Build-A-Bear Workshop, Inc. (BBW) delivered a mixed bag of third-quarter results for fiscal 2025, with the period ending November 1 showing exactly the kind of tariff squeeze that keeps CFOs up at night. The company posted diluted earnings of 62 cents per share, topping analyst estimates of 58 cents. But revenue tells a different story—up 2.7% to $122.7 million, yet falling short of the $124.3 million Wall Street was expecting.
Here's where things get interesting. Pre-tax income took a meaningful hit, dropping to $10.7 million (or 8.7% of revenue) from $13.1 million (11% of revenue) in the year-ago quarter. The culprit? Build-A-Bear pointed to approximately $4 million in tariffs and related costs eating into margins. Net income followed the same trajectory downward, falling to $8.1 million from $9.9 million.
The revenue breakdown reveals some underlying shifts in the business. Net retail sales climbed 2.5% to $112.3 million, which sounds encouraging until you notice that consolidated e-commerce demand dropped 10.8%. On the brighter side, commercial and international franchising revenue grew 4.9% to $10.4 million. The company also posted net new unit growth of 24 locations during the quarter, bringing the total footprint to 651 locations worldwide.
Build-A-Bear has been actively returning cash to shareholders, distributing $26.1 million through the first nine months via buybacks. After quarter-end, the company repurchased another $2.1 million worth of shares through December 3, leaving $69.7 million available under its $100 million authorization adopted in September 2024. The balance sheet shows $27.7 million in cash with no borrowings on the revolving credit facility.
The tariff impact shows up in another key line item: inventory jumped 17.7% to $83.3 million. Management explained this wasn't just about stocking up for the holidays—it reflects both the added cost burden from tariffs and a deliberate strategy to pull forward product orders as part of their tariff-mitigation plans.
CEO Sharon Price John struck an optimistic tone despite the challenges, noting record third-quarter and nine-month revenue while reaffirming the company's full-year guidance. But it was CFO Voin Todorovic who delivered the sobering reality check about what's ahead.
"While the company preemptively mitigated significant tariff impacts during the first half of the year, the third quarter marked the first meaningful expenses from tariffs and related costs," Todorovic explained. "We expect this elevated level of impact to continue through the fourth quarter and into the next fiscal year. Nevertheless, we remain confident in our guidance, which accounts for tariff impacts and our focus on disciplined expense management."
