Build-A-Bear Workshop — Fiscal Second Quarter 2026 Earnings Summary

Financial Performance

• Second-quarter total revenues were $115.3 million, a 7.2% decrease year-over-year from $124.2 million.
• Net retail sales were $106.5 million, down 7.1% year-over-year.
• Consolidated e-commerce demand decreased 15.6% year-over-year.
• Commercial and international franchise revenues totaled $8.8 million, a 9.0% decrease year-over-year.
• Pre-tax income was $11.6 million (10.1% of revenue), down from $15.3 million (12.3% of revenue) in the prior year period.
• Diluted earnings per share (EPS) were $0.70, compared to $0.94 in the prior year period.
• EBITDA was $15.2 million (13.2% of revenue), down from $18.8 million (15.1% of revenue) in the prior year period.
• For the first half of fiscal 2026, total revenues were $240.6 million, a 4.8% decrease year-over-year.
• First-half pre-tax income was $35.5 million (14.8% of revenue), up from $34.9 million (13.8% of revenue) in the prior year period.
• First-half diluted EPS were $2.16, compared to $2.11 in the prior year period.
• First-half EBITDA was $42.9 million (17.8% of revenue), up from $41.9 million (16.6% of revenue) in the prior year period.
• The Company incurred approximately $1 million in tariffs and related costs during the second quarter and approximately $1.5 million during the first half.
• Cash and cash equivalents totaled $14.0 million at quarter-end, a 64.2% decrease from $39.1 million at the end of the second quarter last year.
• Inventory at quarter-end was $81.1 million, a 0.8% decrease from the prior year.
• Capital expenditures were $8.6 million for the quarter and $15.4 million for the first half, compared to $3.4 million and $6.3 million in the respective prior-year periods.
• The Company had no borrowings under its revolving credit facility at quarter-end.

Guidance and Future Outlook

• The Company lowered its fiscal 2026 revenue outlook to a range of $500 million to $525 million.
• The Company lowered its fiscal 2026 pre-tax income outlook to a range of $60 million to $68 million.
• The pre-tax income outlook includes an approximately $13 million IEEPA tariff refund; excluding the $7 million impact from prior-year costs, adjusted pre-tax income is expected to be $53 million to $61 million.
• The outlook reflects $10 million to $11 million of ongoing tariffs and related costs based on the current 12.5% tariff rate.
• The outlook includes approximately $3 million in longer-term investments.
• Commercial revenue is expected to be approximately flat compared to fiscal 2025.
• Capital expenditures are expected to be approximately $25 million for the full year.
• Depreciation and amortization is expected to be approximately $17 million for the full year.
• Net new unit growth of at least 50 experience locations is expected through the combination of corporately-managed, partner-operated, and franchise business models.
• The income tax rate is expected to approximate 24%, excluding discrete items.
• The outlook considers tariffs, labor costs, changes in freight expense, and ongoing inflationary challenges.

Business Segments and Product Lines

• The Company delivered net new unit growth of five global experience locations in the second quarter, consisting of three corporately-managed locations, six franchise locations, and a net decline of four partner-operated locations.
• At the end of the second quarter, Build-A-Bear had 674 global locations: 379 corporately-managed, 177 partner-operated, and 118 franchise locations.
• The Company plans to accelerate experience location openings during the remainder of the year.
• A new, highly immersive, multi-level, largest retail-tainment destination is scheduled for grand opening at ICON Park in Orlando.

Market and Competitive Landscape

• Wholesale opportunities may take longer to realize than previously anticipated.
• The Company operates in more than 30 countries.

Risks and Challenges

• Second-quarter results fell short of expectations.
• The business faces ongoing inflationary challenges, labor costs, and changes in freight expense.
• The business is exposed to tariffs and related costs, including the current 12.5% tariff rate.
• Geopolitical environment, macroeconomic conditions, foreign currency exchange rates, and potential future tariff changes are factors that could materially affect results.

Management Commentary and Tone

• CEO Chris Hurt stated that while fiscal 2026 was expected to be back-half weighted, second-quarter results fell short and wholesale opportunities are delayed, leading to a moderated outlook.
• Management continues to execute against long-term strategic growth initiatives.
• CFO Voin Todorovic noted that continued strong profitability and disciplined capital allocation drove the return of $49 million to shareholders over the past 12 months.
• Management expects cash generation to increase through the remainder of the year, supported by profitability, prudent expense management, and capital expenditure timing.

Other Key Points

• For the first half of fiscal 2026, the Company returned $22.7 million to shareholders through share repurchases and quarterly dividends.
• In the second quarter, the Company utilized $5.6 million to repurchase 155,118 shares and paid a $2.9 million quarterly cash dividend.
• In the first half, the Company utilized $17.1 million to repurchase 403,236 shares and paid $5.8 million in quarterly cash dividends.
• Since the end of the second quarter through August 26, the Company repurchased an additional 39,122 shares for $1.5 million.
• The Company has $43.2 million remaining under its $100.0 million board-authorized stock repurchase program.
• For the first half of fiscal 2026, excluding the $7 million IEEPA tariff refund impact, adjusted pre-tax income was $28.5 million (11.9% of revenue) and adjusted EPS was $1.73.
• For the first half of fiscal 2026, excluding the $7 million IEEPA tariff refund impact, adjusted EBITDA was $35.9 million (14.9% of revenue).