Deep Value with Barriers to Entry, Build-A-Bear Workshop

Build-A-Bear Workshop (BBW) is an Amazon resistant interactive retailer offering "make your own stuffed animal" and related products. The company is managed into three segments, direct-to-consumer, international franchising, and commercial. BBW operates 371 stores globally and 94 franchise locations. Also, products sold on the company, third party and franchisee e-commerce sites including retail locations under wholesale agreements.


The current stock price is $3.92 or an enterprise value 57.249M, market capitalization 58.63M.

Insider Activity:

Major Ownership: Note the 20% of the outstanding shares owned by S Cohen. Cohen is a known shorter term trader and likely sold over the past two weeks after the weak Q3 performance. 

Worse than expected financial performance for the quarter ending November 2018 help create this investable opportunity. Three factors impacted the weak quarter three performance; redirected event promotion, continued poor UK sales, and lack of new kid-friendly films.

A strategic decision to limit planned marketing for September 2018 is redirected to a new event for January. The move motivated by unexpected overwhelming consumer response to July's "Pay Your Age" promotion. Massive consumer response created long waiting lines and increased media attention. Although, management believes there are long-term benefits from the 3 billion media impressions from the Pay Your Age initiative.The proximity and historical lines of prior National Teddy Bear Day promotion forced management to move September's event to manage potential negative consumer and brand-damaging event coverage. The changes made to National Teddy Bear Day resulted in lower third-quarter sales. Now the goal is to recoup lost business with a similar event on National Hug Day before this year's 2018 fiscal year end in January.

A deceleration in European revenues, driven by a double-digit decline in year-over-year sales in the United Kingdom. The overall UK market continues to be a burden by a challenging retail environment, driven by weak consumer confidence and Brexit, which has led to pound sterling volatility.

The third factor; reduced high impact kid-friendly films that translate into higher product demand. Further, management believes the weak mall traffic contributed. Although anticipated, the negative impact was greater than forecast.

Positives going into the last quarter of 2018.

Launched intellectual products include top-selling, Beary Fairy Friends, and Rainbow Friends. New tourist locations include FAO Schwarz NYC, four Great Wolf lodges, Gaylord Resorts ice event and more future launches. Holiday pop-up locations doubled. Sites expanded next to Santa’s Workshop, Bass Pro Shops and Cabela’s. These initiatives are tracking above expectations. Six full-service Build-A-Bear Workshop stores opened inside select market researched Wal-Mart locations.

Additional Positives for 2019 include a promising kid-friendly movie line-up, " How to Train Your Dragon," Aladdin, Lion King and the second installment of Frozen. New films drive family traffic to theaters located at the mall. Consumers attracted by “Pay Your Age Day” leveraged for future. It launched “Count Your Candles birthday." E-commerce sales are growing double digit for the last four consecutive quarters. This channel targeted for the fourth quarter and is up to 50% of our annual digital sales. New digital radio station introduced Build-A-Bear Radio with Dash Radio. Increase in commercial and international franchise revenue estimated to reach 5% of total revenues in the quarter. Progress realized to open the first store in India later this fiscal year and development plans in China. Expect franchise footprint of 120 locations in 12 countries by year-end.


Trades at its historical lowest valuation for sales, book value, gross profit with no long-term debt and a forecasted year-end cash balance of 26M. Insider buying during 2018 at twice the current market value. Aggressive share buybacks reducing shares outstanding by 14% from December 2014. Trailing twelve month gross profit of 152.20M versus an enterprise value of 57.25M.

International franchising expansion realized with the recent addition of India franchisee. Shanghai and Beijing are areas management noted for development as the concept embraced. The concourse model shops are available for franchising.

Commercial, wholesaling , e-commerce, and outbound licensing revenue opportunities to diversify business model. Growth potential within wal-mart stores after six successful pilot locations.  

Ongoing promotion of Count your candle gained full public recognition after the pay your age event in July. A database of over six million exists that can be leveraged to drive additional business over twelve months of the year.

Real estate diversification with more tourist locations, rent concessions exist as a good portion of leases up for renewal.

Toys“R”Us 6 billion liquidations negatively impacted sales during first half of 2018.

Long BBW