BUILD-A-BEAR WORKSHOP INC (BBW)·Q1 2026 Earnings Summary

Executive Summary

• Record quarter: revenue $128.4M (+11.9% YoY), gross margin 56.8% (+260 bps), pre-tax income $19.6M (+30.6% YoY), diluted EPS $1.17 (+42.7% YoY) .
• Clear beat vs S&P Global consensus: Revenue $128.4M vs $118.9M*, EPS $1.17 vs $0.87*, EBITDA $23.1M vs $18.5M*; strength driven by retail traffic (+3% domestic vs national -3%), higher conversion, higher AUR, and lower discounting .
• Guidance: Revenue outlook maintained (mid-single-digit % growth); pre-tax income updated to $61–$67M; tax rate lowered to 22–24% (from ~24% prior); capex $20–$25M, D&A ≈$16M, net new units ≥50 unchanged .
• Business model catalysts: International expansion (604 locations; +15 net in Q1), commercial/partner channels up, and inventory-system transformation to improve responsiveness; tariff headwind now expected to be < $10M net in FY25 with mitigation .

What Went Well and What Went Wrong

• What Went Well

  • Retail execution: all four in-store levers positive (traffic +3% vs U.S. national -3%, conversion, AUR, UPT) supporting margin expansion and EPS beat .
  • Mix and promotion discipline: gross margin +260 bps YoY, driven by improved merchandise margin (lower discounts) and occupancy leverage; EBITDA margin 18.0% .
  • Strategic expansion: +15 net locations in Q1 (604 total), broadened into 30 countries with strong partner/franchise momentum; Mini Beans collectible line +30% YoY Q1 and ~2M units to date .

• What Went Wrong

  • Inflationary pressures: SG&A up 20 bps as % of revenue, driven by higher store wages and healthcare costs .
  • Tariff overhang: Company still anticipates sub-$10M net P&L impact in FY25 despite mitigation; expects greater impact from 2H (starting Q3) .
  • E-commerce growth modest: consolidated e-commerce demand +0.5% YoY in Q1, a sequential improvement but still muted after prior declines in late FY24 .

Financial Results

Trend across the last three reported quarters (oldest → newest)

Q1 2026 actuals vs prior year and vs estimates

Segment breakdown (Q1 2026 vs Q1 2025)

KPIs (Q1 2026)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We have reported the best first quarter results in Build-A-Bear’s history… EPS increased 42.7% to $1.17… We are reiterating our 2025 revenue guidance [and] updating the company’s pre-tax guidance inclusive of the current tariff rates.” — Sharon Price John, CEO .
• “All four levers were positive—traffic, conversion, average unit retail and units per transaction… domestic store traffic was up 3%, significantly outpacing U.S. national traffic, which declined by 3%.” — Voin Todorovic, CFO .
• “We now expect the tariffs and associated cost impact on our fiscal 2025 P&L, net of mitigation, to be less than $10 million… anticipating a relatively modest impact in Q2, with a greater effect starting in the third quarter.” — Voin Todorovic, CFO .
• “We are entering the final phase of decommissioning our legacy inventory management systems… new tools will enable better real-time inventory visibility and improved data-driven decision making.” — Sharon Price John, CEO .

Q&A Highlights

• Licensing/culture tie-ins: Management remains prepared to capitalize on film and cultural moments (e.g., Disney’s Stitch) but treats them as incremental, not core dependency .
• Digital agility: The inventory-system upgrade should improve responsiveness to social-driven demand spikes (e.g., TikTok trends) and reduce manual friction moving inventory across channels .
• Retail KPIs: Positive traffic vs negative national backdrop plus higher conversion, UPT, and AUR supported margin expansion with lower discounting .
• Partner/Franchise expansion: Strong activity across Europe, Middle East, Australia, and travel channels (e.g., airports, cruise lines); careful vetting to ensure consistent brand experience .
• Tariffs clarification: < $10M net P&L impact reflects mitigation, sourcing diversification to Vietnam, and ability to redirect China-sourced products to international markets .

Estimates Context

• Q1 2026 beats: Revenue $128.4M vs $118.9M*, EPS $1.17 vs $0.87*, EBITDA $23.1M vs $18.5M*; coverage: EPS est. count 2, revenue est. count 3* .
• With pre-tax guidance now quantified at $61–$67M including tariffs, and strong retail/store metrics, Street models may need to reflect higher margins vs prior tariff assumptions .
• Consensus snapshots (forward): For reference, Q2 2026 consensus pre-release was revenue $116.2M*, EPS $0.74*; company ultimately delivered revenue $124.2M and EPS $0.94 in Q2, consistent with positive estimate revisions risk into 2H .

Note: Asterisk (*) denotes values retrieved from S&P Global.

Key Takeaways for Investors

• Durable outperformance: Broad-based beat on revenue, EPS, and EBITDA with structural drivers (destination traffic, mix, pricing discipline) underpinning margins .
• Tariff headwind manageable: Net P&L impact now < $10M with mitigation levers (sourcing, redirection, pricing/promo); greater effect expected from Q3 but embedded in guidance .
• Expansion flywheel: Rapid international/partner growth (604 locations; +15 net in Q1) and commercial channel momentum diversify revenue and support multi-year unit growth .
• Digital enablement: Inventory-system modernization should enhance inventory visibility and speed-to-demand, supporting sustained margin gains and conversion .
• Capital returns intact: Dividend maintained ($0.22 declared post-Q1) and repurchases continue with $85M authorization remaining, supported by clean balance sheet .
• Setup: Momentum continued into Q2 per management; watch for 2H tariff cadence vs mitigation and ongoing margin resilience as units and commercial scale .
• Trading implications: Positive estimate revision potential and guidance clarity are near-term supports; monitor traffic/UPT/AUR mix and international rollout pace as catalysts .

Footnote: Values marked with an asterisk (*) are retrieved from S&P Global.