Build-A-Bear sold less, kept less, and spent more to do it.
Revenue fell 7.2% to $115.3 million in the six months ended August 1, while gross profit dropped 12.6% to $62.5 million. Net income declined 29.2% to $8.8 million. The business did not simply shrink at the register: gross margin fell 3.4 percentage points to 54.2%, and operating cash flow fell 18.3% to $26.1 million.
The pressure was concentrated in existing stores and e-commerce, not in a mysterious accounting corner. Build-A-Bear says retail sales fell $18.5 million at existing stores and $4.0 million digitally over the six months, partly offset by $7.7 million from new stores.
"The components of the performance are as follows (dollars in thousands): Twenty-six weeks ended August 1, 2026 Impact from: Existing stores $ (18,450 ) New stores 7,679 Store closures (963 ) Foreign currency translation 701 Gift card breakage (161 ) Gift card discounts 271 Digital sales (4,018 ) Other 726 Total Change $ (14,214 ) The lower retail revenue performance was primarily due to lower sales at existing stores and decreased e-commerce demand."
10-Q 2026-09-10
That is the central tension in the filing: new stores added sales, but the existing base and online channel gave back more. Commercial and international franchising were not large enough to offset the retail decline.
Margins also had a temporary cushion. Build-A-Bear recorded a $7.0 million IEEPA tariff refund tied to prior-year costs. Management says that, excluding the refund's 535-basis-point benefit, retail gross margin increased through selective price increases, partly offset by higher promotions and occupancy costs spread across lower sales.
"Ex cluding a 535 basis-point benefit from the $7.0 million IEEPA tariff refund related to prior fiscal year costs, retail gross margin increased primarily driven by selective price increases partially offset by occupancy cost deleverage and higher promotional activity."
10-Q 2026-09-10
The plain-English version is less tidy than the headline margin number: pricing helped, but promotions and store occupancy weighed on the reported period, while the tariff refund supplied a large one-time lift to the comparison.
Cash fell 64.2% to $14.0 million, while capital spending jumped 143.7% to $15.4 million. Build-A-Bear says the increase in investing cash use was primarily driven by that higher capex, so the company was putting more money into its footprint while generating less operating cash. Inventory was broadly flat at $81.1 million, down 0.8%, which leaves the investment decision more visible than any inventory build.
The market has already marked the shares down 50.7% over 12 months, including a 2.9% fall to $28.24 at the latest close. On the latest annual figures, the stock carries a 7.1x P/E and the company has a $369.5 million market cap. That valuation context sits beside, rather than resolves, the current operating question: the annual business reached $529.8 million of revenue and a 55.8% gross margin, but the latest six-month comparison moved in the opposite direction.
Build-A-Bear's next quarterly report will add the next comparable store and digital-sales read, but the six-month filing leaves one question unanswered: when new-store growth is set against weaker existing stores, which side is becoming the durable pattern?
Build-A-Bear's six-month filing reports lower existing-store and e-commerce sales alongside higher capital spending and a tariff refund tied to prior-year costs.