Build-A-Bear Posts 46% EPS Jump in Q2

Key Points

• Record revenue and earnings per share, with revenue of $124.2 million and EPS of $0.94 for Q2 FY2025, representing double-digit growth.

• Full-year revenue and profit guidance raised, with expected GAAP pre-tax income now between $62 million and $70 million for FY2025.

• Inventory levels rose 22.1% in Q2 FY2025, reflecting tariff mitigation strategies and cost inflation pressures.

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Build-A-Bear Workshop (NYSE:BBW), the specialty retailer best known for its interactive stuffed animal stores, reported its second-quarter earnings on August 28, 2025, covering the 13 weeks ended August 2, 2025. Build-A-Bear announced record results, delivering $124.2 million in revenue and diluted EPS of $0.94 for Q2 FY2025. Both figures showed notable double-digit growth compared to the same quarter last year. Quarterly results broadly exceeded internal targets and prompted management to raise its full-year revenue and profit outlook. Inventory also climbed meaningfully, reflecting strategic actions to manage ongoing supply chain and tariff uncertainties. Overall, the quarter reflected strong consumer demand for Build-A-Bear’s in-store and digital experiences as well as effective expense and margin management, but rising costs and inventory levels are trends to monitor.

About Build-A-Bear Workshop and Key Success Factors

Build-A-Bear Workshop operates a specialty retail business that allows customers to create personalized stuffed animals through hands-on in-store experiences or online via its digital Bear-Builder platform. The company offers accessories, clothing, and branded products that create emotional connections with shoppers. Its business spans corporately-managed stores, partner-operated sites, and franchise locations worldwide.

Recent strategic focuses include expanding its global retail footprint and investing in digital transformation. The company has prioritized omnichannel growth, combining in-store and e-commerce experiences, along with licensing partnerships for broader appeal. Key success factors for Build-A-Bear include successful unit growth, supply chain efficiency, maintaining strong gross margins, and keeping consumer engagement high, especially as the brand has expanded its audience to include teens and adults in addition to children.

Quarter in Review: Results and Business Developments

Build-A-Bear delivered record revenue and profitability in Q2 FY2025. Revenue of $124.2 million marked an 11.1% increase from the prior year, while diluted earnings per share jumped 46.9%. Pre-tax income of $15.3 million also established a new record for any second quarter, climbing 32.7% year over year. EBITDA, a measure of profitability tracking earnings before interest, taxes, depreciation, and amortization, rose 25.3% to $18.8 million. Net income reached $12.367 million, a 40.9% increase against the prior year period.

Strong sales were supported by continued consumer interest in both retail stores and digital channels. Net retail sales represented the majority of revenue. The company’s e-commerce platform achieved a 15.1% year-over-year increase in demand. This reflects Build-A-Bear’s efforts to deepen engagement with older demographics and occasion-based shoppers, alongside traditional family customers.

Margin improvement stood out as a highlight. Retail gross margin expanded by 3.6 percentage points compared to Q2 FY2024, reaching 57.6%. This margin boost was attributed to more selective price increases, less promotional discounting, and the ability to spread fixed costs over higher sales volumes. Selling, general and administrative expenses (SG&A) rose as a percentage of sales, growing by 140 basis points due to higher store wages, corporate costs, and general inflation.

Expansion continued at an accelerated pace, with 14 net new global locations added. This included partner-operated and franchise stores, slightly offset by one fewer corporately-managed site. By quarter’s end, Build-A-Bear operated 627 total locations worldwide. Licensing relationships, such as those with entertainment giants like Disney and NBCUniversal, continued to support broad consumer interest and product diversification.

Inventory levels rose to $81.8 million, representing a 22.1% increase from the prior year. The company stated this was primarily driven by strategies to mitigate expected tariff costs and to ensure product availability, rather than by unsold merchandise. The increase in inventory was planned as a response to global cost uncertainties. Cash and cash equivalents at quarter-end reached $39.1 million, up 55.4% from the prior year and reflecting the company’s healthy balance sheet.

Build-A-Bear returned $2.9 million to shareholders in dividends, along with $3.1 million in share repurchases. This fits a pattern of ongoing capital returns, backed by robust cash generation. The company’s capital expenditures totaled $3.4 million.

Business Model and Critical Focus Areas

Build-A-Bear offers a hands-on retail experience that hinges on shopper participation and personalized stuffed animals, together with a growing web presence. Its operations encompass three main channels: company-operated retail stores, partner-operated and franchise sites, and digital platforms.

In recent years, Build-A-Bear has emphasized retail footprint expansion, digital transformation, supply chain and inventory management, and leveraging its brand for licensing deals. These areas are viewed as the company’s engine for sustainable growth. Retail expansion, especially using partner and franchise models, allows the brand to enter new markets and non-traditional locations. Digital transformation efforts include online sales platforms and interactive content, helping expand the potential customer base beyond children to tweens, teens, and adults.

Looking Ahead: Guidance and What to Watch

Following a strong second quarter, Build-A-Bear has raised its full-year FY2025 financial guidance. For FY2025, revenue is now projected to grow by a mid-to-high single-digit percentage rate, with GAAP pre-tax income expected to come in between $62 million and $70 million. The company also increased its net new unit growth target to at least 60 new experience locations for FY2025, up from a previous target of at least 50. Capital expenditure guidance for FY2025 is $20 million to $25 million. Management describes its balance sheet as solid, and expects continued strong returns on capital and robust cash flow.

The company’s outlook remains subject to risks related to tariffs, labor and medical costs, freight expenses, and ongoing inflation. There were no substantial changes to the company’s dividend policy announced with this release.

BBW does pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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Motley Fool Markets Team is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. The Motley Fool takes ultimate responsibility for the content of these articles. Motley Fool Markets Team cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Build-A-Bear Workshop. The Motley Fool has a disclosure policy.