Wall Street welcomes Build-A-Bear’s surprise profit

By Ashesha Mehrotra

Build-A-Bear Workshop, Inc.’s long-hibernating shares moved sharply higher Tuesday, after the retailer of customized stuffed animals reported fourth-quarter profits that significantly topped Wall Street forecasts.

For the quarter that ended Jan. 2, the St. Louis-based company reported net income of $20.6 million, or $1.25 a diluted share, up from $11.8 million, or 67 cents a share a year earlier.

Revenue in the fourth quarter dropped by 10 percent to $117.7 million from $131.5 million in last year’s quarter. The company noted that fiscal year 2015 represented a 52-week year, whereas 2014 was 53-week; the latest fourth quarter had just 13 weeks, in other words, and the year-ago period had 14 weeks.

Excluding unusual items in both quarters, the company said adjusted earnings were 62 cents a share, compared with 74 cents in the year-ago quarter. The latest quarter’s earnings beat Wall Street expectations by 9 cents.

In New York Stock Exchange trading Tuesday, Build-A-Bear shares shot up by $1.61, or 13.27 percent, to close at $13.74.

Build A Bear Stock for Fiscal Jan 2014-2015

Build A Bear stock surges by 13 percent after Q4 earnings. (Ashesha Mehrotra/MEDILL)

CEO Sharon Price John told analysts during a conference call that “Since my arrival in 2013, the company has been keenly focused on achieving and sustaining profitability by driving operational improvements across a number of functional areas.”

Build-A-Bear made a significant $5.7 million cut in its selling, general and administrative costs, lowering such expenses in the fourth quarter to $50.6 million.

Additionally, it plans to expand its presence at outlet malls, shop-in-shops and seasonal pop-up locations, said executives in a conference call. The company had 329 company-owned stores at the end of 2015, and officials said the aim is to increase that to between 340 and 345 stores this year.

The soft-toy retailer reported a decline of 5.6 percent in comparable sales (stores and e-commerce) for this quarter. But for full-year fiscal 2015 sales were up by 1 percent in fiscal 2015.

The 2015 results reflect “the impact of the fundamental changes we have made from infrastructure to talent,” said Price, adding that in fiscal 2016” We expect to report our fourth consecutive year of consolidated comparable sales and profit improvement.”

In fiscal 2015, Build-A-Bear’s net rose to $27.3 million, or $1.59 a share, up from $14.4 million in 2014, or 81 cents a share.  Revenue in 2015 dipped to $377.7 million from $392.4 million in 2014.
The company said future changes include a “branded experience” on board Cruise Carnival Lines ships through an agreement, which is expected to begin effective in the latter half of 2016.
Build-A-Bear also intends to expand its licensed products with companies including Marvel, CEO Sharon Price John said in the call. “We have a nice lineup of licensed products for this year,” she said, adding the company is slated to launch a proprietary product in the second quarter, “Horses and Hearts.”

Build A Bear stock surges by 13 percent after Q4 earnings. (Ashesha Mehrotra/MEDILL)