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BBW
Earnings call · Jul 2026 (Q2 FY27)

BUILD-A-BEAR WORKSHOP Q2 FY27 earnings call BBW

Aug 27, 2026 Source

Executive summary

Build-A-Bear Workshop, Inc. Q2 FY27 — Guidance Cut on Weak Summer Trends and Traffic

Build-A-Bear's second quarter results fell short of expectations, primarily due to weaker traffic driven by less successful summer trend products and ongoing macroeconomic challenges. This led to a reduction in full-year revenue and pre-tax income guidance. Despite the near-term pressures, the company remains confident in its brand strength, citing strong early performance from its Halloween launch and continued progress on strategic initiatives like location expansion and brand licensing.

Highlights

5

  • Halloween launch delivered the highest non-fourth quarter sales week in company history and the third highest US e-commerce sales week behind only Black Friday weeks of 2020 and 2025.

  • Q3 sales performance to date has improved sequentially over the first half, showing positive momentum in stores and e-commerce.

  • Added 5 net new locations in Q2 FY27, bringing total net new openings to 12 through H1 FY27, on track for at least 50 net new locations this year.

  • Promise Pets, an owned intellectual property, continues to drive higher than average dollars per transaction due to strong attachment rates.

  • Secured a collaboration with McDonald's for Build-A-Bear themed Happy Meals rolling out in the UK later this year.

Concerns

6

  • Q2 FY27 revenue decreased 7.2% to $115.3 million, primarily due to a decline in the direct-to-consumer business.

  • Gross margin for the quarter decreased 340 basis points to 54.2% due to occupancy cost deleverage and increased promotional activity.

  • Pre-tax income declined 24.1% to $11.6 million compared to last year.

  • Full-year revenue guidance reduced to a range of $500 million-$525 million from $530 million-$550 million.

  • Full-year pre-tax income guidance lowered to a range of $60 million-$68 million from $72 million-$78 million.

  • Commercial segment growth expectation reduced from +20% to flat for the full year, primarily due to the non-repeat of a multi-million dollar Walmart program.

Guidance & targets

CategoryTargetConfidence
Full-year revenue
$500 million to $525 million
high materiality
Medium
Full-year pre-tax income
$60 million to $68 million
high materiality
Medium
Full-year adjusted pre-tax income
$53 million to $61 million
high materiality
Medium
Net new experience locations
at least 50
medium materiality
High
Commercial segment growth
flat
medium materiality
Medium
Tariff impact and related costs
$10 million to $11 million
medium materiality
High
Longer-term investments
approximately $3 million
low materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Direct-to-Consumer (DTC)
Mainly driven by lower store traffic and soft web traffic. Despite the year-over-year decline versus Q2 FY26, total DTC revenue grew 3% versus 2024. Q2 FY27 represented the second highest second quarter DTC sales performance in company history.
transactions declinedaverage unit retail decreasedunits per transaction increaseddomestic store traffic downe-commerce demand declined 15.6% YoYtotal direct-to-consumer revenue grew 3% vs 2024
—-7.2%——

Product announcements

ProductTypeDetails
Sanrio Halloween collection (Laura Manic duo, Berry and Cherry)launch
Bear Me (30th Anniversary Special Version)launch
Icon Park Orlando Location Offeringslaunch

Deals & partnerships

McDonald's Collaboration for Build-A-Bear themed Happy Meals

McDonald's will begin rolling out Build-A-Bear themed Happy Meals in the United Kingdom later this year.

Risks & headwinds

Traffic challenges due to product performance and macroeconomic conditions Near-term (Q2 FY27, continuing into Q3 FY27)

Q2 FY27 DTC revenue decreased 7.2%; e-commerce demand declined 15.6%.

Mitigation:Focus on core, customizable products that resonate with guests, as demonstrated by the successful Halloween launch. Leveraging owned IP like Promise Pets.

Gross margin compression Q2 FY27

Gross margin decreased 340 basis points to 54.2% in Q2 FY27.

Mitigation:Attributed to occupancy cost deleverage and increased promotional activity to clear underperforming summer trend products. Expectation for improvement with better product mix.

Underperformance of wholesale business FY27

Commercial segment growth guidance reduced from +20% to flat for FY27.

Mitigation:Continuing to work on wholesale opportunities to provide replenishment and leverage intellectual property for incremental profitable revenue.

Ongoing tariff costs FY27

$10 million to $11 million of ongoing tariffs and related costs for FY27, based on a 12.5% rate.

Mitigation:Working with partners around the world to find ways to mitigate impacts and strengthen the supply chain.

What to watch in Q3 FY27

Commercial Segment Growth

Next quarter
Current Flat for FY27 (reduced from +20%)
Target Evidence of new wholesale opportunities or improved pace of development

Why it matters

The commercial segment's underperformance significantly impacted full-year guidance, and its recovery is key to overall revenue growth.

We are disappointed that this business has not developed at the pace we anticipated. We were unable to repeat the multi-million dollar Walmart program and other wholesale opportunities have progressed more slowly than expected.

Q&A highlights

What caused the underperformance in the commercial segment and the updated guidance, specifically regarding the Walmart program?

Management explained the commercial segment's reduced guidance (from +20% to flat) was primarily due to the non-repeat of a multi-million dollar Walmart program from the previous year. They noted that other wholesale opportunities have progressed slower than anticipated but still view wholesale as an important growth strategy, working towards replenishment and future opportunities.

“With the reduction of the Walmart multi-million dollar that we now don't anticipate that that will happen in the back half of the year. that was a reduction in that guidance.”

asked by Chris Moore · answered by J. Christopher Hurt

2 min read 5 chapters

Detailed narrative

Q2 Performance & Macro Headwinds

Build-A-Bear's second quarter results fell short of projections, primarily due to continued traffic challenges stemming from the performance of its summer trend collection and broader macroeconomic conditions. Direct-to-consumer (DTC) revenue declined, with e-commerce demand specifically decreasing by 15.6%. The gross margin for the quarter compressed by 340 basis points to 54.2%, a decline attributed to occupancy cost deleverage and increased promotional activity aimed at moving underperforming summer products.

Product Innovation & Customer Response

The summer 2026 assortment, which included novel designs such as 'slushy plushies and berry goods,' did not resonate as strongly with consumers as anticipated, contributing to the weaker performance. Management acknowledged that they 'pushed it too far' with less customizable concepts. In contrast, products that emphasize Build-A-Bear's signature customization experience, such as the dressable Chummy Shark, sold out. The successful Halloween launch, featuring fan-favorite Pogel Bat and new Jumping Spider, reinforced that guests respond strongly to 'Trend Right products, offerings, and loved characters' that build on customization and engagement.

Strategic Pillars & Growth Initiatives

The company remains focused on four strategic pillars: driving organic growth through trend-right products and compelling experiences; location expansion, with a target of at least 50 net new locations this year, predominantly international partner-operated; wholesale and outbound brand licensing, despite slower-than-expected development in the wholesale business; and enhancing gifting and personalization. These priorities are designed to evolve and extend the Build-A-Bear brand into larger addressable markets beyond traditional retail.

Icon Park Orlando Flagship

A new, highly immersive, multi-level location is on track to open in Q3 FY27 at Icon Park in Orlando. This flagship store will showcase an elevated Build-A-Bear experience, introducing several premium offerings. These include a first-ever design studio for one-on-one consultations, a 'personalize me' station for embroidery, enhancements to the 'hear me' station for voice recording, a new scent bar, and a Build-A-Bear Bake Shop for guided dessert experiences. This location aims to create new opportunities for personalization, gifting, and celebration in a premier tourism destination.

Brand Awareness & Partnerships

Build-A-Bear is actively amplifying its brand by leveraging nostalgia, licensing, and innovation. Upcoming initiatives include a year-long celebration for its 30th anniversary in 2027, featuring the reintroduction of popular nostalgic furry friends and a special version of mascot Bear Me. Additionally, a significant collaboration with McDonald's will see Build-A-Bear themed Happy Meals rolled out in the United Kingdom later this year, aiming to increase brand awareness and introduce the brand to new customers through a globally recognized partner.

AI-generated summary of the company's earnings call. Not investment advice.