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Bear of the Day

Founded in 1997 and headquartered in St. Louis, Build-A-Bear Workshop (BBW) is the only global company that provides an interactive make-your-own stuffed animal entertainment experience.

The company IPO’d in 2004 and currently operates more than 400 stores worldwide, including company-owned stores in the US, Canada, the UK, Ireland and Denmark and franchisees operated 86 stores in 14 countries.

Disappointing Quarterly Results

The company reported very disappointing results for Q4. Adjusted net income was $5.0 million, or $0.31 per share, down from $10.6 million, or $0.64 per share, in the same quarter a year ago. Earnings significantly lagged the Zacks Consensus Estimate of $0.69 per share.

Consolidated comparable sales were down 8.3%.

“After reporting three consecutive years of comparable sales increases and improved profitability, these results are clearly disappointing. Through November, consolidated comparable sales were positive despite slightly negative traffic levels. However, similar to industry reported retail trends, our December traffic levels abruptly reversed, which adversely impacted both sales and profit for the quarter and the year,” said the CEO.

Estimates Slashed

Analysts have slashed their estimates significantly after poor results. Zacks Consensus Estimates for the current and next year are down to $0.48 per share and $0.52 per share respectively, down more than 60% from $1.07 and $1.28, before the results.

The Bottom Line

In addition to disappointing consumer spending and mall traffic, the retail space is witnessing a shift toward online shopping. This trend definitely hurts this toy maker, which focuses on building toys in store.

Further, the industry is currently ranked 233 out of 265 Zacks industries (bottom 12%), suggesting potential underperformance in the short-to-medium term.

The stock is already down almost 40% this year.

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