Build-A-Bear Workshop, Inc.

Second-quarter revenue was $115.3 million, down 7.2% year over year, and pre-tax income was $11.6 million versus $15.3 million last year, down 24.1%. Gross margin was 54.2%, down 340 basis points year over year, while SG&A was $51.4 million, or 44.6% of revenue, compared with 45.4% last year. For the first half, revenue was $240.6 million, pre-tax income was $35.5 million, and adjusted pre-tax income was $28.5 million excluding a $7 million IEEPA tariff refund related to 2025. Guidance was lowered to revenue of $500 million-$525 million and pre-tax income of $60 million-$68 million; adjusted pre-tax income is expected to be $53 million-$61 million excluding the roughly $7 million tariff refund. The outlook also includes $10 million-$11 million of ongoing tariff and related costs at a 12.5% rate and about $3 million in longer-term investments. The company still expects at least 50 net new experience locations in 2026.

Chris Hurt said the quarter was hurt mainly by traffic weakness tied to summer trend products that “did not resonate as strongly as anticipated,” alongside broader macro pressure. He emphasized that the company pushed innovation too far in summer, but that guests continue to respond to Build-A-Bear’s core customization experience, licensed characters, and dressable products. He sounded constructive on the back half of the year, citing a record Halloween launch and improved early third-quarter sales and traffic, while reiterating the four strategic pillars of organic growth, location expansion, wholesale/licensing, and gifting/personalization.

Vojin Todorovic said revenue missed expectations because direct-to-consumer transactions fell on lower store traffic and soft web demand, with e-commerce demand down 15.6% year over year. He highlighted gross margin pressure from occupancy deleverage and promotional activity, while noting SG&A improved to 44.6% of sales from 45.4% last year due mainly to lower incentive compensation. On the balance sheet, cash was $14 million, down $25.1 million year over year, with the decline attributed mainly to higher share repurchases and front-loaded capital spending; inventory was $81.1 million, down $600,000 year over year, and the company returned $8.5 million to shareholders during the quarter. He said $43.2 million remained under the board-authorized $100 million buyback program.

Analysts focused on the weaker commercial segment, especially the lost Walmart program, and management said the prior-year Walmart deal was a multimillion-dollar opportunistic order that did not repeat, reducing commercial guidance to roughly flat from an earlier expectation of at least 20% growth. Management also said other wholesale opportunities have moved more slowly than expected, though it still sees wholesale and outbound licensing as attractive long-term opportunities. On consumer demand, management said summer trend products missed because they were less customizable, while Halloween and more core, dressable products were seeing better traffic and sales early in the third quarter. Tariff questions came up as well, and management said the current 12.5% rate and possible geopolitical shifts are outside its control, but it is working with partners to mitigate supply chain impacts.