Executive Summary

Q3 FY2025 earnings materials (8‑K 2.02 and call transcript) are not yet published as of Nov 20, 2025; the company announced only a quarterly dividend on Nov 12. Upcoming Q3 results are expected in early December, per third‑party calendars, and represent the next stock catalyst .
Through Q2 FY2025, BBW delivered double‑digit revenue growth (+11.5% 1H), record profitability, and raised full‑year guidance (revenue to mid‑ to high‑single‑digit growth; pre‑tax income to $62–$70M; net new units to ≥60), citing strong retail margins, disciplined promos, and Commercial segment growth .
Management flagged tariff headwinds (U.S. 30% China; Vietnam up to 20%), but guided to <~$11M net FY25 impact after mitigation and reiterated comfort with inventory; e‑commerce strengthened in Q2 (+15.1% demand) with favorable product launch timing .
Dividend continuity highlighted capital returns alongside growth (quarterly $0.22 per share declared Nov 12) .

What Went Well and What Went Wrong

What Went Well
- Record Q2 and 1H: Revenue, pre‑tax income, EPS and EBITDA all set records; retail gross margin expanded ~340 bps and EBITDA reached 15.1% of Q2 revenue .
- Strategic execution: CEO emphasized three pillars—partner‑operated global expansion, digital transformation/social media, and brand leverage (e.g., Mini Beans), with double‑digit Commercial growth and positive traffic; “we remain committed to advancing our long‑term strategic initiatives” .
- Unit growth and network reach: Net +14 locations in Q2; 627 global locations at quarter‑end; partner‑operated sites now 157; Mini Beans up ~80% YoY; wholesale placements expanding (Hudson, Applegreen, international partners) .
What Went Wrong
- Cost headwinds: SG&A deleveraged ~140 bps in Q2 on higher store wages and corporate costs; pretax margin faced tariff, medical, and labor headwinds totaling nearly ~$16M for FY25 .
- Tariffs impact inventory and COGS: Inventory up ~22% YoY at Q2‑end, driven partly by tariff costs and accelerated core purchases; Q2 retail COGS reflects early tariff impacts (mitigated in Q2 by prior pull‑forward) .
- H2 compares tighten: Management cautioned tougher 2H comps (record Halloween last year) and macro uncertainty, implying slower growth cadence despite raised full‑year guidance .

Financial Results

Note: Q3 FY2025 results are not yet reported; below shows trajectory through Q2 FY2025 and YoY growth as disclosed.

Metric	Q1 2025	Q2 2025
Total Revenues ($M)	$128.4 (+11.9% YoY)	$124.2 (+11.1% YoY)
Net Retail Sales ($M)	$119.6 (+10.9% YoY)	$114.6 (+10.8% YoY)
Commercial Revenue ($M)	$7.6 (+28.3% YoY with franchising)	$8.6 (Commercial)
International Franchising ($M)	$1.2	$1.0
Diluted EPS ($)	$1.17 (+42.7% YoY)	$0.94 (+46.9% YoY)
Pretax Income ($M, % of rev)	$19.6 (15.3%)	$15.3 (12.3%)
Gross Margin (%)	56.8%	57.6%
SG&A (% of rev)	41.7%	45.4%
EBITDA ($M, % of rev)	$23.1 (18.0%)	$18.8 (15.1%)

Segment/KPI highlights

KPI	Q1 2025	Q2 2025
E‑commerce demand YoY	+0.5%	+15.1%
Global locations (Total)	604 (369 corp / 148 partner‑op / 87 franchise)	627 (368 corp / 157 partner‑op / 102 franchise)
Capital Expenditures ($M)	$2.9	$3.4
Cash & Equivalents ($M)	$44.3	$39.1
Inventory ($M)	$72.3	$81.8 (↑ from tariffs and accelerated core)

Vs. estimates (S&P Global): S&P Global consensus estimates for Q3 FY2025 were unavailable at time of writing due to data access limits; we will update once available. Third‑party sources indicate calendars pointing to early December earnings timing .

Guidance Changes

Metric	Period	Previous Guidance (Q1 PR, May 29)	Current Guidance (Q2 PR, Aug 28)	Change
Total Revenues	FY2025	Grow mid‑single‑digit %	Grow mid‑ to high‑single‑digit %	Raised
Pre‑tax Income	FY2025	$61M–$67M	$62M–$70M	Raised
Net New Unit Growth	FY2025	≥50 locations	≥60 locations	Raised
Capital Expenditures	FY2025	$20M–$25M	$20M–$25M	Maintained
D&A	FY2025	~ $16M	~ $16M	Maintained
Tax Rate	FY2025	22%–24% (ex‑discretes)	22%–24% (ex‑discretes)	Maintained

Management’s outlook incorporates current tariff rates, medical/labor costs, freight, and inflation; no further macro/FX changes assumed .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1)	Previous Mentions (Q2)	Current Period (Q3 FY2025)	Trend
Tariffs and mitigation	Outlook updated; FY25 pretax range framed inclusive of tariffs	China 30% extended to Nov 10; Vietnam to 20%; net FY25 impact <~$11M after mitigation; ~+$5M medical/labor headwind	Q3 pending; tariff frameworks and mitigation in place	Headwind managed; visibility improving
Partner‑operated expansion	Net +15 units; focus on international partners	Net +14 units; 627 total; partner‑op 157; entering new countries; Germany re‑entry via partner	Q3 pending; raised FY25 unit growth to ≥60	Accelerating
Digital/social + omnichannel	Strategy reiterated; omnichannel focus	Social campaigns (Fruit Stand) drove traffic; e‑comm +15.1%; lower promo cadence online	Q3 pending	Improving execution
Product/brand leverage (Mini Beans)	Highlighted brand/platform	Mini Beans +~80% YoY; wholesale placements (Hudson, Applegreen); Sanrio tie‑in	Q3 pending	Broadening distribution
Inventory posture	Comfortable; accelerated core buys	Comfortable; inventory ↑ with tariffs and core; supports growth	Q3 pending	Stable with buffer
Macro/comps	Noted dynamic environment	Tougher H2 comps (record Halloween prior year); macro uncertainty	Q3 pending	Cautious on H2 cadence

Management Commentary

Strategy and confidence: “We remain committed to advancing our long‑term strategic initiatives… global expansion of our partner‑operated model… digital transformation… invest in leveraging our powerful brand equity” .
Profit model: “The Company’s most profitable second quarter and first half in our history underscore the durability of our evolved business model” .
Tariffs: “We now expect tariffs… net of mitigation to be less than $11,000,000… our pretax guidance continues to include approximately $5,000,000 of additional medical and labor costs” .
Demand and pricing: “Domestic store traffic rose 3%… discounts lower, selective price increases… no negative impact seen from selective price changes” .

Q&A Highlights

Pricing and elasticity under tariffs: Management emphasized selective, strategic pricing tied to resets while protecting entry‑level and loyalty‑driven value; early indications show no adverse demand impact as traffic and conversion rose slightly .
Partner‑operated runway: Strong momentum with partners adding stores; expanding into new countries; cap‑light shop‑in‑shop opportunity in international toy retail footprints .
Mini Beans distribution: ~80% YoY growth; expanding wholesale channels (Hudson, Applegreen) and international partners; first licensed Mini Beans (Sanrio) .
E‑commerce: +15.1% Q2 demand aided by timing of launches; lower discounting; omnichannel role in store planning/party bookings remains critical .
H2 profitability cadence: Slower implied growth due to tough compares and increased tariff rates, but FY25 pretax still targeted at $62–$70M despite ~$16M headwinds .

Estimates Context

S&P Global (Capital IQ) consensus for Q3 FY2025 was unavailable at time of writing due to access limits. We will update this section with S&P Global data once available.
Timing/catalyst: Third‑party calendars indicate an early‑December Q3 release and call, which is the near‑term stock catalyst .

Key Takeaways for Investors

Setup into Q3: Momentum from Q2—traffic gains, e‑comm acceleration, robust retail margin—plus raised FY25 guidance positions BBW well heading into holiday; watch for confirmation of Q3 demand and tariff flow‑through in gross margin .
Operating leverage vs headwinds: Management expects to absorb ~$16M FY25 headwinds (tariffs, medical/labor) and still deliver record year; monitor SG&A discipline and promo cadence in Q3/Q4 .
Expansion optionality: Partner‑operated model is scaling (≥60 net new units targeted FY25); supports Commercial revenue and brand reach with limited capital—key to medium‑term earnings resiliency .
Product engine & DTC: Mini Beans and themed collections (e.g., Sanrio) support frequency and basket; continued social media execution is a differentiator, particularly with “kidult” consumers .
Balance sheet & capital returns: Cash remains solid with no revolver borrowings; dividend maintained ($0.22/qtr) and buyback authorization ample—offers downside support while funding growth .
Near‑term trading: Primary catalyst is Q3 print in early December; focus on holiday commentary, gross margin under tariffs, and any incremental guidance color for FY25 ranges .

References

Q2 FY2025 press release, tables, and guidance updates:
Q2 FY2025 8‑K and exhibits:
Q2 FY2025 earnings call transcript (selected quotes/themes):
Q1 FY2025 press release for prior‑quarter trend and initial guidance:
Q3 FY2025 dividend press release and 8‑K:
Third‑party calendars/earnings timing:

BUILD-A-BEAR WORKSHOP INC (BBW)·Q3 2025 Earnings Summary