Dive Brief:
- Build-A-Bear Workshop said Tuesday that its board of directors has authorized “an exploration of a full range of strategic alternatives” after the toy retailer reported net first quarter income of $3.5 million, down sharply from $6.8 million in Q1 2015.
- Build-A-Bear blamed the Q1 decline on expenses related to the rollout of its new Discovery format stores along with costs related to international expansion, including China, and increased tax rates.
- Build-A-Bear has retained Guggenheim Securities as its financial advisor and Bryan Cave as its legal counsel to assist with the strategic review. No timetable has been set for the review process.
Dive Insight:
Just a year ago, Wall Street applauded Build-A-Bear’s turnaround efforts under President and CEO Sharon Price John. After closing dozens of underperforming stores, adding new products for boys and acquiring a number of high-profile licenses, Build-A-Bear posted sales increases of 170% in the first quarter of 2015 and returned to profitability.
But now Build-A-Bear is once again scrambling for options. Despite posting consolidated comparable sales (stores and e-commerce) increases of 2.2% and modest revenue growth of $1.6 million during Q1 2016 compared to the year-ago quarter, Build-A-Bear’s quarterly income nosedived due to increases in marketing costs, higher compensation expenses and investments in new business initiatives.
The reversal of fortunes is forcing Build-A-Bear to bring in advisors, a sign it may seek a buyer.
"The authorization to explore strategic alternatives by our Board will enable us to evaluate the various opportunities to potentially accelerate our key growth initiatives while enhancing total shareholder value,” Price John said in a statement.
Build-A-Bear’s stock climbed as high as $13.76 following Tuesday’s announcement, its biggest intraday gain since Feb. 16, Bloomberg reports.
Build-A-Bear is the latest in a series of U.S. retailers at a crossroad. Embattled teen apparel retailer Aeropostale will close more than 100 of its 800 stores as it prepares to file for Chapter 11 bankruptcy protection later this week, the Wall Street Journal reported Tuesday. Sports gear retailer Sports Authority will put its operations up for sale May 16, without any intent to reorganize under Chapter 11 protection. Pacific Sunwear and Sport Chalet also filed for Chapter 11 protection in recent weeks.