Build-A-Bear Workshop, Inc. (NYSE:BBW) Q4 2025 Earnings Call Transcript

Build-A-Bear Workshop, Inc. (NYSE:BBW) Q4 2025 Earnings Call Transcript March 12, 2026

Build-A-Bear Workshop, Inc. beats earnings expectations. Reported EPS is $1.26, expectations were $1.23.

Operator: Greetings, and welcome to the Build-A-Bear Workshop, Inc. 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 requires operator assistance during the conference, please press 0 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. Thank you.

Gary Schnierow: Good morning, everyone, and welcome to Build-A-Bear Workshop, Inc.’s fourth quarter 2025 earnings conference call. With us today are Sharon Price John, Build-A-Bear Workshop, Inc.’s Chief Executive Officer; Christopher Hurt, Chief Operating Officer; and Voin Todorovic, Chief Financial Officer. During this call, we will 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 statements. 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. I will now turn the call over to Sharon.

Operator: Thank you, Gary.

Sharon Price John: Good morning, and thanks for joining us for Build-A-Bear Workshop, Inc.’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, Inc., and that long-time Chief Operations Officer, Chris Hurt, has been appointed by the Board of Directors to assume the CEO role on 06/11/2026 in accordance with a multiyear 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 ten years, and I am confident that his outstanding leadership skills, strategic insights, business acumen, and intimate knowledge of the brand and culture of this iconic company underscore 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 tariff and global supply chain disruption. 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-billion dollars in annual revenue for the first time in Build-A-Bear Workshop, Inc.’s history.

However, we did not just barely cross the mark on the top line. Specifically, revenue hit close to $530,000,000, which represents nearly 7% growth. After accounting for $11,000,000 in tariff and related costs, pretax income increased marginally to $67,200,000. 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 Workshop, Inc.’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 Workshop, Inc.

brand, while continuing to return capital to shareholders. With that, I will turn our first initiative—expanding our experiential retail location—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 Workshop, Inc. experience around the world. Chris?

Christopher Hurt: Thanks, Sharon. We remain committed to bringing our signature workshop experience—the cornerstone of the Build-A-Bear Workshop, Inc. 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 ten 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 underscore the global appeal of the Build-A-Bear Workshop, Inc. 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 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 Workshop, Inc. reentered Germany in the early part of the fourth quarter through one of our existing European partners, Intersource, opening four stand-alone 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 U.S., we continued to expand our corporate store footprint, building on the momentum from the opening of the first Build-A-Bear Workshop, Inc. 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 Workshop, Inc. Hello Kitty and Friends Workshops in high-traffic, premier tourist malls: at the Mall of America in Minneapolis and American Dream just outside New York City. These cobranded experiential stores complement our already established Build-A-Bear Workshop, Inc. 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 Workshop, Inc.

fans of all ages. Looking ahead, we plan to continue expanding our corporate store footprint and to debut our new multilevel 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 multilevel store include a new Build-A-Bear Workshop, Inc. 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 Workshop, Inc. Bake Shop, an outdoor rooftop entertainment and event space, along with reimagined signature experiences 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, Inc. experience locations open around the globe, we are not only expanding our reach—adding a little more heart to life in more places for more people—and positioning Build-A-Bear Workshop, Inc. for sustained global growth. I will now hand the call back over to Sharon.

Sharon Price John: Thank you, Chris. Brand expansion is critical to the long-term growth strategy, and bringing the unique and memorable Build-A-Bear Workshop, Inc. 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 a legacy inventory management system 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 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 is important to note that we both recognize and strongly believe in the value of a true omnichannel 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 3,000,000 Mini Beans units, and as envisioned, this success led to product placement at a variety of independent retailers and, more recently, to a multimillion-dollar wholesale order in 2025, which is now hitting shelves in approximately 1,500 Walmart locations across the U.S. In addition to returning nearly $40,000,000 directly to shareholders via a combination of tax and dividends, another key investment has been in the expansion of Build-A-Bear Workshop, Inc.’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 Bernard the teddy bear and Paulette the bunny, and it is translated into a popular kawaii aesthetic. Kabu launched on Build-A-Bear Workshop, Inc.’s very own YouTube channel toward 2025, paired with a coordinated Make-Your-Own product introduction of core characters. I am pleased to report that the rollout of our Kabu episodes has already driven over 1,000,000 views, and our Kabu character plush has already surpassed $1,000,000 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 disruption 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 have 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 product, 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 multigenerational, highly customizable, and emotion-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 e-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 a quarter-billion media impressions in less than a week—I am 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 will turn the call to Voin.

Voin Todorovic: Thank you, Sharon, and good morning, everyone. It is good to speak with you again today and review our fiscal fourth quarter and full-year 2025 results. Before turning to the financials, I would 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 pretax 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 $154,500,000, an increase of 2.7% year over year, and net retail sales for the fourth quarter were $139,500,000, 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 resulted in approximately $2,000,000 in lost revenue. 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 $63,900,000, 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.

Pretax income was $21,500,000 compared to $27,500,000 last year. This reflects approximately $6,000,000 in tariffs and related costs and over $1,200,000 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 pretax income and a higher effective tax rate, partially offset by a lower share count. Now moving to select full-year results. Fiscal 2025 was a record year, with total revenues of $529,800,000, up 6.7% year over year. Pretax income of $67,200,000 was also a record, though it was negatively impacted by approximately $11,000,000 of tariff-related impacts and about $5,000,000 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 $26,800,000 at year end, compared to $27,800,000 last year. Inventory at year end was $82,200,000, an increase of $12,400,000. 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. Pretax income is expected to range from a mid-single-digit decline to low-single-digit growth, reflecting a $16,000,000 full estimated impact from tariffs and tariff-related costs, and approximately $3,000,000 in longer-range investments to support wholesale growth and international expansion, as well as preopening costs for our ICON Park location. This outlook includes approximately $5,000,000 in incremental tariffs compared to last year.

Specifically, the first half of 2026 will have approximately $8,000,000 of incremental tariff costs, while the second half, based on current rates, should have approximately $3,000,000 less of tariff costs versus last year. 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 Price John: Thank you, Voin. As I approach nearly thirteen fulfilling years at the helm, I have made the decision to retire as President and CEO of Build-A-Bear Workshop, Inc. As noted, my departure follows a multiyear planned succession process culminating with the transition of my responsibilities to our Chief Operations Officer, Chris Hurt, on June 11, after which I look forward to continuing to serve on the Board and as an adviser to Chris in his new role. In preparation for today, my fifty-first earnings call, I could not 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 Workshop, Inc.’s addressable market and global footprint, the transformation is most evident in the significant operational and financial improvements we have 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 pretax 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 $170,000,000 in dividends and the repurchase of more than 4,000,000 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 investment in the brand, was designed to position the company to scale more rapidly over time. Simply put, we have 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 Workshop, Inc. positioned at the center of pop culture, nostalgia, consulting, 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’s instrumental role spanning from the multiyear 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 Workshop, Inc. 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 strategy, 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.

Christopher Hurt: 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 Workshop, Inc., and personally thank Sharon for her leadership, ongoing counsel, and an inarguable positive impact on this company. I am 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 Workshop, Inc. forward with the goal of continuing to create long-term shareholder value. With that, I would 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 omnichannel 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 Workshop, Inc. brand with our core kids 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 Park. Pillar three is wholesale and outbound licensing. We are enhancing our capabilities from systems, to sourcing, to replenishment to be 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 thirty years of multigenerational brand equity to access substantial white space and enter adjacent non-plush categories through outbound licensing relationships, again to bring Build-A-Bear Workshop, Inc.

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 Workshop, Inc. experience. Pillar four is gifting and personalization, and is designed to gain more share of those growing multibillion-dollar markets. Build-A-Bear Workshop, Inc. is a beloved gift that creates memories for both the gift giver and recipient across multiple age groups and occasions. With over a third of our revenue currently driven by birthdays, we have already proven that the brand is associated with gifting occasions, but believe there is 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 am very proud of this organization and the contributions I have been able to make in support of 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 Price John: 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.

Christopher Hurt: I am genuinely thrilled for you and for the future of this company.

Sharon Price John: And I look forward to continuing to serve on the Board as an adviser. In closing, there is 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 Workshop, Inc. journey. Even so, I would like to extend my sincere gratitude to Maxine Clark, our founder; the entire Build-A-Bear Workshop, Inc. family—from our stores to our warehouses to our Bearquarters and our Board of Directors, past and present—to hundreds of partners and our investor community; but most importantly, to the millions of incredible guests whose Build-A-Bear Workshop, Inc. 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. I will now turn the call back to the operator for questions.

Operator: Thank you. We will now open for questions. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 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 speaking. 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: Good morning. Thank you. 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. And I think the other piece here, when you talk about personalization, was the ability to do embroidery in the store. How should we be thinking about the opportunities to continue to expand that personalization, like being able to offer almost immediate kind of in-store personalization opportunities?

Q&A Session

Sharon Price John: Thank you, Eric. First of all, we love that you go to our stores and that you shop. That is good. You know that we have been in FAO Schwarz for many years, and what you walked into is an entirely new and updated version of it, and we recently moved and expanded our square footage pretty dramatically just a few years ago. That is an exciting new location, and I know a lot of you are in New York—feel free to stop by. What Eric is referring to is one of the pillars that Chris noted: that personalization, customization, and gifting pillar. We already have embroidery online, but having that kind of in-store, visible experience for consumers is important, and personalization and customization are rising trends for consumers, and it is perfect for Build-A-Bear Workshop, Inc., as we have already been in that space for 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 at our ICON store, but this is a test and learn, and absolutely something we want to roll out. Chris, I do not know if you want to add any additional color to that.

Christopher Hurt: Yes. FAO Schwarz has been an important brand area for us, as we have 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 provide an even more personalized experience in that location. As we said, this will provide us an opportunity to understand how we can incorporate that into more stores across our entire fleet, and 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: Great. Voin, could you talk a little bit about the inventory? I know that the tariffs are going to kind of skew the inventory flows, but how should we be thinking about inventory flows going forward for the rest of 2026?

Voin Todorovic: Yes. Our inventory finished the year a little bit more elevated compared to last year. As I mentioned, a portion of that reflects the tariff cost, and, as a reminder, the tariffs were at a much higher level. We also plan to open at least 50 new locations this year. 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. We are diligent in managing our inventory and our expenses. We will continue to adjust, and 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 to mitigate some of those things that are outside of our control.

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

Sharon Price John: 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: Hi. Thanks for the question, and congrats, Sharon, on the update, and congrats, Chris, on the new role. My question is on the kind of $3,000,000 in long-term investments you talked about. I think it was on the digital business and some operations, I bet, in manufacturing. Can you bucket how much you are spending in each area that you talked about in the prepared remarks?

Voin Todorovic: I will take that. Thanks for the question. It is very important for us to continue to make strategic, longer-term investments to support growth. Over the last five years, we delivered record results and record profitability, and we continue to make investments in our business. We are trying to maintain this ratio of SG&A and pretax and continue to have high flow-through. At the same time, as we are making some of these longer-term investments, I will pick a couple of those that we highlighted. ICON Park, which Chris shared a lot more detail about—that store has elevated preopening expenses and things that we are trying to do around that store. Similarly, when we talk about growth of wholesale and international expansion, we are making these investments upfront, and the revenue is expected to come at a later date.

We are calling out some of those things specifically, especially around the uncertainty in international markets considering the current geopolitical situation and the impact of tariffs and how that may impact our wholesale order flow. There are investments that we are committed to because we believe in them. We are guiding to mid-single-digit growth in 2026, and we are going to continue to make investments. The $3,000,000—we wanted to help people out as we provide guidance for next year. Our pretax margin is going to grow at a slower rate than our revenue growth.

Sharon Price John: As Voin noted, we need to be able to make some investments where the return might be at a future date, not necessarily within the quarter or the year. ICON is a great example. Even in these disruptions, we believe—and the numbers prove it—that the underlying strength of the brand and the strategy are strong. We cannot operate just based on constant disruptions of a changing tariff rate or a situation overseas. Of course, we plan on numerous fronts regarding how we import, what we do, and the choices we are making on a global basis, but Build-A-Bear Workshop, Inc. has been here thirty years, and we believe Build-A-Bear Workshop, Inc. can be here thirty more, and we have to think like that.

Keegan Cox: Got it. And just a follow-up on the momentum you are seeing in your Commercial and franchise businesses. You talked about the win with the Walmart wholesale orders. On the partner-operated stores, are there any new partners there? Which countries did you open in? And how are those stores maturing at this point? I think you have been in Italy for a year or two now.

Christopher Hurt: Thank you. As we talked about, 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 contributed to these record-breaking results. Last year, we opened in eight countries: Estonia, Finland, Georgia, Germany—as I mentioned, a key market for us in our European expansion—along with Panama, Peru, Uzbekistan, and Venezuela. As we move into these global markets, we will continue to grow the existing stores opened over the last two years. Over the last two years, we have opened over 125 experience locations. As we said today, we will open at least 50 new experience locations this year, and most of those will be in our international partner-operated, asset-light format.

These provide us an opportunity to expand the brand quickly and with established partners. Italy is our biggest area, where we have 15 partner-operated locations right now, and it shows there is a lot of white space in global expansion.

Keegan Cox: Great. Thanks for taking my questions.

Operator: Our next question comes from the line of Chris Moore with CJS Securities. Please proceed with your question.

Chris Moore: Congrats, Sharon and Chris, as well. Maybe start with the guide on pretax margins—mid-single-digit decline to low-single-digit percentage increase. Can you talk about some of the key variables that will determine where you wind up on that continuum?

Voin Todorovic: Sure. As mentioned, our full-year guide reflects incremental $5,000,000 of estimated tariff impact assuming the current rate. As I shared earlier, there is going to be timing between the first half and second half. We expect in the first half to see about an $8,000,000 negative impact of tariffs, and we would expect to see a benefit of $3,000,000 versus this year in the second half. This is caused by the fluctuation in tariff rates and the inventory flow-through we are seeing. In addition, we are making approximately $3,000,000 in longer-range investments to support wholesale growth, our international expansion, and preopening costs for our ICON Park location in Orlando. When you think about it, we have about $8,000,000 of additional cost between those two things.

Even though our mid-single-digit revenue growth is solid, from the pretax perspective it is challenging to absorb in one year the level of impact that we are seeing, thus the range we have provided. Some of the investments are already committed because the ICON store is going to be opening in the early second half of this fiscal year, and the investment to bring talent and support the wholesale organization is important to make upfront, with the expectation for revenues and growth to come in subsequent quarters and years.

Chris Moore: Got it. Appreciate that. Very helpful. And maybe just as a follow-up, a little bit longer term: in terms of the current mix between North America and global locations, it had been 75/25. I am guessing at the end of the year we are getting closer to 70/30. Is that right?

Christopher Hurt: Yes, that is accurate—70/30% in our international business.

Chris Moore: Is there a typical mix goal for a successful global toy store in the 60/40 or 50/50 range? Is that your goal, and is it a five-year target? Just trying to get a longer-term thought process in terms of where you might be driving this to.

Christopher Hurt: One of our pillars is expanding our experience locations. Over the last two years, we have been able to open over 125 of those locations. We look for opportunities in both our domestic business and our international business, and we are going to look to see where those partners are located and where the best opportunities are for us to deliver the brand and bring that experience to our guests. There is not a particular exact mix we are driving to; we are looking across the globe to see where the best places for our brand will be.

Voin Todorovic: To add to that, we do not have a specific time frame or a specific number like 30/60. We believe there is a big opportunity. We are only in 36 countries around the world, so Chris and team have done a terrific job expanding. Even in existing markets like Germany and Italy, we have plenty of opportunities. Also, when we talk about the stores and the type of stores and formats that we have, they are not all the same. When we compare our full-line stores versus shop-in-shops, there are different economics and different types, but we believe there is growth. Previously, we felt there is no reason we should not have as many or more stores outside of the U.S. as we have within the U.S.

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

Voin Todorovic: Thank you.

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

Steve Silver: Thanks, operator, and good morning, and thanks for taking the questions. Sharon, congratulations, and Chris as well. My first question: I know you mentioned not managing inventory based on near-term movements. Have expectations for changes in the tariff landscape this year prompted any shifts in the product sourcing mix?

Voin Todorovic: Thank you for the question. Inventory management and supply chain disruptions over the last twelve to eighteen months have been really challenging, to say the least. Some of those things have been completely outside of our control, especially fluctuations in tariff rates over the last couple of years. We have been proactive and aggressive in our decision-making to mitigate some of that impact, and I think we have executed well considering the uncertainty. As we move forward, there is still a high level of uncertainty about 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, we have the luxury that a lot of product we sell all year long is core product, and it is the same or similar assortment that can be dressed in a variety of different outfits. That gives us flexibility to work with our factories from production planning, from costing, and to support our international expansion. Once things get back to normal or before we had these fluctuations in tariffs, we will address some of the things, but it is also very important for us to continue to make investments as we are creating goals to continue to grow our revenue. We are expanding in different channels, and some of those channels have different inventory turns and timing; bringing in inventory to support wholesale business versus retail has a different dynamic.

Sharon Price John: I will add a little more clarity. When Voin talks about the fluctuation in tariff rate, we are not talking about just tariff rates going up and down; we are talking about tariff rates changing from country to country on a monthly basis. When I spoke about my gratefulness to the team for delivering a strong 2025, that shout-out is largely to the logistics and financial groups for what they have been able to do with an ever-changing environment: creating core products with the ability for us to import from multiple factories in multiple countries so we can shift in the moment, and delays or pull-forwards of our products and inventory. When you look at the elevated inventory number and how we have been managing it, I am really proud of where we landed for the year.

Remember that toys, prior to this situation, were tariff-free. This was not something that we had to deal with, so I am incredibly proud of the way this company has worked through this disruption.

Steve Silver: That is helpful. Great. One more if I may. You mentioned the expectation for there to be 50 new locations opened in 2026. Is there any color from your discussions with your partners on the mix of international expansion—whether a majority will be new countries being entered versus penetration into some of the recent countries you have entered over the last couple of years?

Christopher Hurt: We have guided to at least 50 net new experience locations, and those will be with some of our current partners. We are also looking at new countries and new partners to expand our global footprint. As Voin mentioned, we believe there is a lot of white space within our global opportunity to bring the brand to more places. As we talked about reentering Germany—with four stores in the fourth quarter and two in the first quarter—clearly that country has a lot of opportunity for us to expand. We look at Italy with 15. We will look at both new countries for expansion and partners that can expand within their territories and areas over the course of this year and beyond.

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

Sharon Price John: Thank you.

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

Greg Gibas: Great. Thank you. Thanks for taking the question. Congrats, Chris. Congrats, Sharon. I think you addressed a lot of my tariff-related questions—appreciate the color there. Maybe I wanted to follow on your commentary around the SEO challenges and the headwinds there. To what degree do you believe that impacted traffic? What is the level of headwind you are looking to offset with those measures you discussed?

Sharon Price John: Thank you. It is an interesting dynamic how quickly the digital environment is evolving and changing. You can track what is going on in the digital world with the shift to AI-driven searches. Now, when consumers search, the solution is often presented in its full form versus providing a list of different websites for an automatic click-through. There is a new terminology happening called the “click collapse,” where direct click-through via organic search has significantly declined. Reports on a macro basis indicate a double-digit impact to direct click-through from organic search to consumer websites. The shift we need to make—we are actually well suited for the positive attributes of brands that can overcome this.

One is being a strong, branded company so people are really looking for you and your brand. Another is creating unique and engaging content. Another is the ability to speak directly to consumers, which we are able to do—we have roughly an 80% capture rate at our stores of people that shop at Build-A-Bear Workshop, Inc., so we can send them direct email. We are also building the muscle you saw with the Animal Cracker launch in social media and getting more engaged and involved, because every time we get a direct click-through to a PDP page or product page, that goes around organic search. That will have to be a bigger part of the way we market and the dollars we spend, to make sure we are getting directly to the consumer versus relying on what was a growing aspect of driving sales online—organic search and SEO.

There will be a decrease in our SEO spend and an increase in direct marketing.

Greg Gibas: Thanks. That is very helpful. Appreciate that. I wanted to follow up—trends within the Mini Bean product line. How did that trend in the quarter?

Sharon Price John: We mentioned we sold 3,000,000 Mini Beans since launch, and we are still seeing positive trends on Mini Beans. We are not just launching core products; we are launching Mini Beans with some of our licenses and things we know collectors will love. We are integrating them into our seasonal products. We are using Mini Beans to drive our marketing stories as well as product sales. We are also creating unique Mini Beans for some partners, like Walmart with the 1,500 stores. Some of the early UGC is all about the search and the hunt for some of these unique Mini Beans at Walmart right now.

Greg Gibas: Got it. That is great to hear. Last one—are you able to comment on the rough cadence of expectations for new unit growth throughout the year?

Christopher Hurt: As we discussed in our prepared remarks, growth will be back-half weighted, where you will see most of our experience location openings this year.

Sharon Price John: Most importantly, that ICON store—a big, single-location opening in the back half of the year.

Christopher Hurt: Yes.

Greg Gibas: Great. Thanks very much.

Sharon Price John: Thank you.

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

Christopher Hurt: Thank you for joining us today. I look forward to sharing more details on the EVOLVE 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.