Key Highlights

● Second-quarter revenues fell 7.2% to US$115.3 million from US$124.2 million.

● Net income was US$8.8 million, or US$0.70 per diluted share, versus US$0.94.

● Fiscal 2026 revenues are now expected at US$500 million to US$525 million.

● Cash was US$14.0 million at quarter end, with no revolver borrowings.

Build-A-Bear Workshop Inc (NYSE:BBW) has been in focus since it cut its fiscal 2026 guidance alongside second-quarter results on August 27, 2026. Total revenues for the quarter ended August 1, 2026 fell 7.2% to US$115.3 million from US$124.2 million. Chief executive Chris Hurt said the quarter's results "fell short of our expectations".

The company runs experiential, mall-based stores where children make their own stuffed toys, and also earns income from commercial partnerships and international franchising. It operated 674 locations at quarter end: 379 corporately managed, 177 partner-operated and 118 franchised, a net gain of five in the period.

What the numbers show

Net retail sales fell 7.1% to US$106.5 million, while commercial and international franchise revenue slid 9.0% to US$8.8 million. E-commerce demand dropped 15.6%. Pre-tax income was US$11.6 million, a 10.1% margin, against US$15.3 million and 12.3% a year earlier. Gross margin fell by 340 basis points, which the company attributed to occupancy deleverage and higher promotions, although lower incentive compensation helped selling, general and administrative costs.

Net income was US$8.8 million, or US$0.70 per diluted share, compared with US$12.4 million, or US$0.94, a year earlier. EBITDA was US$15.2 million, or 13.2% of revenues, versus US$18.8 million. For the first 26 weeks, revenues were US$240.6 million, down 4.8%. Reported pre-tax income of US$35.5 million included a US$7 million tariff refund relating to fiscal 2025 costs, so adjusted pre-tax income was US$28.5 million. Reported first-half diluted earnings per share were US$2.16, while adjusted earnings per share of US$1.73 compared with US$2.11 a year earlier. Tariff costs were about US$1 million in both quarters.

Guidance and shareholder returns

Management now expects fiscal 2026 revenues of US$500 million to US$525 million. Pre-tax income is guided at US$60 million to US$68 million, including an approximately US$13 million tariff refund. Excluding the portion relating to the prior year, the company put the range at US$53 million to US$61 million. It also said some wholesale opportunities may take longer than expected, and it expects at least 50 net new experience locations this year.

The balance sheet is lean. Cash was US$14.0 million at quarter end, down 64.2% year on year, mainly because of share repurchases and the timing of capital spending, with no borrowings under the revolving credit facility. Inventory was US$81.1 million. In the second quarter the company spent US$5.6 million on buybacks and US$2.9 million on dividends, and about US$43.2 million remained under its US$100 million repurchase authorization as of August 26, 2026. Capital expenditure was US$8.6 million in the quarter and US$15.4 million for the year to date, with the company guiding to about US$25 million for the full year.

Dividend and risks

The company pays a quarterly dividend of US$0.23 per share, or US$0.92 annualized, and the last ex-dividend date was September 24, 2026.

Risks include softer consumer spending, mall traffic, promotional pressure on margins and tariff costs. A shareholder-rights law firm has also promoted an investigation of the company; such notices are not findings.

A Lowered Range Awaits Its First Check

Build-A-Bear now expects fiscal 2026 revenues of US$500 million to US$525 million and pre-tax income of US$60 million to US$68 million, including an approximately US$13 million tariff refund. The company operated 674 locations at the end of the second quarter and expects at least 50 net new experience locations this year, while its cash balance of US$14.0 million sits against no borrowings under the revolving credit facility.

The third-quarter report will show whether the company holds its lowered range. Investors can also follow new store openings, including its ICON Park experience, further progress on wholesale opportunities that management said may take longer than expected, and continuing share buybacks under the roughly US$43.2 million that remained on its US$100 million repurchase authorization.