Build-A-Bear Workshop Fourth Quarter 2025 Earnings Call - Record Revenue and Rapid International Expansion, Even as Tariffs and SEO Shifts Bite Margins

Operator: Greetings, and welcome to the Build-A-Bear Workshop Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gary Schnierow, Investor Relations. Thank you, sir. You may begin.

Gary Schnierow, Investor Relations, Build-A-Bear Workshop: Thank you. Good morning, everyone, and welcome to Build-A-Bear’s fourth quarter 2025 earnings conference call. With us today are Sharon John, Build-A-Bear’s Chief Executive Officer, Chris Hurt, Chief Operating Officer, and Vojin Todorovic, Chief Financial Officer. During this call, we’ll refer to forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially. Please refer to our Forms 10-K and 10-Q, including the Risk Factors section. We undertake no obligation to update any forward-looking statement. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today’s earnings press release, which is distributed and available to the public through our investor relations website. Now, I’ll turn the call over to Sharon.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Thank you, Gary. Good morning, and thanks for joining us for Build-A-Bear’s fourth quarter fiscal 2025 earnings call. In addition to our earnings release, you may have read this morning’s announcement concerning my decision to retire as President and Chief Executive Officer of Build-A-Bear Workshop, and that longtime Chief Operations Officer, Chris Hurt, has been appointed by the Board of Directors to assume the CEO role on June 11, 2026, in accordance with a multi-year planned succession process. Given his instrumental impact on both the company’s turnaround and current success, Chris has proven to be an invaluable partner over the last 10 years. I am confident that his outstanding leadership skills, strategic insights, business acumen, and intimate knowledge of the brand and culture of this iconic company underscores his ability to take the organization to new heights.

With this news as a backdrop, after we provide the 2025 highlights, financial summary, and the 2026 outlook, we plan to share more about Chris and the transition, as well as an outline for the go-forward strategic framework before opening up the call for questions. Fiscal 2025 was a dynamic year marked by our continued focus on strategic store and global brand expansion, while we also worked to manage and mitigate unexpected tariff and global supply chain disruptions. With gratitude to the team, I am pleased to share that we ultimately delivered a solid year with both pretax income and revenue within our guidance range. In fact, we hit an important milestone for the company by delivering more than a half a billion dollars in annual revenue for the first time in Build-A-Bear’s history. However, we didn’t just barely cross the mark on the top line.

Specifically, revenue hit close to $530 million, which represents nearly 7% growth. While after accounting for $11 million in tariff and related costs, pretax income increased marginally to $67.2 million. We believe this performance not only reflects the company’s proven tenacity and resilience, but even in disruption, our ability to continue to focus on the ongoing execution of Build-A-Bear’s long-term strategic initiatives that we have shared over the past several years. One, expanding and evolving our experiential retail footprint. Two, advancing our comprehensive digital transformation. And three, investing to leverage the powerful equity of the Build-A-Bear brand while continuing to return capital to shareholders. With that, I’ll turn our first initiative, expanding our experiential retail locations, over to Chris.

Over the past decade, Chris has been central to evolving and improving performance across our corporate store base while also building the capabilities and models that allow us to efficiently grow the Build-A-Bear experience around the world. Chris?

Chris Hurt, Chief Operating Officer / Incoming Chief Executive Officer, Build-A-Bear Workshop: Thanks, Sharon. We remain committed to bringing our signature workshop experience, the cornerstone of the Build-A-Bear brand, into new markets through a mix of our corporately managed, partner-operated, and franchise business models. In the fourth quarter, we made significant progress, adding 11 net new experience locations across four continents, bringing our total to 64. For the year, we entered eight new countries, following the 10 countries added in 2024. This doubles our international footprint to 36 countries in just two years. Our entry into new markets and our expansion within established markets underscores the global appeal of the Build-A-Bear experience, the brand’s scalability, and our ongoing international growth. We ended the fiscal year with 375 corporately managed stores, 109 franchise locations, and 178 partner-operated locations.

Since Q2 of 2023, we have more than doubled the number of asset-light partner-operated locations, which we have grown to nearly 30% of our total portfolio. As we shared on our third quarter call, Build-A-Bear reentered Germany in the early part of the fourth quarter through one of our existing European partners, InnerSource, opening 4 standalone stores in key markets with tremendous success, as guests were thrilled to experience the brand once again in their home market. I am pleased to announce that this expansion continued in the first quarter with openings in Cologne and Hanover, marking an important step in our European growth strategy. Shifting back to the US, we continue to expand our corporate store footprint, building on the momentum from the opening of the first Build-A-Bear Hello Kitty and Friends Workshop in the popular Century City Mall in Los Angeles in October 2024.

In February, we opened two additional Build-A-Bear and Hello Kitty and Friends workshops in high traffic tourist premier malls at the Mall of America in Minneapolis and American Dream just outside New York City. These co-branded experiential stores complement our already established Build-A-Bear workshops at both destinations. These locations opened to strong traffic with early results, outpacing initial expectations to the delight of enthusiastic Hello Kitty and Build-A-Bear fans of all ages. Looking ahead, we plan to continue expanding our corporate store footprint and to debut our new multi-level next generation retail experience at Icon Park in Orlando, Florida later this year, a showcase for the brand’s experiential innovation. Exciting plans for this multi-level store include a new Build-A-Bear design studio offering a high level of customization as guests collaborate directly with a personal consultant to create a truly one of a kind furry friend.

This location will also feature the Build-A-Bear Bakeshop, an outdoor rooftop entertainment and event space, along with reimagined signature experience, including our Stuff Me and Hear Me stations, plus our new scent bar. This will truly be a must-visit attraction in this epicenter of global tourism. Overall, across our three business models, we expect to open at least 50 net new locations in 2026, with the majority of those openings in our partner-operated asset-light model. This continues our commitment to expanding all three of our business models and diversifying our location portfolio. As new Build-A-Bear Workshop experience locations open around the globe, we’re not only expanding our reach, we’re adding a little more heart to life in more places for more people and positioning Build-A-Bear for sustained global growth. I will now hand the call back over to Sharon.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Thank you, Chris. Brand expansion is critical to the long-term growth strategy, and bringing the unique and memorable Build-A-Bear experience to more markets and more consumers worldwide is paramount to achieving that goal. For our second initiative, the digital transformation effort, while progress was made on select consumer-facing upgrades, including the online digitization of our Record Your Voice offering to make it easier and faster for e-commerce guests to add a special personalized message to a new furry friend, most of our focus last year was on evolving behind-the-scenes infrastructure. This included continued IT work toward a necessary sweeping upgrade of legacy inventory management systems to enable future growth. As a result, some of our previously planned e-commerce advancements, which are a key part of the overall digital initiative, were delayed, contributing to disappointing online sales.

Additionally, we believe the more aggressive rollout of AI-driven changes by Google late last year, which have altered traditional SEO and digital advertising dynamics and have been linked to broader traffic headwinds across a wide array of DTC websites, contributed to suppressed traffic to buildabear.com as well. Addressing this shift will require both strategic and tactical changes, including reducing our reliance on organic search, upgrading our product schema to better align with emerging AI-driven discovery criteria, increasing the use of direct email, and expanding our social media efforts with more engaging content designed to drive direct click-through. As the digital environment continues to evolve, it’s important to note that we both recognize and strongly believe in the value of a true omni-channel strategy that includes a robust e-commerce business focused on collectors and gifting.

Looking ahead, we expect improved integration, stronger marketing and merchandising alignment, greater loyalty club engagement to extend lifetime value, and continued enhanced personalization options, all designed to improve traffic, conversion, and revenue while rebuilding our online foundation to address this evolving digital dynamic. Our third strategic initiative has been investing in the company in a manner designed to leverage our powerful brand equity to expand business opportunities and create new revenue streams. In short, these investments are intended not only to drive sales within our own retail space, but to also extend beyond it while still directly returning capital to shareholders. As an example, in 2024, we launched a new line of pre-stuffed branded Mini Beans with the intention of first selling them in our own workshops to gauge popularity and gain momentum before introducing them to other retailers.

Since launch, we have sold more than 3 million Mini Beans units, and as envisioned, this success led to product placement at a variety of independent retailers, and more recently, to a $multi-million wholesale order in the fiscal fourth quarter of 2025, which is now hitting shelves in approximately 1,500 Walmart locations across the U.S. In addition to returning nearly $40 million directly to shareholders via a combination of stocks and dividends. Another key investment has been in the expansion of Build-A-Bear’s growing storytelling and intellectual property ecosystem with the launch of Kabu. This fun, new animated episodic series for kids about friendship and positivity is based on some of our original characters, like Bearnard the teddy bear and Pawlette the bunny, and is translated into a popular kawaii aesthetic.

Kabu launched on Build-A-Bear’s very own YouTube channel toward the end of 2025, paired with a coordinated make-your-own product introduction of core characters. I’m pleased to report that the rollout of our Kabu episodes has already driven over 1 million views, and our Kabu character plush has already surpassed $1 million in sales. This marks an important step in building yet another proprietary IP concept intentionally designed to drive elevated consumer engagement through the strategic integration of content, product, and experiential retail to create fandom. Overall, even as we navigated unexpected and evolving supply chain disruptions with the financial impacts of tariffs, 2025 was a year of forward momentum.

From delivering record results for the fifth consecutive year with the highest revenue in our history, to operating in the greatest number of countries we’ve ever reached, to breaking ground on what will be our largest retail location ever, we continue to reinvent and reimagine what is possible for this beloved brand. Turning to the first quarter, thus far, we have seen mixed results, ranging from challenging traffic trends to achieving a record Valentine’s Day. In fact, Valentine’s Day was the largest revenue day in our North American store history, surpassing even last year’s record-breaking Black Friday.

We believe the Valentine’s Day performance was achieved through a combination of factors, including trend-right products, impactful in-store execution, and the evolved digital Record Your Voice technology, all brought together with a new marketing campaign entitled A Squeeze Away, which turned storytelling into outstanding results, earning recognition from Ad Age, who specifically noted our evolution into a multi-generational, highly customizable, and emotional-driven gifting platform. This serves as a proof point of what our brand can deliver when we effectively integrate product, marketing, and digital capabilities. Conversely, we estimate that some of the challenging traffic trends are due to a combination of factors, including tough comparative timing related to strong collector launches last year and the impact of severe weather across large portions of the country.

Importantly, the team is actively addressing the quarter-to-date traffic trends through targeted actions, including driving momentum around our Easter holiday collection, leveraging relationships tied to a slate of kid-focused entertainment, and introducing new merchandise collections, such as the innovative Frosted Animal Cookies assortment, which debuted last week. Although still early, boosted by the positive response to social marketing and UGC content, which has already generated nearly 250 million media impressions in less than a week. I’m pleased to share that since the launch of this creative new collection, we have seen a trend change with incremental improvements across key metrics, including traffic, dollars per transaction, and sales, both online and in stores. With that, I’ll turn the call to Voin Todorovic.

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: Thank you, Sharon, and good morning, everyone. It’s good to speak with you again today and review our fiscal fourth quarter and full year 2025 results. Before turning to the financials, I’d like to highlight a few key takeaways from the year. First, we met our guidance and delivered our fifth consecutive year of record results, underscoring the durability of our business model. We grew across all segments, expanded gross margin, and increased pre-tax income versus last year, even with the absorption of a negative tariff impact on our profitability. Moving to a more detailed review of our performance, total revenues for the quarter were $154.5 million, an increase of 2.7% year-over-year. Net retail sales for the fourth quarter were $139.5 million, essentially flat with last year.

Looking more closely at our direct-to-consumer business, although adverse January weather weakened our store traffic and caused select store closures in the quarter, overall, we saw a more significant challenge on a percentage basis than the national benchmark. Specifically, we estimate that adverse weather conditions have resulted in approximately $2 million in lost revenue. The impact from traffic challenges was mostly offset by higher dollars per transaction as selective price increases and improved product mix contributed to growth in average unit retail. Our overall traffic for fiscal 2025 outperformed the fourth quarter and outpaced the national average. Ending slightly down for the year and on a two-year stack, we were down less than 1% compared to the national benchmark, which was down about 5%.

E-commerce demand decreased 13.6% for the quarter, primarily due to traffic declines and difficult comparisons from strong licensed product launches last year. As a result, e-commerce demand was down 5.5% for the full year. Commercial revenue, which reflects wholesale sales to our partner operators as well as Walmart shipment late in the year, increased 42.2% for the quarter and 23.4% for the year. Gross margin for the quarter was 55.2%, down 140 basis points compared to last year, reflecting the negative impact of tariffs, partially offset by selective price increases. SG&A expense was $63.9 million, or 41.4% of total revenues, compared to 38.4% last year.

The increase was driven by higher compensation costs, medical expenses, additional inflationary pressures, and the timing of marketing expenses. Pre-tax income was $21.5 million compared to $27.5 million last year. This reflects approximately $6 million in tariffs and related costs and over $1.2 million combined in increased medical expenses and labor costs related to minimum wage increases, which were previously shared as part of our full year estimate. Earnings per share was $1.26 compared to $1.62 last year, reflecting lower pre-tax income and higher effective tax rate, partially offset by a lower share count. Now moving to select full-year results. Fiscal 2025 was the record year, with total revenues of $529.8 million, up 6.7% year-over-year.

Pre-tax income of $67.2 million was also a record, though it was negatively impacted by approximately $11 million of tariff-related impacts and about $5 million of higher medical and labor expenses, which were previously shared. Earnings per share were $3.99, representing 5% growth for the year. Tariffs and related costs reduced full-year EPS by approximately $0.65. Turning to the balance sheet. Cash and cash equivalents totaled $26.8 million at year-end compared to $27.8 million last year. Inventory at year-end was $82.2 million, an increase of $12.4 million. This increase reflects the inclusion of tariffs in inventory costs and incremental investments to support our expected growth across different business channels. As a reminder, inventory held for our international corporate and partner-operated stores is not subject to tariffs.

Turning to the outlook. We expect total revenues to grow at a mid-single digit rate, driven in part by the addition of at least 50 net new experience locations, the majority of which are expected to be international partner-operated. Revenue growth should accelerate as the year progresses, with first quarter revenue roughly flat with last year. Retail segment revenue is also expected to build as the year progresses, supported by easier comparisons in the second half of the year and increased store count. In the commercial segment, we expect revenue growth of at least 20% for the year, with significant back half weighting.

Pre-tax income is expected to range from a mid-single digit decline to low single digit growth, reflecting a $16 million full estimated impact from tariffs and tariff-related costs and approximately $3 million in longer-range investments to support wholesale growth and international expansion, as well as pre-opening costs for our Icon Park location. This outlook includes approximately $5 million in incremental tariffs compared to last year. Specifically, the first half of 2026 will have approximately $8 million of incremental tariff costs, while the second half, based on current rates, should have approximately $3 million less of tariff costs. For purposes of this guidance, we are assuming the current 10% tariff rate will be in effect for the remainder of the fiscal year. The amount and timing of any potential tariff changes or refunds remain uncertain.

However, any refunds received would create an incremental benefit. With that, I would like to thank all of our store and warehouse associates and corporate team members for contributing to our record 2025 results, which have positioned us for a sixth consecutive successful year in 2026. I will now turn it back to Sharon.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Thank you, Voin. As I approach nearly 13 fulfilling years at the helm, I’ve made the decision to retire as President and CEO of Build-A-Bear Workshop. As noted, my departure follows a multi-year planned succession process, culminating with the transition of my responsibilities to our Chief Operations Officer, Chris Hurd, on June 11. After which, I look forward to continuing to serve on the board and as an advisor to Chris in his new role. In preparation for today, my 51st earnings call, I couldn’t help but reflect on the progress the company has made and thought it would be appropriate to share a few highlights comparing 2025 to the last pre-COVID year of 2019. Since then, the impact of our strategic execution has been striking, driven by deliberate investments that have reshaped our business model and potential long-term trajectory.

Beyond expanding Build-A-Bear’s addressable market and global footprint, the transformation is most evident in the significant operational and financial improvements we’ve achieved, from store productivity to meaningful growth in revenue and margin, including delivering a more than 50% increase in total revenues, nearly doubling our store contribution margin to approximately 25%, and expanding pre-tax margin from roughly zero to almost 13%. The combination of revenue growth and margin expansion since 2019 has generated materially higher free cash flow after strategic investment. Again, that free cash flow has enabled a combined $170 million in dividends and the repurchase of more than 4 million shares, reducing our share count by 25% from its peak and contributing to earnings per share growth from $0.02 to $3.99, as well as meaningful share price appreciation.

We have built a robust infrastructure supported by a clean balance sheet and a team that has demonstrated the ability to navigate challenges and deliver profitable growth. Importantly, this strategy, including our investments in the brand, was designed to position the company to scale more rapidly over time. Simply put, we’ve been building a strong foundation while continuing to invest in the iconic brand status, diversifying and growing the business by reaching more consumers in more places with more products for more occasions. Against that backdrop, and with Build-A-Bear positioned at the intersection of pop culture, nostalgia, kidulting, in-person experiences, and personalization, we believe the timing is right for the next phase. This step is intended to continue the company’s success, given Chris’ instrumental role spanning from the multi-year turnaround to the current record results.

Over the past decade, Chris has led the company’s largest business unit, Global Retail Operations, delivering top-tier economic performance while also overseeing the logistics, real estate, and store development teams. He is also the architect of the recent successful international expansion, with his focus on leveraging a unique asset-light partner-operated model to efficiently introduce the brand to more fans around the world, in addition to applying his brand, operational, and leadership expertise to other key areas of the organization, including merchandising, marketing, and licensing. Chris’s broad company history and relevant experience have wholly prepared him to lead Build-A-Bear to its next great chapter of success. In preparation, over the past few years, Chris and the team have been identifying, vetting, and researching a framework to establish a future-looking strategic construct designed to focus on scaling the company.

From that work, we have defined four strategic pillars supported by four platform areas. These four pillars are intended to drive incremental revenue, with pillars one and two continuing to leverage proven strategies with an expectation that they will help fund the expansion into the newer revenue streams represented by pillars three and four. With that, I will hand it over to Chris.

Chris Hurt, Chief Operating Officer / Incoming Chief Executive Officer, Build-A-Bear Workshop: Thank you. I would first like to take a moment to express my appreciation to the board for entrusting me with the opportunity to evolve and expand our successful strategy as the next CEO of Build-A-Bear, and personally thank Sharon for her leadership, ongoing counsel, and inarguable positive impact on this company. I’m very proud of my tenure and contribution to the success of this iconic business across multiple areas of the company, and I look forward to this opportunity to drive Build-A-Bear forward with the goal of continuing to create long-term shareholder value. With that, I’d like to take you through our strategic pillars that Sharon just mentioned. Pillar one is organic growth. While we expect to add new and faster-growing revenue streams over time, we must also continue to drive our core business.

We plan to do this by optimizing our omni-channel model via deeper integration, greater visibility, and more meaningful engagement with guests to improve lifetime value. Our physical experience locations remain critical in building the strength of the Build-A-Bear brand with our core kid consumer. At the same time, our e-commerce business remains our single largest store, serving as a key information destination and a highly complementary channel that extends our reach beyond the core by over-indexing with teen and adult gifting and collectible consumers. Pillar two is location expansion. We expect to continue growing our experiential location footprint across all three business models, corporately operated, partner-operated, and franchise, with a particular focus on international growth through our asset-light partner-operated approach. We expect to continue opening across global locations in a broad range of formats, from smaller shop-in-shops to larger tourist destination locations, including icon parks.

Pillar three is wholesale and outbound licensing. We are enhancing our capabilities from systems to sourcing to replenishment, to being able to seamlessly sell branded pre-stuffed products based on a variety of form factors to traditional wholesale customers beyond our workshops. This effort is not only designed to drive incremental revenue, but also to extend the brand presence to tens of thousands of new points of sale. We also intend to leverage our nearly 30 years of multi-generational brand equity to access substantial white space and enter adjacent non-plush categories through outbound licensing relationships, again, to bring Build-A-Bear branded items to more places. Importantly, we view this additional space as complementary to our workshops, with the intention of ultimately serving as a mechanism for awareness and trial, driving more traffic to our stores for the full Build-A-Bear experience.

Pillar four is gifting and personalization and is designed to gain more share of those growing multi-billion-dollar markets. Build-A-Bear is a beloved gift that creates memories for both the gift giver and recipient across multiple age groups and occasions. With over 1/3 of our revenue currently driven by birthdays, we have already proven that the brand is associated with gifting occasions, but believe there’s a robust opportunity to expand into gifts for more of life’s special moments, ranging from baby showers to retirement parties, with our powerful brand and personalization options serving as an important competitive point of difference. As noted, these four pillars will be supported by four platform areas focusing on brand, content, digital, and talent.

I’m very proud of this organization and the contributions I’ve been able to make and support the success of this iconic business across multiple areas of the company. I look forward to continuing to create long-term shareholder value as we execute on these strategic pillars. Sharon.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Thank you for that, Chris. Again, your track record of success at the company is unmatched. Not only clearly supported by the board’s stated confidence in you, but also the confidence of the entire leadership team and across the organization. Congratulations. I’m genuinely thrilled for you and for the future of this company, and I look forward to continuing to serve on the board as an advisor. In closing, there’s no way I could possibly capture the range of emotions I feel or properly acknowledge all of the people who have been a part of my Build-A-Bear journey. Even so, I would like to extend my sincere gratitude to Maxine Clark, our founder, the entire Build-A-Bear family, from our stores to our warehouses to our bear quarters and our board of directors, past and present, to hundreds of partners and our investor community.

Most importantly, to the millions of incredible guests whose Build-A-Bear stories have never ceased to amaze and inspire me. Thank you for reminding me every day of the power of a teddy bear and the importance of our mission to add a little more heart to life. Now, I’ll turn the call back to the operator for questions.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Eric Beder with SCC Research. Please proceed with your question.

Eric Beder, Analyst, SCC Research: Good morning.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Good morning, Eric.

Eric Beder, Analyst, SCC Research: Congratulations, Sharon.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Thank you.

Eric Beder, Analyst, SCC Research: Congratulations, Sharon, on a great period of time here and look forward to the next venture. I want to talk about it very granular. We were at the FAO Schwarz store yesterday, and I want to talk about some. Talk to us about how that kind of expansion flows in here. I think the other piece here, when you talk about personalization with the ability to do embroidery in the store, how should we be thinking about the opportunities to continue to expand that personalization like that by even offering almost immediate kind of in-store personalization opportunities?

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Yeah. Thank you, Eric. First of all, we love that you go to our stores and that you shop. That’s good. But yeah, I mean, you know that we’ve been in FAO for many years. What you did walk into is an entirely new and updated version of it. We recently expanded our square footage pretty dramatically just a few years ago. That’s an exciting new location, and I know a lot of you guys are in New York. Feel free to stop by. What Eric’s referring to is one of the pillars that Chris noted is that personalization, customization, and gifting pillar. Now, we already have embroidery online, but having that kind of in-store, you know, visible experience for consumers is important.

Personalization, customization is a rising trend for consumers, and it’s perfect for Build-A-Bear, as we’ve already been in that space for many, many years. We see this as an opportunity to expand in key markets, more of these large tourist locations. Chris mentioned that it would be in our Icon store, but you can look at this as a test and learn, but absolutely something we wanna roll out. Chris, I don’t know if you wanna add any additional color to that.

Chris Hurt, Chief Operating Officer / Incoming Chief Executive Officer, Build-A-Bear Workshop: Yeah, no. FAO Schwarz has been an important brand area for us as we’ve been able to, as Sharon said, expand that location, and most recently, update the look of that store by adding the personalization of embroidery there. We also are able to do heat transfer to T-shirts to be able to even provide a more personalized experience in that location. As we said, this will provide us an opportunity to have an understanding of how we can incorporate that into more stores across our entire fleet. In the Icon Park store, we will have an even more robust personalization and customization design shop where people can make a one of a kind furry friend.

Eric Beder, Analyst, SCC Research: Great. Voin Todorovic, could you talk a little bit about the inventory? I know that the tariffs are gonna kinda skew the inventory flows, but how should you be thinking about inventory flows going forward for the rest of the 2026?

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: Yes. Our inventory, we finished the year a little bit more elevated compared to last year, as I mentioned, portion of that reflects the tariff cost. As a reminder, the tariffs were at a much higher level second half of last year. That’s reflected in our inventory. In addition to that, we are making investments in inventory to support the growth and expansion. We shared some things on the call earlier today about some of our new wholesale business. As well, we continue to expand internationally. We provided guidance on the call that we expect to add at least net 50 new location this year.

Eric, again, as we are growing in different business channels, the flow of that inventory may be different than what we have had in the past, just managing more of our direct to consumer piece. Again, we are diligent in managing our inventory and our expenses. We’ll continue to monitor and adjust. At the same time, we are keeping our options open because there is a lot of uncertainty around tariffs and tariff rates, and we are choosing to pull or push inventory really to mitigate some of those things that are outside of our control.

Eric Beder, Analyst, SCC Research: Great. Thank you, and good luck with the rest of the year.

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: Thank you.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Thank you, Eric.

Operator: Our next question comes from the line of Keegan Cox with D.A. Davidson. Please proceed with your question.

Keegan Cox, Analyst, D.A. Davidson: Hi. Thanks for the question. Congrats, Sharon, on the update, and congrats, Chris, on the new role. My question is on the kind of $3 million in long-term investments you guys talked about. I think it was on the digital business and, you know, some operations I bet in manufacturing. I guess, can you bucket how much you’re spending in each area that you kinda talked about in the prepared remarks?

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: Yes, Keegan, I’ll take that. You know, thanks for the question. You know, it’s very important for us to continue to make strategic investments and longer term investments to support the growth. You know, over the last five years, we delivered record results, record profitability, and we continue to make investments in our business. We are trying really to maintain this ratio of SG&A and pre-tax and continue to really have high flow through business. At the same time, as we are making some of these longer term investments, and I’ll pick on a couple of those that we highlighted, Icon Park, and Chris shared like a lot more detail and specificity about that store. You know, these are long-term investments and, you know, there is just like elevated pre-opening expenses and things that we are trying to do around that store.

Similarly, when we talk about growth of wholesale, international expansion, we are making these investments up front and the revenue is expected to come at a little bit later date. We are just calling out some of those things, specifically, especially around the uncertainty that’s taking place in the international markets, considering the current geopolitical situation and the same impact of tariffs and how that may impact our wholesale order flow, you know, there are investments that we are committed to because we believe in the future. We are guiding to a mid-single-digit% growth in 2026, and we are gonna continue to make investments. You know, $3 million, you know, just we wanted to help people out as we provide guidance for next year that our pre-tax margin is gonna grow at a slower rate than our, basically, revenue growth.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Yeah, Keegan, I mean, as Boyan noted, we need to be able to make some investments where the return might be in a little more of a future date than in the quarter of the year or the year that we’ve been operating. Icons, as he said, it’s a great example. I mean, even in these disruptions, we believe, and I think the numbers prove it, that the underlying strengths of the brand, and the strategy are strong. We can’t operate just based on the constant disruptions of this tariff rate, this is happening, or, you know, some situation overseas. Of course, we think about that in the way we plan as on numerous fronts on how we import, what we do, the choices that we’re making on a global basis.

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: Build-A-Bear’s been here 30 years, and we believe Build-A-Bear can be here 30 more, and we have to think like that.

Keegan Cox, Analyst, D.A. Davidson: Got it. Just a follow-up on kind of the momentum you guys are seeing in your commercial and franchise businesses. You talked about the kinda win with the Walmart wholesale orders. I’m just wondering more so on, like, the partner-operated stores, are there any new partners there, which countries you opened in, and I guess kinda how those stores are maturing at this point? I think you’ve been in Italy for a year or two now, so just kinda curious on that front.

Chris Hurt, Chief Operating Officer / Incoming Chief Executive Officer, Build-A-Bear Workshop: Yeah. Thank you. As we talked about, you know, our strategy is to expand our global footprint in our three business models, our corporate operated, our partner operated, and our franchise business. This has certainly contributed to these record-breaking results. Last year, we did open in 8 countries, Estonia, Finland, Georgia, Germany, as I mentioned, which is a real key market for us in our European expansion, along with Panama, Peru, Uzbekistan, and Venezuela. This is important as we move into these global markets that we not only, as I talked about in our pillars, is our organic core business in growing the existing stores that we’ve opened over the last two years. Over the last two years, we’ve opened over 125 experience locations.

As we said today, we’ll open at least 50 new experience locations this year. Most of those will be in our international partner-operated asset-light formats. These provide us an opportunity to really expand the brand and be able to do it quickly and with established partners. Italy is our biggest area where we have 15 partner-operated locations right now and shows how there’s a lot of white space in this area of global expansion.

Keegan Cox, Analyst, D.A. Davidson: Great. Thanks for the questions.

Operator: As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Chris Moore with CJS Securities. Please proceed with your question.

Chris Moore, Analyst, CJS Securities: Hey, good morning, guys. Thanks for taking the call. And congrats to Sharon and Chris as well. Maybe just start with the guide on the pre-tax margins, mid-single-digit% decline to low single-digit% increase. Can you maybe just walk through or talk about some of the key variables that’ll determine kinda where you wind up on that continuum? Sure. As we mentioned, our full-year guide reflects incremental $5 million of estimated tariff impact, assuming current rate. What I also shared in my remarks earlier, there is gonna be a little bit of timing between first half and second half.

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: That $5 million, we expect in the first half to see about $8 million negative impact of tariffs, and we would expect to see a benefit of $3 million versus this year in the second half of the year. This is caused by the fluctuation in tariff rates and the inventory flow through that we are seeing. In addition to that, as we just talked about, we are making investments for additional, I estimate about $3 million in these longer-range investments to support wholesale growth in our international expansion, as well as costs related to pre-opening of our Icon Park location in Orlando. When you think about, we have about, just between those two things, about $8 million of additional cost.

Even though our mid-single-digit range revenue growth, it’s a solid growth, but just from the pre-tax perspective, it is challenging to absorb in one year the level of impact that we are seeing, and thus the range that we have provided. With some of the things kinda like what we were trying to address in the previous question, some of those investments we are already committed because the store, the Icon store is gonna be opening in the early second half of this fiscal year. The investment to bring talent and support the wholesale organization and have the opportunity to grow in that channel, it’s important for us to make investments upfront. Then the expectation is for revenues and growth to come in subsequent quarters and years.

Chris Moore, Analyst, CJS Securities: Got it. Appreciate that. Very helpful. Maybe just as a follow-up and be a little bit longer term. In terms of the current mix between North America global locations, I mean, it had been 75/25. I’m guessing at the end of the year it’s. We’re getting closer to 70/30. Is that right?

Chris Hurt, Chief Operating Officer / Incoming Chief Executive Officer, Build-A-Bear Workshop: Yeah. That’s accurate. 70% and 30% in our international business.

Chris Moore, Analyst, CJS Securities: Is there, you know, we have talked about, you know, kinda typical mix for a successful global to-store in the 60/40 or 50/50. Is that mix, is that your goal? You know, is it, you know, is it a five-year target? Or just trying to get a, kind of a longer term, you know, thought process in terms of where you might be driving this to.

Chris Hurt, Chief Operating Officer / Incoming Chief Executive Officer, Build-A-Bear Workshop: Yeah, I can take that for you. As we talked about, one of our pillars is obviously expanding our experience locations. As I said, over the last two years, we’ve been able to open at least over 125 of those locations. We look for opportunities in both our domestic business and also our international business. We’re gonna look to see where those partners are located and where are the best opportunities for us to deliver the brand and be able to bring that experience to our guests. There’s not a particular area. There’s not a particular exact that we’re doing, but we’re looking across the globe to be able to see where are the best places that our brand should be able to be.

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: Chris, just to add a couple more things to that. We don’t have specific time, but, like, there is a lot of white space as we talk about some of those things. We are not trying to get to any specific numbers, 30, 60. You know, what we believe there is a big opportunity, we are only in 36 countries around the world. Chris and team have done terrific job expanding and driving some of those areas. Even in these existing markets, when we think about Germany, when we think about Italy, we are, you know, we have plenty of opportunities. Also, when we talk about these stores and the type of stores and formats that we have, they are not all the same.

You know, when we think and we compare, like, our full line stores versus shop-in-shops, and there are different economics, there are different types, but we believe there is growth. Previously, like, there is no reason that we shouldn’t have as many or more stores outside of the U.S. borders as we have within the U.S.

Chris Moore, Analyst, CJS Securities: I appreciate that. I will take the rest offline. Thanks, guys.

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: Thank you.

Operator: Our next question comes from the line of Steve Silver with Argus Research. Please proceed with your question.

Steve Silver, Analyst, Argus Research: Thanks, operator, and good morning, and thanks for taking the questions. Sharon, congratulations, and Chris as well. My first question, I know you guys mentioned not managing inventory based on near-term movements, but I’m curious as to whether the expectations for changes in the tariff landscape this year have prompted any shifts in the product sourcing mix.

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: I’ll take that, Steve. Thank you for the question. You know, inventory management and supply chain disruptions over the last 12-18 months have been really challenging, to say the least.

Steve Silver, Analyst, Argus Research: Sure.

Vojin Todorovic, Chief Financial Officer, Build-A-Bear Workshop: Some of those things have been really completely outside of our control, especially when you think about the fluctuations in tariff rates over the last couple of years. We have been as proactive and as aggressive in our decision-making to mitigate some of those impacts. I think we have executed well, considering the uncertainty. As we move forward, there is still a high level of uncertainty what may happen and how the administration will use tariffs to impact our business. We continue to work with our sourcing partners to manage things that are within our control, to manage flow. As I mentioned on previous calls, the luxury that we have in our inventory, a lot of product that we sell all year long, it’s core product.

It’s the same, or similar assortment that can be dressed in a variety of different outfits. It gives us the flexibility to work with our factories from the production planning perspective, from the costing perspective, as well as, you know, to support our international expansion. We will continue to do things. You know, once things get hopefully back to normal or before we had these fluctuations in tariffs, we will clearly address some of the things. It’s also very important for us to continue to make investment as we are making, and we are creating these goals to continue to grow our revenue and we are expanding in different channels.

As I mentioned earlier, some of those channels have different inventory turn and timing, and bringing in inventory to support wholesale business versus retail, it has a little bit of a different dynamic.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: I’m just gonna add a little bit there just for some more clarity. I just wanna be clear that when Voin talks about the fluctuation in tariff rates, we’re not talking about just tariff rates going up and down. We’re talking about tariff rates changing from country to country on some, you know, monthly basis. And when I spoke about my gratefulness to the team for delivering a strong 2025, that shout out is largely to this logistics and financial group for what they’ve been able to do with with an ever-changing environment, from creating these core products with availability for us to import those from multiple factories in multiple countries, so we can kind of shift in the moment on the delays or pull forward of our products and inventory.

you know, when you look at that elevated inventory number and you think about how we’ve been managing it, I’m really proud of where we’ve landed for the year, frankly. Remember that toys prior to this situation were tariff-free. This was just not something that we really had to deal with. I’m just incredibly proud of the way this company has worked through this disruption.

Steve Silver, Analyst, Argus Research: That’s helpful. Great. One more, if I may. You mentioned the expectation for there to be 50 new locations opened in 2026. I’m curious as to whether there’s any color coming from your discussions with your partners, just in terms of that mix of the international expansion, whether a majority of that will be new countries being entered versus penetration into some of the recent countries you’ve entered over the last couple of years.

Chris Hurt, Chief Operating Officer / Incoming Chief Executive Officer, Build-A-Bear Workshop: Yeah, as we said, we’ve guided to at least 50 net new experience locations, and those will be with some of our current partners, and we are looking at new countries and new partners that we can expand our global footprint. As Voin Todorovic mentioned, we believe there’s a lot of white space within our global opportunity to bring the brand to more places. As we talked about reentering Germany with 4 stores in the fourth quarter and 2 in the first quarter, clearly that country has a lot of opportunity for us to expand. We looked at Italy with 15. We will look at both new countries for expansion, and we will look at partners that can expand within their territories and their areas over the course of this year and beyond.

Steve Silver, Analyst, Argus Research: Great. Thanks so much, and best of luck across the year.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Thank you.

Operator: Our final question comes from the line of Greg Gibas with Northland Securities. Please proceed with your question.

Greg Gibas, Analyst, Northland Securities: Great. Thank you. Thanks for taking the questions. Congrats, Chris. Congrats, Sharon. Hey, I think you addressed a lot of my tariff-related questions. Appreciate the color there. You know, maybe wanted to follow up on, you know, your commentary around the SEO challenges, and I guess the headwinds there. You know, to what maybe degree do you believe that impacted traffic in a way? Like, what’s kind of the level of the headwind that you’re kind of looking to offset with those measures that you discussed?

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Yeah. Thank you. It’s such an interesting dynamic of how quickly, you know, the digital environment is evolving and changing. If you can track this, what’s going on out in the digital world on this shift to AI-driven searches, right? What’s happening is that now when consumers search, the solution is in its full form versus providing just different websites for them to do an automatic click-through. There’s a new terminology, apparently, that’s happening. It’s called the Clickocalypse. Like, you know, so where that direct click-through through organic search has significantly declined.

The reports are on a macro basis, as we don’t always share the specifics, but that’s a double-digit impact to the direct click-through, which was very measurable from organic search to these consumer websites. You know, that shift that we that needs to happen for us, we’re actually very well suited for what is expected to be the positive attributes of the brands and the companies that will be able to overcome this. One is that you’re a strong branded company, so people are really looking for you and your brand. One is that you can create unique and engaging content.

Another is that you have the ability to speak directly to your consumers, which we’re able to do through, I mean, we have, like, an 80% capture rate at our stores of people that shop at Build-A-Bear, so we can send them direct emails. We’re also building this muscle, as you saw when I shared just about the Frosted Animal Cookie launch on social media and getting more people engaged and involved. Because every time we get a direct click through the PDP page or the product page, that is going out and around organic search.

That’s going to have to be a bigger part of the way we market and the dollars and the spend that we market with, to make sure that we’re getting directly to the consumer versus relying on what was a growing aspect of driving sales online, organic search and SEO. You know, there’ll be a decrease in our SEO spend and an increase in direct marketing.

Greg Gibas, Analyst, Northland Securities: Thanks. That’s very helpful. Appreciate that. I guess I wanted to follow up, and I apologize if I missed this, but just trends within the Mini Beans product line. I’m curious how that trended in the quarter.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Yeah. Well, we mentioned we sold, like, 3 million Mini Beans. I mean, not in the quarter, but maybe someday. Since its launch, we’re still seeing positive trends on Mini Beans. You know, not now, we’re not just launching the core products. We’re launching Mini Beans and with some of our licenses. We’re launching them with our things that we know the collectors are gonna love. We’re launching them in conjunction with our seasonal products. We’re using Mini Beans to drive our marketing stories as well as just the product sales of Mini Beans. They’re also, we’re creating unique Mini Beans for some of our partners, like we mentioned Walmart with the 1,500 stores.

Some of the early, again, UGC, it’s fun to be a brand, is all about the search for some of these unique Mini Beans at Walmart right now.

Greg Gibas, Analyst, Northland Securities: Got it. That’s great. That’s great to hear. Hey, I guess last one. Are you able to kinda comment on the rough cadence of expectations for new unit growth throughout the year?

Chris Hurt, Chief Operating Officer / Incoming Chief Executive Officer, Build-A-Bear Workshop: Mm-hmm. As we talked in our back half weighted will be where you’ll see the most of our experience location growth for this year.

Sharon John, President and Chief Executive Officer, Build-A-Bear Workshop: Most importantly, that Icon store. Big, single location opening in the back half of the year.

Greg Gibas, Analyst, Northland Securities: Yep. Great. Well, hey, thanks very much.

Operator: Thank you. Mr. Hurt, I’d like to turn the floor back over to you for closing comments.

Chris Hurt, Chief Operating Officer / Incoming Chief Executive Officer, Build-A-Bear Workshop: Thank you for joining us today. I look forward to sharing more details on the evolved strategic pillars and platform areas on upcoming calls as we usher in this exciting new chapter for the company. We look forward to you joining us for our first quarter 2026 call. Thank you.

Operator: Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.