Group 1 - Build-A-Bear Workshop, Inc. (NYSE: BBW) presents an upside potential of 14.38% to 32.38% for investors [1] - Despite a bleak consumer outlook, BBW has demonstrated the ability to generate consistent cash flows [1] - The investment philosophy is based on fundamental bottom-up analysis and quantitative modeling, focusing on identifying perception gaps [1] Group 2 - The analysis emphasizes the importance of capitalizing on over-pessimism and excessive exuberance in the market [1] - The objective is to identify asymmetric opportunities for investors [1]

Store Operations and Growth - As of November 2, 2024, the company operated 362 corporately-managed stores, 123 partner-operated locations, and 80 international franchised stores[81]. - The company expects net new unit growth of at least 65 locations in fiscal 2024, focusing on non-traditional locations such as family-centric tourist sites[87]. - The company has opened a net of 40 new retail experience locations during the first thirty-nine weeks of fiscal 2024[87]. - The number of third-party retail locations increased to 123 by November 2, 2024, from 92 at the beginning of the period, highlighting the expansion of the capital-light retail model[91]. Financial Performance - The company reported growth in total revenues and profit in fiscal 2023, driven by strategic investments and improved operational efficiency[87]. - Consolidated revenues increased by 11.0%, driven by a $9.1 million (9.1%) increase in net retail sales and a $2.6 million (43%) increase in commercial revenue compared to the third fiscal quarter of 2023[98]. - Net retail sales for the thirteen weeks ended November 2, 2024, were $109.5 million, up from $100.4 million for the same period in 2023, with existing stores contributing $8.8 million to this increase[99]. - Commercial revenue reached $8.6 million for the thirteen weeks ended November 2, 2024, compared to $6.0 million for the same period in 2023, primarily due to increased sales volume from wholesale accounts[102]. - For the thirty-nine weeks ended November 2, 2024, net retail sales were $320.8 million, a $4.9 million (1.5%) increase compared to the same period in 2023[108]. - Commercial revenue for the thirty-nine weeks ended November 2, 2024, was $21.9 million, up from $17.7 million in the prior year, reflecting a $4.2 million increase[109]. - International franchising revenue was $1.3 million for the thirteen weeks ended November 2, 2024, compared to $1.1 million in the same period of 2023, mainly due to product shipment timing[103]. Profitability and Margins - Retail gross margin dollars increased by $6.5 million to $59.4 million, with the retail gross margin rate improving by 160 basis points compared to the prior year[104]. - EBITDA for the thirteen weeks ended November 2, 2024, increased by $3.4 million, or 25.3%, to $16.7 million from $13.3 million for the same period last year[117]. - EBITDA for the thirty-nine weeks ended November 2, 2024, increased by $0.7 million, or 1.5%, to $49.9 million from $49.2 million for the same period last year[118]. Shareholder Returns and Capital Management - The company returned $42 million to shareholders through special dividends and has initiated a quarterly dividend program, declaring cash dividends of $0.20 per share totaling $2.9 million, $2.7 million, and $2.7 million in the first three quarters of fiscal 2024[88]. - The company has implemented a $100 million stock repurchase program announced in September 2024, following previous repurchase programs totaling $75 million[88]. - The company utilized $23.0 million in cash to repurchase 832,944 shares during the thirty-nine weeks ended November 2, 2024, compared to $15.2 million for 672,734 shares in the same period last year[133]. Cash Flow and Capital Expenditures - Cash provided by operating activities decreased by $5.2 million to $27.6 million for the thirty-nine weeks ended November 2, 2024, compared to $32.7 million for the same period last year[124]. - Total inventory at quarter end was $70.8 million, an increase of $6.3 million or 10% from the end of the fiscal 2023 third quarter[131]. - Capital spending through the thirty-nine weeks ended November 2, 2024, totaled $9.6 million, with an expected capital expenditure of approximately $18 to $20 million in fiscal 2024[131]. Business Strategy and Digital Transformation - The company's digital transformation includes the launch of its first animated theatrical film in 2023, "Glisten and the Merry Mission," aimed at expanding its consumer base beyond children[87]. - The company aims to enhance its omnichannel capabilities, integrating customer communications to acquire new customers and increase purchase occasions[87]. - The company has shifted to asset-light business models, improving cash flows and supporting long-term profitable growth initiatives[88]. - The company operates in three segments: Direct-to-Consumer, Commercial, and International franchising, leveraging its brand strength across various channels[82]. Financial Position and Obligations - As of November 2, 2024, the company had a consolidated cash balance of $29.0 million, with 79% domiciled within the U.S.[123]. - The company had purchase obligations totaling approximately $99.7 million as of November 2, 2024, with $29.0 million due in the next 12 months[132]. - The company had no outstanding borrowings as of November 2, 2024, under its revolving credit agreement[127]. Economic Outlook - The company expects inflationary pressures to continue throughout fiscal 2024, particularly through wage increases[135].

Core Viewpoint - Build-A-Bear (BBW) reported quarterly earnings of $0.73 per share, exceeding the Zacks Consensus Estimate of $0.70 per share, and showing an increase from $0.53 per share a year ago, indicating a positive earnings surprise of 4.29% [1] Financial Performance - The company achieved revenues of $119.43 million for the quarter ended October 2024, surpassing the Zacks Consensus Estimate by 7.02%, compared to $107.56 million in the same quarter last year [2] - Over the last four quarters, Build-A-Bear has exceeded consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - Build-A-Bear shares have increased approximately 64.9% since the beginning of the year, significantly outperforming the S&P 500's gain of 27.6% [3] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $1.63 on revenues of $154 million, and for the current fiscal year, it is $3.72 on revenues of $492.1 million [7] - The estimate revisions trend for Build-A-Bear is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Retail - Miscellaneous industry, to which Build-A-Bear belongs, is currently ranked in the bottom 30% of over 250 Zacks industries, which may impact stock performance [8]

Build-A-Bear Workshop Q3 2024 Earnings Release [Financial Highlights and Executive Commentary](index=1&type=section&id=Financial%20Highlights%20and%20Executive%20Commentary) The company reported record Q3 2024 results with double-digit growth in revenue and pre-tax income, driven by brand evolution and global expansion Q3 2024 Key Metrics | Metric | Q3 2024 | Change YoY | | :--- | :--- | :--- | | Total Revenues | $119.4 million | +11.0% | | Pre-tax Income | $13.1 million | +26.4% | | Diluted EPS | $0.73 | +37.7% | - The company raised its fiscal 2024 guidance for net new unit growth from 50 to **at least 65 experience locations** globally[3](index=3&type=chunk) - CEO Sharon Price John attributed the record performance to the business model's evolution and the brand's strength, highlighting the expansion of its international footprint to over 20 countries[3](index=3&type=chunk) - CFO Voin Todorovic noted that strong retail and third-party sales drove profitability, but web demand underperformed, and the company repurchased **over 6% of its shares** outstanding in the past year[4](index=4&type=chunk) [Detailed Financial Performance](index=1&type=section&id=Detailed%20Financial%20Performance) The company achieved strong Q3 growth in revenue and profit, while year-to-date performance showed modest revenue growth and a slight decline in pre-tax income [Third Quarter Fiscal 2024 Results](index=1&type=section&id=Third%20Quarter%20Fiscal%202024%20Results) Q3 2024 saw an 11% revenue increase to $119.4 million and a 26.4% rise in pre-tax income, driven by strong sales and margin expansion Q3 2024 Revenue Performance | Revenue Stream | Q3 2024 Value | % Change YoY | | :--- | :--- | :--- | | Total Revenues | $119.4 million | +11.0% | | Net Retail Sales | $109.5 million | +9.1% | | E-commerce Demand | N/A | +1.3% | | Commercial & Franchise | $9.9 million | +38.8% | Q3 2024 Profitability Metrics | Profitability Metric | Q3 2024 Value | % Change YoY | | :--- | :--- | :--- | | Pre-tax Income | $13.1 million | +26.4% | | Diluted EPS | $0.73 | +37.7% | | EBITDA | $16.7 million | +25.3% | [Nine-Month Fiscal 2024 Results](index=2&type=section&id=Nine-Month%20Fiscal%202024%20Results) Year-to-date revenue grew 2.7% to $346.0 million, while pre-tax income slightly declined due to higher SG&A expenses Nine-Month 2024 Revenue Performance | Revenue Stream | Nine-Month 2024 Value | % Change YoY | | :--- | :--- | :--- | | Total Revenues | $346.0 million | +2.7% | | Net Retail Sales | $320.8 million | +1.5% | | E-commerce Demand | N/A | -11.8% | | Commercial & Franchise | $25.2 million | +20.5% | Nine-Month 2024 Profitability Metrics | Profitability Metric | Nine-Month 2024 Value | % Change YoY | | :--- | :--- | :--- | | Pre-tax Income | $39.7 million | -1.3% | | Diluted EPS | $2.20 | +4.8% | | EBITDA | $49.9 million | +1.5% | [Operational and Balance Sheet Review](index=2&type=section&id=Operational%20and%20Balance%20Sheet%20Review) The company expanded its global store count, maintained a strong debt-free balance sheet, and returned significant capital to shareholders [Store Activity](index=2&type=section&id=Store%20Activity) The company added 17 net new global locations in Q3, increasing its total store count to 565 Global Store Count (as of Q3 2024 End) | Store Type | Count at Q3 2024 End | | :--- | :--- | | Corporately-managed | 362 | | Partner-operated | 123 | | Franchise | 80 | | **Total Global Locations** | **565** | [Balance Sheet and Cash Flow](index=2&type=section&id=Balance%20Sheet%20and%20Cash%20Flow) The company ended Q3 with a 16.8% year-over-year increase in cash to $29.0 million and no outstanding debt Key Balance Sheet Items | Balance Sheet Item | Value at Q3 2024 End | % Change YoY | | :--- | :--- | :--- | | Cash and cash equivalents | $29.0 million | +16.8% | | Inventory | $70.8 million | +9.8% | - The company finished the quarter with **no borrowings** under its revolving credit facility[10](index=10&type=chunk) - Capital expenditures totaled **$3.9 million** for the third quarter and **$9.6 million** for the first nine months of fiscal 2024[11](index=11&type=chunk) [Return of Capital to Shareholders](index=3&type=section&id=Return%20of%20Capital%20to%20Shareholders) The company returned $31.3 million to shareholders in the first nine months and adopted a new $100 million share repurchase program Capital Return Summary | Capital Return Activity | First Nine Months 2024 | | :--- | :--- | | Share Repurchases | $23.0 million | | Quarterly Dividends | $8.3 million | | **Total Capital Returned** | **$31.3 million** | - A new **$100.0 million** stock repurchase program was adopted on September 11, 2024, with **$97.0 million** remaining available for future repurchases[14](index=14&type=chunk) [2024 Outlook](index=3&type=section&id=2024%20Outlook) The company updated its fiscal 2024 guidance, raising its net new store growth target and projecting revenue between $489 million and $495 million Fiscal Year 2024 Financial Guidance | FY 2024 Guidance | Updated Range | | :--- | :--- | | Total Revenue | $489M - $495M | | Pretax Income | $65M - $67M | Fiscal Year 2024 Operational Guidance | FY 2024 Other Expectations | Updated Guidance | | :--- | :--- | | Net New Unit Growth | At least 65 locations | | Capital Expenditures | $18M - $20M | | Depreciation & Amortization | $15M - $16M | | Tax Rate | Approx. 24.5% | [Financial Statements and Reconciliations](index=6&type=section&id=Financial%20Statements%20and%20Reconciliations) This section presents detailed unaudited financial statements, including income statements, balance sheets, and non-GAAP reconciliations [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) The Q3 income statement shows year-over-year growth in revenue and net income, while the nine-month period reflects revenue growth but slightly lower net income Q3 Statement of Operations ($ in thousands) | Q3 Statement of Operations | 13 Weeks Ended Nov 2, 2024 | 13 Weeks Ended Oct 28, 2023 | | :--- | :--- | :--- | | Total Revenues | $119,430k | $107,562k | | Gross Profit | $64,640k | $56,633k | | Net Income | $9,870k | $7,586k | Nine-Month Statement of Operations ($ in thousands) | Nine-Month Statement of Operations | 39 Weeks Ended Nov 2, 2024 | 39 Weeks Ended Oct 28, 2023 | | :--- | :--- | :--- | | Total Revenues | $345,958k | $336,837k | | Gross Profit | $187,374k | $180,172k | | Net Income | $30,107k | $30,532k | [Unaudited Condensed Consolidated Balance Sheets](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of November 2, 2024, reflects growth in total assets to $285.9 million and an increase in stockholders' equity Consolidated Balance Sheet Highlights ($ in thousands) | Balance Sheet Item | Nov 2, 2024 | Oct 28, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $28,955k | $24,800k | | Inventories, net | $70,774k | $64,466k | | Total Assets | $285,862k | $250,543k | | Total Stockholders' Equity | $128,573k | $111,648k | [Unaudited Selected Financial and Store Data](index=9&type=section&id=Unaudited%20Selected%20Financial%20and%20Store%20Data) This section provides supplementary data showing an improved retail gross margin and detailing the growth in store locations Retail Gross Margin | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Retail Gross Margin % | 54.2% | 52.6% | Store Count by Type | Store Count (End of Period) | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Corporately-managed | 362 | 356 | | Franchised | 80 | 70 | | Third-party retail | 123 | 85 | [Reconciliation of GAAP to Non-GAAP figures](index=10&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20figures) This section reconciles GAAP pre-tax income to non-GAAP EBITDA, showing year-over-year growth for both Q3 and the nine-month period Reconciliation of Income Before Taxes to EBITDA | EBITDA Reconciliation ($ in thousands) | Q3 2024 | Q3 2023 | Nine-Month 2024 | Nine-Month 2023 | | :--- | :--- | :--- | :--- | :--- | | Income before income taxes | $13,081 | $10,348 | $39,655 | $40,180 | | EBITDA | $16,660 | $13,298 | $49,915 | $49,196 |

Core Insights - Build-A-Bear Workshop has launched a new product line in collaboration with KFC, combining plush toys with KFC's iconic flavors, available starting today [1][6] - The collection is designed to celebrate togetherness during the holiday season, merging Build-A-Bear's interactive fun with KFC's comfort food tradition [2][3] Product Details - The collection features limited-edition outfits and accessories inspired by KFC, including a KFC Bucket Costume, KFC Plush Chicken Wristie, and KFC Pajama Outfit [3][4] - The KFC Bucket Costume allows plush toys to be dressed as a KFC bucket, while the KFC Plush Chicken Wristie is a plush chicken leg that attaches to the toy's paw [3] - The KFC Pajama Outfit includes a cozy two-piece set with a KFC onesie and chicken leg slippers [3] Brand Commitment - Both brands emphasize a shared commitment to delivering joy through heartwarming experiences, blending creativity, nostalgia, and fun [4][5] - Build-A-Bear Workshop aims to create memorable experiences for guests of all ages, while KFC has a long-standing tradition of bringing families together over meals [5][7] Company Background - Build-A-Bear Workshop has been a beloved brand since 1997, focusing on creating personalized stuffed animals and fostering emotional connections with consumers [7] - KFC, established in 1952, operates over 30,000 restaurants globally, known for its Original Recipe fried chicken and various menu items [8]

Group 1 - In April 2020, a stuffed animal retailer, Build-a-Bear Workshop, was on the brink of bankruptcy due to the COVID pandemic impacting retail in the United States [1] - The company has since undergone significant changes to navigate the challenges posed by the pandemic [1] Group 2 - The article does not provide specific financial data or performance metrics related to Build-a-Bear Workshop or the retail industry [1]

Core Insights - Build-A-Bear Workshop, Inc. has appointed Kim Utlaut as Senior Vice President and Chief Brand Officer, bringing over two decades of brand marketing expertise from The Coca-Cola Company [1][5] - The company is experiencing a pivotal moment of success, having achieved three consecutive record-setting years [1][5] Company Strategy - Kim Utlaut's responsibilities will include leading the evolution of Build-A-Bear's brand and communications strategy, focusing on strengthening relationships with a diverse consumer base across multiple revenue streams and product offerings [2][3] - The company aims to leverage Utlaut's expertise to effectively communicate various offerings, including new product launches and personalized experiences [4] Leadership Perspective - Chris Hurt, Chief Operations Officer, emphasized that Utlaut's appointment reflects management's commitment to the ongoing evolution of Build-A-Bear and the pursuit of accelerated profitable growth [5] - The company is confident that Utlaut's background and leadership will help identify opportunities to elevate the brand further [5] Brand Development - Build-A-Bear has expanded its global retail presence and is advancing its digital transformation while investing in the brand through collaborations [5] - The brand's latest communications campaign, "The Stuff You Love," celebrates over 25 years of creating cherished memories [8] Financial Performance - For fiscal 2023, Build-A-Bear Workshop, Inc. reported consolidated total revenues of $486.1 million [8]

Group 1 - The company Build-A-Bear Workshop (NYSE: BBW) is recognized, but it was surprising to discover that it pays a dividend [1] - There is a lack of awareness regarding the company's dividend policy among investors [1]

Core Viewpoint - The article emphasizes the importance of confirming the sustainability of stock trends for profitable short-term investing, highlighting the need for sound fundamentals and positive earnings estimates to maintain momentum [1]. Group 1: Stock Performance - Build-A-Bear (BBW) has shown a solid price increase of 36.5% over the past 12 weeks, indicating strong investor interest [2]. - In the last four weeks, BBW's price has increased by 19.2%, confirming that the upward trend is still intact [2]. - BBW is currently trading at 98.8% of its 52-week high-low range, suggesting it may be on the verge of a breakout [2]. Group 2: Fundamental Strength - BBW holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises [3]. - The Zacks Rank system has a strong track record, with Zacks Rank 1 stocks averaging an annual return of +25% since 1988 [3]. - The Average Broker Recommendation for BBW is 1 (Strong Buy), indicating high optimism from the brokerage community regarding its near-term price performance [3]. Group 3: Investment Strategy - The article suggests that investors can utilize the "Recent Price Strength" screen to identify stocks like BBW that are on an upward trend supported by strong fundamentals [1][4]. - There are over 45 Zacks Premium Screens available for investors to find winning stock picks based on their personal investing styles [4].

Core Viewpoint - The article emphasizes the importance of value investing and highlights BuildABear Workshop (BBW) as a strong candidate for value investors due to its favorable financial metrics and Zacks Rank [1][2][3] Company Summary - BuildABear Workshop (BBW) has a Zacks Rank of 2 (Buy) and an A grade for Value, indicating strong potential for value investors [2] - The stock's Forward P/E ratio is 9.27, significantly lower than the industry average of 16.85, suggesting it may be undervalued [2] - BBW's Forward P/E has fluctuated between 5.95 and 9.27 over the past year, with a median of 6.84 [2] - The P/CF ratio for BBW is 7.51, which is attractive compared to the industry's average P/CF of 20.02, indicating strong operating cash flow [2] - BBW's P/CF has ranged from 4.66 to 7.51 in the past year, with a median of 5.77 [2][3] - Overall, BBW appears to be undervalued based on these metrics and has a strong earnings outlook, making it a compelling value stock [3]