Will Build-A-Bear Continue to Rebound in 2021?

NYSE: BBW | Build-A-Bear Workshop, Inc.  News, Ratings, and Charts

BBW – Trading up 17% in the past year, Build-A-Bear Workshop (BBW) could continue to rebound in 2021.

Build-A-Bear Workshop (BBW) is a St. Louis-headquartered specialty retailer that allows customers to play a role in an interactive process where they can assemble and tailor a stuffed toy to fit their individual preferences. 

BBW has more than 450 stores worldwide, including company-operated outlets in North America, the U.K., Ireland, Denmark and China and franchise stores in Mexico, Europe, Asia, Africa, Australia and the Middle East. BBW’s online Buildabear.com enables Net surfers to use the proprietary feature The Bear-Builder to create customized gifts digitally. The company also has its own channel on iHeartRadio (IHRT) with family-friendly music and talk shows, and last fall it partnered with Crown Media Family Network for Deliver by Christmas, one of the films included in the popular Hallmark Channel Christmas movies line-up.

On Jan. 11, BBW published its financial expectations for Q4 (covering the 13 weeks ending Jan. 30) and fiscal year 2020. BBW acknowledged its retail store operations were badly dented by the COVID-19 pandemic, with Q4 predicted to bring total revenues between $88 million to $92 million, down from $104.6 million in the same period one year earlier. The company also forecasted is e-commerce demand will swell to a 90% to 100% year-over-year increase while earnings before interest and taxes (EBIT) will range from $4.0 million to $6.0 million, compared to $7.6 million in the fiscal 2019 fourth quarter.

BBW was founded in 1997 and had its initial public offering. Their stock opened on Oct 28, 2004, when its stock traded at $20.00.

Here’s how our proprietary POWR Ratings system evaluates BBW:

Trade Grade: B

BBW is currently trading at $6.78, which is closer to its 52-week high of $8.40 than its 52-week low of $1.01. The stock tumbled with the rest of the market in March when the COVID-19 pandemic disrupted the economy and gradually regained its strength over the course of 2020 as some degree of normalcy returned to American society.

Buy & Hold Grade: B

Proximity to the 52-week high is a determining factor in this grading, and BBW’s ability to maintain a steady stock performance without veering off into the lower regions of trading have earned the company a B grade.

For a company that was traditionally aimed at hands-on in-store experiences, BBW came out of its third quarter in rather good shape thanks to its pivot to e-commerce – e-commerce soared in Q3 with a 167% increase year-over-year demand that partially buffeted the company’s $1.5 million decrease in commercial and international franchise revenues. 

BBW reported Q3 earnings with total revenues at $74.7 million, up from the $70.4 million in Q3 2019. Earnings before interest and taxes were $1.7 million, a $9.4 million spike from one year earlier, while earnings per share increased 127.50% year-over-year to $0.11, which outpaced the analysts’ estimate of -$0.04.

Peer Grade: D

BBW ranks #23 of 43 stocks in the Specialty Retailers category. The company has the misfortune of being in a category currently dominated by stock du jour GameStop (GME), as well as major players including Ulta Beauty (ULTA), Rent-a-Center (RCII) and Office Depot (ODP). This is not a reflection of weakness on BBW, but rather an acknowledgment of the XL-sized competition it has been grouped against.

Industry Rank: B

The Specialty Retailers industry ranks #65 out of 123 stock categories and has an overall POWR Rating of B.

Overall POWR Rating: B

Based on the strengths of its grades, BBW earns a B (for buy) POWR Rating.

Bottom Line

In the Q3 earnings report, BBW President and CEO Sharon Price John heralded how the company ended the quarter “with over $25 million in cash and cash equivalents with no borrowings on our credit facility, and we’re pleased to have positive momentum at the start of our fourth quarter while remaining appropriately cautious given the ongoing impact of the pandemic. After the initial actions to address the immediate challenges brought by the pandemic, we rapidly shifted our focus in order to leverage the circumstances to accelerate our strategic initiatives for the long-term benefit in three key areas.”

John added that despite “COVID-driven temporary store closures and reduced operating hours in the quarter, we were able to leverage available store labor and inventory to support the heightened digital demand with buy-online, ship-from-store and buy-online, pick-up-in-store or curbside.”

Considering that the retail sector is littered with companies that have either shut down their brick-and-mortar operations completely or have scaled back at an acute degree, BBW appears to have reinvented itself to meet the challenges of the ongoing health crisis. This stock deserves a big bear hug from investors.

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BBW shares were trading at $4.96 per share on Thursday morning, down $1.82 (-26.84%). Year-to-date, BBW has gained 16.16%, versus a 1.62% rise in the benchmark S&P 500 index during the same period.


About the Author: Phil Hall


Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series.  He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...


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