We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is Build-A-Bear's Commercial Arm Driving Its Next Revenue Surge?
Read MoreHide Full Article
Key Takeaways
Build-A-Bear's Commercial revenues jumped 18.3% in Q2, with total partner and franchise revenues up 15.2%.
The partner-operated model boosts margins through low capital needs and high-margin wholesale revenues.
Commercial expansion and new collectibles signal Build-A-Bear's shift toward a hybrid consumer-product model.
Build-A-Bear Workshop, Inc.’s (BBW - Free Report) Commercial arm is emerging as a powerful engine for diversifying revenues and profitability beyond its traditional retail locations. In the second quarter of fiscal 2025, Commercial revenues grew 18.3%, while Commercial and International franchise revenues combined rose 15.2%. The Commercial segment — comprising wholesale sales to partner-operated stores and licensed distributors — has expanded at a 63% compound annual rate between fiscal 2020 and 2024.
The company’s partner-operated model underpins this surge. These locations require minimal capital expenditure from Build-A-Bear and allow the company to realize high-margin wholesale revenues by leveraging its partners' existing infrastructure and inventory management. With 157 partner-operated stores, now covering 25% of Build-A-Bear’s 627 global locations, this network is scaling faster than corporate stores.
CEO Sharon Price John credits the “capital-light partner-operated retail model” for accelerating profitability and broadening brand reach. CFO Voin Todorovic highlighted that higher Commercial gross margins helped lift the company’s total gross margin by 340 basis points year over year in the second quarter.
Management now expects at least 60 net new locations in fiscal 2025, mostly through partners. Beyond store sales, wholesale distribution of new collectibles such as Mini Beans and licensed collaborations adds recurring volume streams. The Commercial arm’s success reflects a structural shift as Build-A-Bear is evolving from an experiential retailer into a hybrid consumer-products brand. If this trajectory holds, the Commercial segment could soon rival its retail business in margin contribution, establishing itself as the company’s next long-term growth engine.
What the Latest Metrics Say About Build-A-Bear
Build-A-Bear, which competes with Walmart Inc. (WMT - Free Report) and Target Corporation (TGT - Free Report) , has surged 50.8% over the past year, outperforming the industry’s growth of 7.3%. While Walmart shares have rallied 30.5%, Target has declined 38.7% in the aforementioned period.
Image Source: Zacks Investment Research
From a valuation standpoint, Build-A-Bear's forward 12-month price-to-earnings ratio stands at 12.79, lower than the industry’s ratio of 17.84. BBW carries a Value Score of B. Build-A-Bear is trading at a discount to Walmart (with a forward 12-month P/E ratio of 37.74) but at a premium to Target (11.58).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Build-A-Bear's current financial-year sales and earnings per share implies year-over-year growth of 7.4% and 6.9%, respectively.
Image: Bigstock
Is Build-A-Bear's Commercial Arm Driving Its Next Revenue Surge?
Key Takeaways
Build-A-Bear Workshop, Inc.’s (BBW - Free Report) Commercial arm is emerging as a powerful engine for diversifying revenues and profitability beyond its traditional retail locations. In the second quarter of fiscal 2025, Commercial revenues grew 18.3%, while Commercial and International franchise revenues combined rose 15.2%. The Commercial segment — comprising wholesale sales to partner-operated stores and licensed distributors — has expanded at a 63% compound annual rate between fiscal 2020 and 2024.
The company’s partner-operated model underpins this surge. These locations require minimal capital expenditure from Build-A-Bear and allow the company to realize high-margin wholesale revenues by leveraging its partners' existing infrastructure and inventory management. With 157 partner-operated stores, now covering 25% of Build-A-Bear’s 627 global locations, this network is scaling faster than corporate stores.
CEO Sharon Price John credits the “capital-light partner-operated retail model” for accelerating profitability and broadening brand reach. CFO Voin Todorovic highlighted that higher Commercial gross margins helped lift the company’s total gross margin by 340 basis points year over year in the second quarter.
Management now expects at least 60 net new locations in fiscal 2025, mostly through partners. Beyond store sales, wholesale distribution of new collectibles such as Mini Beans and licensed collaborations adds recurring volume streams. The Commercial arm’s success reflects a structural shift as Build-A-Bear is evolving from an experiential retailer into a hybrid consumer-products brand. If this trajectory holds, the Commercial segment could soon rival its retail business in margin contribution, establishing itself as the company’s next long-term growth engine.
What the Latest Metrics Say About Build-A-Bear
Build-A-Bear, which competes with Walmart Inc. (WMT - Free Report) and Target Corporation (TGT - Free Report) , has surged 50.8% over the past year, outperforming the industry’s growth of 7.3%. While Walmart shares have rallied 30.5%, Target has declined 38.7% in the aforementioned period.
Image Source: Zacks Investment Research
From a valuation standpoint, Build-A-Bear's forward 12-month price-to-earnings ratio stands at 12.79, lower than the industry’s ratio of 17.84. BBW carries a Value Score of B. Build-A-Bear is trading at a discount to Walmart (with a forward 12-month P/E ratio of 37.74) but at a premium to Target (11.58).
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Build-A-Bear's current financial-year sales and earnings per share implies year-over-year growth of 7.4% and 6.9%, respectively.
Image Source: Zacks Investment Research
Build-A-Bear currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.