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$6.88 -0.12 (-1.71%)
8/21/2008 4:01 PM

Build-A-Bear Workshop, Inc. (BBW)

CAPS Rating:
*

An International, company providing a 'make your own stuffed animal' interactive retail-entertainment experience.

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Avatar NetscribeRetail (35.20) Submitted: 1/16/07 1:30 AM : Underperform Start Price: $29.30 BBW Score: 65.85

Build-A-Bear Workshop offers a selection of merchandise, including approximately 30 styles of stuffed animals, as well as various clothing, shoes, and accessories for the stuffed animals. Company operates 226 stores across 44 U.S. states and Canada, 38 stores in the United Kingdom and Ireland, and 27 franchised stores operating internationally under the Build-A-Bear Workshop brand.

The company’s concept of plush toys and dolls appeals primarily to children and teens. However, as per NPD Group, plush sales have seen the most significant decrease in sales in the toy category. Also dolls, one of the companies’ offerings are experiencing negative trends in the industry. Toy market in US is undergoing a declining phase and as per the latest trends, kids are shunning traditional toys for interactive videogames.

Company’s revenue growth has also declined significantly in the past year and with similar industry trends in U.K, it would be tougher for the company to ignite its revenues in future. Moreover, same-store sales, one of the key performance indicators has been negative in the past several quarters and management expects the trend to continue in 2007 fiscal. Profitability margins of the company have been under scanner due to the acquisition of U.K stores in this fiscal. Margin pressure is likely to continue as management plans to open some more stores in UK in 2007. Also, management expects the acquisition to deliver value only in the long-term.

The company has achieved some success in non-traditional store locations and has been taking some initiatives to increase their licensing reveues, which are relatively very small. However in the near future, with negative industry outlook coupled with deteriorating financials, the scrip is expected to enter a bearish phase.

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Avatar NetscribeRetail (35.20) Submitted: 5/22/07 9:18 AM

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The entertainment-based retailer of customized stuffed animals Build-A-Bear Workshop (BBW) seems to be weathering a rough storm. In the past few years, revenue growth of the company has declined sharply owing to the softness in the retail sales of plush toys and dolls. Albeit, revenues grew by 18.6% in the first quarter of fiscal 2007, the rising popularity of video games is hampering the growth of the company. Net income of the company suffered by over 3.3% owing to the UK acquisition, which is expected to deliver value only in the long term.

Going forward, BBW expects the softness to continue in the North American markets, which could result in flat to negative same store sales. BBW seems to be testing new things in 2007 to stabilize its position in the toy market. The company is trying to lure its customers by bringing attractive characters like Shrek and Cody in its offerings. However, marketing spends associated with these programs are likely to be high which could put pressure on the margins.

One of the major projects for the company includes an agreement with ‘Retail Entertainment Concepts’ in order to offer better shopping experience to the children. However, company expects losses from this transaction in considering fiscal 2007 and views it a long-term opportunity. Also, the company has expanded its partnership with Landry’s to open stores inside Rainforest Caf. However, licensing forms a negligible chunk of entire sales and thus cannot be looked upon as a major sales driver. Company has still a long way to go in the UK business, which forms about 9.2% of the revenues, as it has not penetrated in the lucrative birthday parties business. Thus considering the unexciting business outlook and unimpressive financial performance, BBW is attracting some bearish sentiments at the prevailing price levels.

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