BuildABear (BBW) Stock Forecast & Price Target

Build-A-Bear Workshop Inc. reported a 4.7% increase in net retail sales, driven by successful new product lines and effective online engagement, while the higher margin third-party segment contributed positively by increasing its revenue share by 110 basis points to 7.2%. The company's focus on cost control and leveraging top-line growth is reflected in a significant year-over-year revenue increase of 20.5% in the Commercial and International Franchising categories, alongside a 4.7% growth in company store sales. Additionally, an EBITDA of $31.1 million, which exceeded expectations and marked a 13.5% year-over-year improvement, highlights the company's strengthening margins and operational efficiency.

Build-A-Bear Workshop is facing significant challenges due to its reliance on China for production, which is expected to result in a material impact of over $5 million on pre-tax income due to tariffs, consequently leading to a projected low single-digit decline to low single-digit increase in pre-tax income for FY25. Despite a forecasted revenue increase of 3.9% for FY25 and a further 3.4% for FY26, the company is adjusting its FY25 earnings per share (EPS) estimate downward from $4.06 to $3.82, indicating a less favorable financial outlook. Furthermore, potential negative changes in mall and tourist activity may also hinder sales growth, compounding the already negative implications of elevated tariffs and dependency on international production.