. Net retail sales grew 10.8%, e-commerce surged 15.1%, and commercial revenue jumped 15.2%. “We anticipate record results for the fifth consecutive year for fiscal 2025,” declared CEO Sharon Price John. CFO Voin Todorovic emphasized: “This was the most profitable second quarter and first half in the company’s history.” The stock has responded accordingly, rising to new highs in mid-September. Wall Street has taken notice: Three of four analysts in coverage rate BBW a “Strong Buy” with a mean price target of $80, suggesting meaningful upside from current levels. The Fundamentals Tell the Story So how did this happen? There are several factors here that make this a great success story. First, the numbers validate the transformation. Build-A-Bear posts a 37% return on equity compared to just 17% for the industry average. The company generates $0.37 in profit for every $1 of shareholder equity, which points to exceptional operational efficiency. Over the past five years, net income has grown 38% compared to just 7.8% for the industry. Perhaps most telling: Build-A-Bear retains 84% of its profits for reinvestment rather than paying it all out as dividends. This isn’t a company managing decline; it’s a company investing in growth. Leadership Locked In and Aligned on Strategy The turnaround came from leadership getting locked in and aligned on strategy, survival, and ruthless waste reduction. They closed stores that weren't profitable. They developed their e-commerce strategy. And most importantly, they developed an “emotional moat.” This emotional moat derives from people who anchor their Build-A-Bear experience to pivotal moments in their life - whether it was their first stuffed animal, a graduation present, a new present for their first child. As a result, the retailer doesn’t just sell stuffed animals, they sell time capsules and memories. “We are in the business of telling stories, not just selling items,” explains the CEO. “So we drive our dollars per transaction on more than just the unit cost.” COO Christopher Hurt captured it perfectly: “A teddy bear hug is understood in every language, and that is totally true.” The company has transformed into a capital-light, global operation. Today, 157 partner-operated units represent 25% of total locations, expanding the brand to 32 countries with 86% of new Q2 locations being international. Its Mini Beans collection yielded an 80% year-over-year revenue increase. Management raised 2025 guidance to at least 60 net new locations, up from 50. This strategic commitment, combined with financial discipline, has resulted in one of the greatest turnarounds (that’s still ongoing). The company sits on $39.1 million in cash with zero debt. Gross margins expanded to 57.6% while EBITDA margins hit nearly 17%, tripling since 2019. It has returned $13.1 million to shareholders in just the first half of the year, with $80 million remaining in buyback authorization. Despite facing nearly $16 million in annual headwinds from tariffs and increased labor costs, Todorovic indicated that the company is successfully navigating these challenges, leading to an increase in guidance. Should You Buy Build-A-Bear? The fact that this overlooked company is now profitable and consistently beating earnings has Wall Street asking: “Should you buy Build-A-Bear?” Here’s what matters: the leadership team that orchestrated the turnaround is still helming the ship, and they are all very bullish on their strategy and their company. “Simply put, we are building on the iconic status of the brand to introduce it to more people, in more places, with more types of products for more purposes,” John explained. While they may or may not have another 1,000%-plus jump ahead, BBW’s consistent performance, tactful partnerships, and collections, such as the Halloween collection that just sold out, are all strong indicators that this stock has resilience, adaptability, and is looking to the future. Analysts maintain that “Strong Buy” rating for good reason. In a market obsessed with which AI stock to chase next, Build-A-Bear demonstrates that sometimes the best returns come from companies that understand something more fundamental than algorithms: human emotion doesn’t have an expiration date. For more analysis on Build-A-Bear’s remarkable transformation, see our previous coverage.
