UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended May 2, 2026
OR
☐
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number: 001-32320
BUILD-A-BEAR WORKSHOP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
43-1883836
(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer
Identification No.)
415 South 18th St.
St. Louis, Missouri
63103
(Address of Principal Executive Offices)
(Zip Code)
(314) 423-8000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock
BBW
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 9, 2026, there were 12,537,443 issued and outstanding shares of the registrant’s common stock.
INDEX TO FORM 10-Q
Page
Part I Financial Information
Item 1.
Financial Statements (Unaudited)
4
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations and Comprehensive Income
5
Condensed Consolidated Statements of Cash Flows
6
Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
17
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
25
Item 4.
Controls and Procedures
Part II Other Information
Item 1A.
Risk Factors
26
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.
Exhibits
27
Signatures
28
PART I -FINANCIAL INFORMATION
Item 1. Financial Statements
BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
May 2,
January 31,
May 3,
2026
2025
(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and restricted cash
Inventories, net
Receivables, net
Prepaid expenses and other current assets
Total current assets
Operating lease right-of-use asset
Property and equipment, net
Deferred tax assets
Other assets, net
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Operating lease liability short term
Gift cards and customer deposits
Deferred revenue and other
Total current liabilities
Operating lease liability long term
Other long-term liabilities
Stockholders' equity:
Preferred stock, par value $0.01, Shares authorized: 15,000,000; No shares issued or outstanding at May 2, 2026, January 31, 2026 and May 3, 2025
Common stock, par value $0.01, Shares authorized: 50,000,000; Issued and outstanding: 12,628,877, 12,808,954, and 13,174,014 shares, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total stockholders' equity
Total Liabilities and Stockholders' Equity
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
Thirteen weeks ended
Revenues:
Net retail sales
Commercial revenue
International franchising
Total revenues
Costs and expenses:
Cost of merchandise sold - retail
Cost of merchandise sold - commercial
Cost of merchandise sold - international franchising
Total cost of merchandise sold
Consolidated gross profit
Selling, general and administrative expense
Interest income, net
Income before income taxes
Income tax expense
Net income
Foreign currency translation adjustment
Comprehensive income
Income per common share:
Basic
Diluted
Shares used in computing common per share amounts:
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Cash flows provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Share-based and performance-based stock compensation
Provision/adjustments for doubtful accounts
Gain on disposal of property and equipment
Net change in film costs and advances
Deferred taxes
Change in assets and liabilities:
IEEPA tariff refund receivable
Prepaid expenses and other assets
Accounts payable and accrued expenses
Operating leases
Deferred revenue
Net cash provided by operating activities
Cash flows used in investing activities:
Purchases of property and equipment
Net cash used in investing activities
Cash flows used in financing activities:
Purchases of common stock for employee equity awards, net of tax
Cash dividends paid on vested participating securities
Purchases of Company’s common stock
Net cash used in financing activities
Effect of exchange rates on cash
(Decrease)/Increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
Supplemental disclosure of cash flow information:
Cash and cash equivalents
Restricted cash from long-term deposits
Total cash, cash equivalents and restricted cash
Net cash paid during the period for income taxes
1. Basis of Presentation
The condensed consolidated financial statements included herein are unaudited and have been prepared by Build-A-Bear Workshop, Inc. and its subsidiaries (collectively, the “Company”) pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States ("U.S.") generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet of the Company as of January 31, 2026, was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to summarize fairly the financial position of the Company and the results of the Company’s operations and cash flows for the periods presented. All of these adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. Because of the seasonal nature of the Company’s operations, results of operations of any single reporting period should not be considered as indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended January 31, 2026, which were included in the Company’s Annual Report on Form 10-K filed with the SEC on April 16, 2026, as amended by Amendment No. 1 filed with the SEC on April 17, 2026 (the "2025 Form 10-K").
Significant Accounting Policies
The Company's significant accounting policies are summarized in Note 2 to the consolidated financial statements included in its 2025 Form 10-K.
Recently Adopted Accounting Pronouncements
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 provides the option to apply a practical expedient to address implementation challenges related to the estimation of expected credit losses for current accounts receivable and current assets arising from transactions accounted for under revenue recognition (Topic 606) and assets acquired through business combinations. The practical expedient allows entities to assume that current conditions as of the balance sheet date remain unchanged over the life of these assets when developing forecasts. The guidance allows entities to bypass the requirement to incorporate macro-economic data into their forecast when such data is not expected to materially affect the estimate. The Company adopted the guidance in ASU 2025-05 effective February 1, 2026 prospectively and applied the practical expedient. The adoption of this new accounting standard did not have a material impact on the Company's condensed consolidated financial statements.
2. Revenue
Currently, most of the Company’s revenue is derived from direct-to-consumer ("DTC") retail sales (including from its e-commerce sites) and is recognized when control of the merchandise is transferred to the customer. The Company's disaggregated revenue is fully disclosed as net sales to external customers by reporting segment and by geographic area (See Note 11 — Segment Information for additional information). The Company's direct-to-consumer reporting segment represents 91% of consolidated revenue for the first quarter of fiscal 2026. The majority of these sales transactions were single performance obligations that were recorded when control of merchandise was transferred to the customer.
The following is a description of principal activities from which the Company generates its revenue through three reportable segments.
The Company’s direct-to-consumer segment includes the operating activities of corporately-managed stores, other retail-delivered operations and online sales. Direct-to-consumer revenue is recognized when control of the merchandise is transferred to the customer and for the Company's online sales, control generally transfers upon delivery to the customer. Revenue is measured as the amount of consideration, including any discounts or incentives, the Company expects to receive in exchange for transferring the merchandise. Product returns have historically averaged less than one-half of one percent due to the personalized and interactive nature of sales, where consumers customize their own stuffed animal. The Company has elected to exclude from revenue all collected sales, value add, and other taxes paid by its customers.
For the Company’s gift cards, revenue is deferred for single transactions until redemption including any related gift card discounts. Approximately 80% of gift cards issued are redeemed within three years of issuance and over the last three years, approximately 65% of gift cards issued have been redeemed within the first twelve months. In addition, unredeemed gift cards or breakage revenue is recorded in proportion to the consumers’ redemption pattern using an estimated breakage rate based on historical experience. Following the reopening of stores after the pandemic, the Company experienced lower gift card redemption rates for all periods of outstanding activated cards compared to historical redemption patterns observed prior to fiscal year 2020, which impacted the gift card breakage rate. Management believes that the redemption behavior observed during the pandemic was not indicative of long-term customer behavior and accordingly adjusted the historical redemption data used to calculate the breakage rate. In more recent periods, gift card redemption patterns have generally returned to levels consistent with pre-2020 experience. The Company continues to evaluate expected breakage annually and adjusts the breakage rates in the fourth quarter of each year, or at other times if significant changes in consumer behavior are detected. Changes to breakage estimates impact revenue recognition prospectively. Further, given the magnitude of the Company's gift card liability, the changes in breakage rates could have a significant impact on the amount of breakage revenue recognized in future periods. As a matter of sensitivity, a hypothetical 1% change in our gift card breakage rate in fiscal 2025 would have resulted in a change in breakage revenue of $1.3 million.
For certain qualifying transactions, a portion of revenue transactions are deferred for the obligation related to the Company’s loyalty program or when a material right in the form of a future discount is granted. In these transactions, the transaction price is allocated to the separate performance obligations based on the relative standalone selling price. The standalone selling price for the points earned for the Company’s loyalty program is estimated using the net retail value of the merchandise purchased, adjusted for estimated breakage based on historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired. Loyalty program points expire if there is no qualifying account activity for a period of 12 months. The Company issues certificates daily to loyalty program members who have earned 100 or more points in North America and 50 points or more in the United Kingdom (the "U.K.") with certificates historically expiring in four months if not redeemed. The Company assesses the redemption rates of its certifications on a quarterly basis to update the rate at which loyalty program points turn into certifications and the rate that certifications are redeemed. The Company classifies contract liabilities related to the loyalty program as deferred revenue and other on the condensed consolidated balance sheet.
The Company’s commercial segment includes transactions with other businesses and is mainly comprised of wholesale sales of merchandise, supplies and fixtures, licensing the Company's intellectual properties for third-party use, and revenues generated from entertainment activities. Revenue for wholesale sales is recognized when the control of the merchandise or fixtures is transferred to the customer, which generally occurs upon shipment to the customer. The license agreements provide the customer with highly interrelated rights, including the Build-A-Bear retail operations proprietary process, that are not distinct in the context of the contract and therefore, have been accounted for as a single performance obligation and recognized as licensee sales occur. If the contract includes a guaranteed minimum, the minimum guarantee is recognized on a straight-line basis over the guarantee term until such time as royalties earned through licensee sales exceed the minimum guarantee. The Company classifies these guaranteed minimum contract liabilities as deferred revenue and other on the condensed consolidated balance sheet. Entertainment revenue is generated through the sale of entertainment assets directly to customers or through licensing agreements.
The Company’s international franchising segment includes the activities with franchisees who operate store locations in certain countries and includes development fees, sales-based royalties and merchandise, including supplies and fixture sales. The Company's obligations under the franchise agreements are ongoing and include operations and product development support and training, generally concentrated around initial store openings. These obligations are highly interrelated rights that are not distinct in the context of the contract and, therefore, have been accounted for as a single performance obligation and recognized as franchisee sales occur. If the contract includes an initial, one-time nonrefundable development fee, this fee is recognized on a straight-line basis over the term of the franchise agreement, which may extend for periods up to 25 years. The Company classifies these initial, one-time nonrefundable franchise fee contract liabilities as deferred revenue and other on its condensed consolidated balance sheet. Revenue from merchandise and fixture sales is recognized when control is transferred to the franchisee, which generally occurs upon delivery.
The Company also incurs expenses directly related to the startup of new franchises, which may include finder’s fees, legal and travel costs, expenses related to its ongoing support of the franchises and employee compensation. Accordingly, the Company’s policy is to capitalize any finder’s fee, as an incremental cost, and expense all other costs as incurred. The Company amortizes these capitalized costs into expense in the same pattern as the development fee as described previously. These capitalized costs for the thirteen weeks ended May 2, 2026 are not material to the financial statements.
The Company reserves for “expected” credit losses on financial instruments and other commitments to extend credit rather than the “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions and reasonable and supportable forecasts. For the thirteen weeks ended May 2, 2026 and May 3, 2025, the Company's accounts receivable are net of $4.1 million and $7.0 million, inclusive of the allowance for credit losses and the reserve for the UK's customs authority "HMRC" matter of $0.6 million and $3.6 million, respectively. See Note 12 for further discussion of the HMRC matter.
On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). Further, on March 4, 2026, the Court of International Trade ruled that U.S. Customs and Border Protection must refund the IEEPA tariffs that were collected. Based on these court rulings affirming the Company's legal right to recover IEEPA tariffs, the Company determined that it is entitled to a tariff refund of approximately $13.2 million, which was recorded in receivables, net on the condensed consolidated balance sheet. For the thirteen weeks ended May 2, 2026, the Company recorded a $10.4 million benefit for these tariffs in cost of merchandise sold-retail on the condensed consolidated statements of operations and comprehensive income and reduced the carrying value of inventory by $2.8 million on the condensed consolidated balance sheet as of May 2, 2026.
3. Leases
The majority of the Company's leases relate to retail stores and corporate offices. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Most new retail store leases have an original term of a five to ten-year base period and may include renewal options to extend the lease term beyond the initial base period. The extension periods are typically much shorter than the original lease term given the Company's strategic decision to maintain a high level of lease optionality. Some leases also include early termination options, which can be exercised under specific conditions. Additionally, the Company may operate stores for a period of time on a month-to-month basis after the expiration of the lease term. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Additionally, certain leases contain incentives, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property.
The table below presents certain information related to the lease costs for operating leases for the thirteen weeks ended May 2, 2026 and May 3, 2025 (in thousands).
May 2, 2026
May 3, 2025
Operating lease costs
Variable lease costs (1)
Short term lease costs
Total Operating Lease costs
(1)
Variable lease costs consist of leases with variable rent structures, which are intended to increase flexibility in an environment with expected high sales volatility and provide a natural hedge against potential sales declines.
Other information
The table below presents supplemental cash flow information related to leases for the thirteen weeks ended May 2, 2026 and May 3, 2025 (in thousands).
Operating cash flows for operating leases
As of May 2, 2026 and May 3, 2025, the weighted-average remaining operating lease term was 6.3 years and 6.1 years, respectively, and the weighted-average discount rate was 6.9% and 7.2%, respectively, for operating leases recognized on the Company's condensed consolidated balance sheets.
The value of our operating lease asset was $119.6 million and $92.7 million as of May 2, 2026 and May 3, 2025, respectively. The increase was driven by the Company entering into leases for new stores as well as securing longer-term extensions for existing stores resulting in contracts with more favorable terms.
For the thirteen weeks ended May 2, 2026 and the thirteen weeks ended May 3, 2025 the Company incurred no impairment charges against its right-of-use operating lease assets.
Undiscounted cash flows
The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet (in thousands).
Operating Leases
2027
2028
2029
2030
Thereafter
Total minimum lease payments
Less: amount of lease payments representing interest
Present value of future minimum lease payments
Less: current obligations under leases
Long-term lease obligations
As of May 2, 2026, the Company had additional executed leases that had not yet commenced with operating lease liabilities of $4.4 million. These leases are expected to commence in the second quarter of fiscal 2026 with lease terms of 10 years.
4. Other Assets
Prepaid expenses and other current assets consist of the following (in thousands):
Prepaid occupancy (1)
Prepaid insurance
Prepaid taxes (2)
Prepaid gift card fees
Prepaid royalties
Other (3)
Total
Prepaid occupancy consists of prepaid expenses related to variable non-lease components.
Other non-current assets consist of the following (in thousands):
Entertainment assets (1)
Deferred compensation
Other (2)
(2)
Other consists primarily of deferred financing costs related to the Company's credit facility.
5. Accrued Expenses
Accrued expenses consist of the following (in thousands):
Accrued wages, bonuses and related expenses
Sales and value added taxes payable
Current income taxes payable
Accrued rent and related expenses (1)
Accrued expense - other (2)
Accrued rent and related expenses consist of accrued costs associated with non-lease components.
6. Stock-based Compensation
On April 14, 2020, the Company's Board of Directors (the “Board”) adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. 2020 Omnibus Incentive Plan (the “2020 Incentive Plan”). On June 11, 2020, the Company’s stockholders approved the 2020 Incentive Plan. On April 11, 2023, the Board adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. Amended and Restated 2020 Omnibus Incentive Plan (the “Restated 2020 Incentive Plan”). On June 8, 2023, at the Company’s 2023 Annual Meeting of Stockholders, the Company’s stockholders approved the Restated 2020 Incentive Plan. The Restated 2020 Incentive Plan, which is administered by the Compensation and Human Capital Committee of the Board, permits the grant of stock options (including both incentive and non-qualified stock options), stock appreciation rights, other stock-based awards, including restricted stock and restricted stock units, cash-based awards, and performance awards pursuant to the terms of the Restated 2020 Incentive Plan. The Restated 2020 Incentive Plan will terminate on April 11, 2033, unless earlier terminated by the Board. The total number of shares of the Company’s common stock authorized for issuance under the Restated 2020 Incentive Plan increased by 800,000 to a maximum of 1,800,000 since its inception as the 2020 Incentive Plan, subject to customary capitalization adjustments, substitutions of acquired company awards and certain additions of acquired company plan shares, plus shares that are subject to outstanding awards made under the Build-A-Bear Workshop, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”) that on or after April 14, 2020, may be forfeited, expire or be settled for cash.
For the thirteen weeks ended May 2, 2026 and May 3, 2025, selling, general and administrative expense included stock-based compensation expense of $0.7 million and $0.5 million, respectively. As of May 2, 2026, there was $5.6 million of total unrecognized compensation expense related to unvested restricted stock awards which is expected to be recognized over a weighted-average period of 1.6 years.
As of May 2, 2026 and January 31, 2026 the Company had no outstanding stock options.
The following table is a summary of the balances and activity related to time-based and performance-based restricted stock for the thirteen weeks ended May 2, 2026
Time-Based Restricted Stock
Performance-Based Restricted Stock
Shares
Weighted Average Grant Date Fair Value
Outstanding, January 31, 2026 (1)
Granted (1)
Vested
Adjustment for performance achievement
Earned and vested
Forfeited (1)
Outstanding, May 2, 2026 (1)
The total fair value of shares vested during the thirteen weeks ended May 2, 2026 and May 3, 2025 was $0.8 million and $2.0 million, respectively.
The outstanding performance shares as of May 2, 2026 consist of the following:
Unearned shares subject to performance-based restrictions at target:
2024 - 2026 consolidated, cumulative EBITDA objectives
2024 - 2026 consolidated cumulative revenue objectives
2025 - 2027 consolidated, consolidated revenue growth objectives
2026 - 2028 consolidated, consolidated revenue growth objectives
Performance shares outstanding, May 2, 2026
7. Income Taxes
The Company's effective tax rate was 23.4% for the thirteen weeks ended May 2, 2026 compared to 22.0% for the thirteen weeks ended May 3, 2025. In the first quarter of fiscal 2026, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense offset by the tax impact of equity awards vesting and the foreign-derived deduction eligible income (formerly foreign derived intangible income). In the first quarter of fiscal 2025, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and foreign derived intangible income. In addition, in the first quarter of fiscal 2026 and 2025, the Company remains in a full valuation allowance in certain foreign jurisdictions.
8. Stockholders’ Equity
The following table sets forth the changes in stockholders’ equity (in thousands) for the thirteen weeks ended May 2, 2026 and May 3, 2025 (in thousands).
For the thirteen weeks ended May 2, 2026
For the thirteen weeks ended May 3, 2025
Common
Retained
stock
APIC (1)
AOCI (2)
earnings
Balance, beginning
Shares issued under employee stock plans
Stock-based compensation
Shares withheld in lieu of tax withholdings
Share repurchase
Cash dividends
Other
Other comprehensive income
Balance, ending
(1) Additional paid-in capital (“APIC”)
(2) Accumulated other comprehensive loss (“AOCI”)
During the thirteen weeks ended May 2, 2026, the Company utilized $11.4 million in cash to repurchase 248,118 shares under its $100 million stock repurchase program that was authorized by the Board on September 11, 2024 (the "September 2024 Stock Repurchase Program"). Between the end of the first fiscal quarter of 2026 and June 9, 2026, the Company utilized an additional $3.8 million in cash to repurchase 103,064 shares under the September 2024 Stock Repurchase Program, leaving an aggregate of $46.5 million available for future repurchases under that plan. For the thirteen weeks ended May 2, 2026, the Board authorized cash dividends to shareholders of $2.9 million on March 11, 2026, as the Board declared a quarterly cash dividend of $0.23 per share on the issued and outstanding common stock of the company. The dividend was paid on April 9, 2026, to all stockholders of record as of March 26, 2026.
During the thirteen weeks ended May 3, 2025, the Company utilized $4.2 million in cash to repurchase 108,502 shares under the September 2024 Stock Repurchase Program. The Company's Board of Directors also declared a quarterly cash dividend of $0.22 per share that was paid on April 10, 2025, to shareholders of record as of March 27, 2025.
9. Income per Share
The following table sets forth the computation of basic and diluted net income per share (in thousands, except share and per share data):
NUMERATOR:
DENOMINATOR:
Weighted average number of common shares outstanding - basic
Dilutive effect of share-based awards:
Weighted average number of common shares outstanding - dilutive
Basic net income per common share
Diluted net income per common share
In calculating the diluted income per share for the thirteen weeks ended May 2, 2026, there were 19,214 shares of common stock that were outstanding at the end of the period that were not included in the computation of diluted income per share due to their anti-dilutive effect. For the thirteen weeks ended May 3, 2025, there were zero shares of common stock that were outstanding at the end of the period that were not included in the computation of diluted income per share due to their anti-dilutive effect.
10. Comprehensive Income
The difference between comprehensive income or loss and net income or loss is the result of foreign currency translation adjustments on the balance sheets of subsidiaries whose functional currency is not the U.S. dollar. The accumulated other comprehensive loss balance on May 2, 2026 and May 3, 2025 was comprised entirely of foreign currency translation. For the thirteen weeks ended May 2, 2026 and May 3, 2025, the Company had no reclassifications out of accumulated other comprehensive loss.
11. Segment Information
The Company’s operations are conducted through three operating segments, consisting of DTC, commercial and international franchising. The DTC segment includes the operating activities of corporately-managed locations and other retail delivery operations in the U.S., Canada, Puerto Rico, the Republic of Ireland and the U.K., including the Company’s e-commerce sites and temporary stores. The commercial segment includes the Company’s transactions with other businesses, mainly comprised of wholesale sales of merchandise, supplies and fixtures, licensing the Company's intellectual properties for third party use, and revenues generated from entertainment activities. The international franchising segment includes the licensing activities of the Company’s franchise agreements with store locations in select countries in Asia, Australia, the Middle East, Africa, and South America. The operating segments have discrete sources of revenue, different capital structures and different cost structures. These operating segments represent the basis on which the Company’s chief operating decision maker regularly evaluates the business in assessing performance, determining the allocation of resources and the pursuit of future growth opportunities. Accordingly, the Company has determined that each of its operating segments represent a reportable segment. The three reportable segments follow the same accounting policies used for the Company’s consolidated financial statements.
The following is a summary of the financial information for the Company’s reportable segments (in thousands):
Direct-to-
International
Consumer
Commercial
Franchising
Thirteen weeks ended May 2, 2026
Total Revenue
Cost of Goods Sold
Gross Profit
Selling, General & Administrative
Contribution Margin
Overhead Expenses(1)
Interest Income
Thirteen weeks ended May 3, 2025
Total assets, depreciation and amortization, and capital expenditures for the Company's segments, as well as for Corporate and support, are as follows (in thousands):
Corporate
Capital Expenditures
The Company’s reportable segments are primarily determined by the types of products and services that they offer. Each reportable segment may operate in many geographic areas. Revenues are recognized in the geographic areas based on the location of the customer or franchisee. The following schedule is a summary of the Company’s sales to external customers and long-lived assets by geographic area (in thousands):
North
America (1)
Europe (2)
Net sales to external customers
For purposes of this table only:
(1) North America includes corporately-managed locations and sales to wholesale customers in the United States and Canada.
(2) Europe includes corporately-managed locations in the U.K. and the Republic of Ireland and sales to wholesale customers in Europe.
(3) Other includes wholesale and franchise businesses outside of North America and Europe.
12. Contingencies
In the normal course of business, the Company is subject to legal proceedings, government inquiries and claims, and other commercial disputes. If one or more of these matters has an unfavorable resolution, it is possible that the results of operations, liquidity or financial position of the Company could be materially affected in any particular period. The Company accrues a liability for these types of contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. Gain contingencies are recorded when the underlying uncertainty has been settled.
Assessments made by the U.K. customs authority in 2012 were appealed by the Company, which has paid the disputed duty, strictly under protest, pending the outcome of the continuing dispute, and this is included in receivables, net in the DTC segment. The U.K. customs authority contested the Company's appeal. Rulings by the First Tier Tribunal in November 2019 and Upper Tribunal in March 2021 held that duty was due on some, but not all, of the products at issue. The Company petitioned the Court of Appeal for permission to appeal certain elements of the Upper Tribunal decision, and in early November 2021, a judge granted the Company's petition for permission to appeal those elements of the Upper Tribunal decision on some, but not all, of the grounds of appeal that the Company had put forward. An appeal was heard by the Court of Appeal during the first quarter of fiscal 2022, and the Court of Appeal dismissed the appeal in the third quarter of fiscal 2022. During the fourth quarter of fiscal 2022, the UK Supreme Court declined to hear the appeal. The Company is engaging with the customs authority to attempt to resolve all outstanding issues following the application of the determined principles. The case will return to the lower tribunal for a final ruling if outstanding issues cannot be resolved. The Company maintains a provision against the related receivable, based on a current evaluation of collectability, using the latest facts available in the dispute. During the first quarter of fiscal 2026, the Company received approximately $0.6 million from His Majesty's Revenue and Customs (HMRC). Following this receipt, the Company reassessed the collectability of the related receivable and adjusted both the gross receivable balance and the associated reserve by $3.2 million, leaving a gross receivable balance of $0.8 million, a reserve of $0.6 million, and a net receivable of $0.2 million. The Company believes that the outcome of this dispute will not have a material adverse impact on the results of operations, liquidity, or financial position of the Company.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Notice Regarding Forward-Looking Statements
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties, and we undertake no obligation to update these statements except as required by the federal securities laws. Our actual results may differ materially from the results discussed in the forward-looking statements. These risks and uncertainties include, without limitation, those detailed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, as amended by Amendment No. 1, as filed with the SEC, and include the following:
we may not be able to operate successfully if we lose key personnel, are unable to hire qualified additional personnel, or experience turnover of our management team;
Business Overview
Build-A-Bear Workshop, Inc., a Delaware corporation, was formed in 1997 as a mall-based, experiential specialty retailer for children. Build‑A‑Bear has evolved to become a leading global "retailtainment" brand on a mission to add a little more heart to life. At Build-A-Bear, guests are invited to create personalized furry friends through a unique stuffing, dressing, accessorizing and naming process, accentuated by a memorable Heart Ceremony that creates moments of connection for people of all ages. Over the years, Build‑A‑Bear has grown into a multi‑generational phenomenon, positioned at the intersection of pop‑culture trends. Beyond its signature retail experience, our brand also offers pre‑stuffed plush, gifting, partnerships with best‑in‑class licensed and collectible characters, and original storytelling through Build‑A‑Bear Entertainment, LLC. Build‑A‑Bear’s current brand platform and message, “The Stuff You Love,” crosses ages and cultures while celebrating nearly 30 years of helping people mark life’s meaningful moments.
The Build-A-Bear brand has high consumer awareness and positive affinity, and we leverage our brand strength to expand the footprint of our retail experience locations through a range of store sizes, formats, and locations, including tourist destinations. In addition to growing our corporately-managed store footprint, we are also growing through partner-operated and franchise locations, particularly for our international expansion. Our ongoing digital transformation, which touches our e-commerce business, consumer loyalty program, and digital content, has led to omnichannel growth over the past several years. Build-A-Bear's pop-culture appeal plays a key role in expanding our total addressable market beyond children to teens and adults with sports licensing, collectible and gifting offerings, as well as to categories beyond plush.
As of May 2, 2026, the Company had 669 global locations through a combination of its corporately-managed, partner-operated, and franchise models. This reflects 376 corporately-managed locations, including 334 stores in the United States (“U.S.”) and Canada and 42 stores in the United Kingdom ("U.K.") and the Republic of Ireland, 181 partner-operated locations in which we sell our products on a wholesale basis to other companies that then, in turn, execute our retail experience, and 112 international franchise locations , all under the Build-A-Bear Workshop brand. In addition to these stores, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements. For the 2026 fiscal year to date, the Company had net new unit growth of 7 experience locations, comprised of one corporately managed location, 3 partner-operated locations, and 3 international franchise locations.
We operate in three segments that share the same infrastructure, including management, systems, merchandising and marketing, and generate revenues as follows:
International franchising – Royalties as well as product and fixture sales from other international operations under franchise agreements.
Selected financial data attributable to each segment for the thirteen weeks ended May 2, 2026 and May 3, 2025 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Recent Events and Trends Regarding Tariffs and International Trade
Global trade policy continues to evolve and the ultimate impact of recent developments with respect to U.S. tariffs is unclear. On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). On March 4, 2026, the Court of International Trade ordered U.S. Customs and Border Protection ("CBP") to begin the refund process for all importers who were subject to the IEEPA duties. In April 2026, the CBP opened a portal for the refund process to begin for certain importers. Based on these court rulings affirming the Company's legal right to recover IEEPA tariffs, the Company determined that it is entitled to a tariff refund of approximately $13.2 million, which was recorded in receivables, net on the condensed consolidated balance sheet. For the thirteen weeks ended May 2, 2026, the Company recorded a $10.4 million benefit for these tariffs in cost of merchandise sold-retail on the condensed consolidated statements of operations and comprehensive income, $7.0 million of which related to prior fiscal year costs, and reduced the carrying value of inventory by $2.8 million on the condensed consolidated balance sheet as of May 2, 2026. The related inventory with tariffs is expected to be substantially sold in the second fiscal quarter of 2026.
The ultimate availability, timing, and amount of any remaining refunds of such tariffs remain uncertain and are subject to further legal, regulatory, and administrative developments. Following the Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on the Company's business. The Company continues to monitor and evaluate these developments and assess their potential impact on its business, financial condition, and results of operations.
Since we import the vast majority of our products from vendors outside the U.S., we face uncertainty and risks related to tariffs and other trade policies that could negatively impact our Company. Tariffs and other non-tariff trade practices can adversely affect our business in multiple ways, including increased costs of our products. While we have taken steps in recent years to diversify our supply chain and reduce China sourcing by shifting primarily to Vietnam, we remain subject to substantial potential exposure to tariffs. Specifically, the latest tariffs implemented by the U.S. continues to have an impact on our cost structure and product margins. Additionally, the uncertainty about trade policy, tariff rates, and other changes in practices affecting international trade, including whether such tariffs or other measures will be withdrawn, or modified in the future, makes it difficult for us to operate optimally. Depending on the level and longevity of the tariff disruption, we will continue to adjust our pricing while monitoring the impact of inflation and consumer confidence, on both a micro and macro basis.
Description of Operations
Build-A-Bear Workshop offers interactive entertainment experiences via both physical and digital engagement, targeting a range of consumer segments and purchasing occasions through digitally-driven, diversified omnichannel capabilities. We operate a vertical retail channel with corporately-operated experience locations that feature a unique combination of interactivity and product in which guests can “make their own” furry friends by participating in the stuffing, dressing, accessorizing and naming of their own teddy bears and other stuffed animals along with the now-famous Heart Ceremony that helps to make the experience memorable by bringing the furry friend to "life." Our retail footprint also comprises both domestic and international partner-operated and franchise locations that extend our unique combination of experience and product beyond our corporately-operated locations. We also operate buildabear.com, which serves as an information and communications tool to plan a store visit as well as an e-commerce platform that focuses on gift-giving, collectible merchandise and licensed products that appeal to consumers that have an affinity for characters from a range of entertainment, sports, art, and gaming properties. Our engaging digital purchasing experiences include our online “Bear-Builder” and an age-gated adult-focused “Bear Cave” microsite. Our retail stores also act as “mini distribution centers” that provide efficient omnichannel support for our digital demand. While the primary consumer target for our retail stores is families with children, our e-commerce sites focus on collectors and gift givers that are primarily tweens, teens and adults. We have also extended our business model by leveraging our brand strength and owned intellectual properties through the creation of engaging content for kids and adults while also offering products at wholesale and in non-plush consumer categories via outbound licensing agreements with leading manufacturers.
We seek to provide outstanding guest experiences across all channels and touch points including our retail locations, our e-commerce sites, our mobile sites and apps as well as traditional, digital, and social media. We believe the hands-on and interactive nature of our experience locations, our personal service model and engaging digital shopping experiences result in guests forming an emotional connection with our brand which has multi-generational appeal that captures today’s zeitgeist including desire for engaging experiences, personalization and “DIY” while being recognized as trusted, giving, and a part of pop culture.
Operating Strategies
Our operating strategies have enabled us to build a strong foundation while continuing to invest in the brand’s iconic status, diversifying and growing the business by reaching more consumers, in more places, with more products, for more occasions. Upon that foundation, we have evolved to focus on scaling our company through a four-pillar strategic framework, supported by four platform areas. These four pillars are intended to leverage the strength of the brand to drive incremental revenue, with pillars one and two continuing to activate proven strategies, with an expectation that they will help fund the expansion into the newer revenue streams represented by pillars three and four.
These four pillars are as follows:
These four pillars are enabled by our continued focus on four platform areas that span each of the pillars and support their continued growth. The four platforms are as follows:
Stores:
Corporately-Managed Locations:
The table below sets forth the number of Build-A-Bear Workshop corporately-managed stores in the U.S., Canada, and Puerto Rico (collectively, North America) and the U.K. and Ireland (collectively, Europe) for the periods presented:
North America
Europe
Beginning of period
Opened
Closed
End of period
As of May 2, 2026, 53% of our corporately-managed stores were in an updated Discovery format. We also expect to close certain stores in accordance with natural lease events as an ongoing part of our real estate management and day-to-day operational plans. The future of our retail store fleet may include expansion into more non-traditional locations, including concourse format shops and by expansion in other locations outside of traditional malls.
Partner-Operated Locations:
The number of partner operated locations opened and closed for the periods presented below is summarized as follows:
Through our partner-operated model, there were 181 stores in operation at the end of the first quarter of 2026 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Girl Scouts of the USA. The partner-operated model is capital light for us, with the partner company building out and operating the workshops including providing the real estate location and covering the cost of labor and inventory, which is purchased from us on a wholesale basis. These locations are heavily weighted to the hospitality industry, which allow us to further advance our focus on experience location expansion in non-traditional and tourist areas, as well as shop-in-shop arrangements within other retailers’ stores.
International Franchise Locations:
Our first franchisee location opened in November 2003. All franchise stores have similar signage, store layout, merchandise characteristics and guest experience as our corporately-managed stores. As of May 2, 2026, we had seven master franchise agreements, which typically grant franchise rights for a particular country or group of countries, covering a total of twelve countries.
The number of international franchise locations opened and closed for the periods presented below are summarized as follows:
Beginning of period(1)
In the ordinary course of business, we anticipate signing additional master franchise agreements in the future and terminating other such agreements. We source fixtures and other supplies for our franchisees from China which significantly reduces the capital and lowers the expenses required to open franchises. We are leveraging new formats that have been developed for our corporately-managed locations such as concourses and shop-in-shops with our franchisees.
Results of Operations
The following table sets forth, for the periods indicated, selected income statement data expressed as a percentage of total revenues, except where otherwise indicated. Percentages will not total due to cost of merchandise sold being expressed as a percentage of net retail sales, commercial revenue, international franchising, respectively, as well as immaterial rounding.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Cost of merchandise sold - retail (1)
Cost of merchandise sold - commercial (1)
Cost of merchandise sold - international franchising (1)
Selling, general and administrative
Retail Gross Margin (2)
Cost of merchandise sold – retail is expressed as a percentage of net retail sales. Cost of merchandise sold – commercial is expressed as a percentage of commercial revenue. Cost of merchandise sold – international franchising is expressed as a percentage of international franchising revenue.
Retail gross margin represents net retail sales less cost of merchandise sold - retail; retail gross margin percentage represents retail gross margin divided by net retail sales.
Thirteen weeks ended May 2, 2026 compared to thirteen weeks ended May 3, 2025
Total revenues. Consolidated revenues decreased $3.1 million or 2.4%, primarily driven by a $6.1 million or 5.1% decrease in Net Retail sales partially offset by a $3.3 million or 44% increase in Commercial revenue when compared to the first fiscal quarter of 2025. The decrease in net retail sales was driven by lower sales at existing stores, decreased e-commerce demand offset by sales at new stores. The increased commercial revenue was due to higher sales to our wholesale customers, including sales to new wholesale customers resulting from a net increase of 54 partner-operated locations since the first quarter of 2025.
Net retail sales for the thirteen weeks ended May 2, 2026 were $113.5 million, compared to $119.6 million for the thirteen weeks ended May 3, 2025. The components of the performance are as follows (dollars in thousands):
Impact from:
Existing stores
New stores
Store closures
Foreign currency translation
Gift card breakage
Gift card discounts
Digital sales
Total Change
The lower retail revenue performance was primarily due to lower sales at existing stores, decreased e-commerce demand offset by sales at new stores.
Commercial revenue was $10.9 million for the thirteen weeks ended May 2, 2026 compared to $7.6 million for the thirteen weeks ended May 3, 2025. The $3.3 million increase is primarily due to increased sales volume from our wholesale accounts through our partner-operated retail model.
International franchising revenue was $0.9 million for the thirteen weeks ended May 2, 2026 compared to $1.2 million for the thirteen weeks ended May 3, 2025. The $0.3 million decrease is primarily due to timing of product shipments.
Retail gross margin. Retail gross margin dollars increased $5.1 million to $73.1 million from $68.0 million for the thirteen weeks ended May 3, 2025. The retail gross margin rate increased 750 basis points compared to the prior year, including a 560 basis-point benefit from the $7.0 million IEEPA tariff refund related to prior fiscal year costs, with the remaining 190 basis-points primarily driven by selective price increases.
Selling, general and administrative. SG&A expenses were $56.1 million, or 44.8% of consolidated revenue, for the thirteen weeks ended May 2, 2026, compared to $53.6 million, or 41.7% of consolidated revenue, for the thirteen weeks ended May 3, 2025. The increase was driven by higher total compensation costs, general inflationary pressures, and longer-range investments.
Interest income, net. Interest income was $0.1 million for the thirteen weeks ended May 2, 2026, compared to interest income of $0.2 million for the thirteen weeks ended May 3, 2025.
Provision for income taxes. Income tax expense was $5.6 million with a tax rate of 23.4% for the thirteen weeks ended May 2, 2026, as compared to $4.3 million with a tax rate of 22.0% for the thirteen weeks ended May 3, 2025. In the first quarter of fiscal 2026, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and the foreign-derived deduction eligible income (formerly foreign derived intangible income). In the first quarter of fiscal 2025, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and foreign derived intangible income. In addition, in the first quarter of fiscal 2026 and 2025, the Company remains in a full valuation allowance in certain foreign jurisdictions.
Earnings before Interest, Taxes, Depreciation, and Amortization
We believe that earnings before interest, taxes, depreciation, and amortization ("EBITDA") provides meaningful information about our operational efficiency by excluding the impact of differences in tax jurisdictions and structures, debt levels, and capital investment. Additionally, this measure is the metric used for portions of the Company's incentive compensation structure. This measure is not in accordance with, or an alternative to, GAAP. The most comparable GAAP measure is income before income taxes, or pre-tax income. EBITDA should not be considered in isolation or as a substitution for analysis of our results as reported in accordance with GAAP. Other companies may calculate EBIT and EBITDA differently, limiting the usefulness of the measures for comparisons with other companies. The following table sets forth, for the periods indicated, the components of EBITDA (dollars in millions).
Income before income taxes (pre-tax)
Depreciation and amortization expense
Earnings before interest, taxes, depreciation, and amortization
EBITDA for the thirteen weeks ended May 2, 2026 increased $4.6 million, or 20.0% to $27.7 million from $23.1 million for the thirteen weeks ended May 3, 2025. The increase was driven by higher gross profit resulting from increased retail and commercial margins partially offset by higher SG&A expenses. The increase to retail margin primarily resulted from the benefit of IEEPA tariff refund, $7 million of which related to prior fiscal year costs.
Seasonality and Quarterly Results
Our operating results for one period may not be indicative of results for other periods, and may fluctuate significantly because of a variety of factors, including, but not limited to: (1) changes in general economic conditions and consumer spending patterns; (2) increases or decreases in our existing store and e-commerce sales; (3) fluctuations in the profitability of our stores; (4) the timing and frequency of the sales of licensed products tied to major theatrical releases (including the cancellation or delay of such releases due to the pandemic or other external factors) and our marketing initiatives, including national media and other public relations events; (5) changes in foreign currency exchange rates; (6) the timing of new store openings, closings, relocations and remodeling and related expenses; (7) changes in consumer preferences; (8) the effectiveness of our inventory management; (9) the actions of our competitors or mall anchors and co-tenants; (10) seasonal shopping patterns and holiday and vacation schedules; (11) disruptions in store operations due to civil unrest; and (12) weather conditions.
The timing of store closures, relocations, remodels, openings and re-openings may result in fluctuations in quarterly results based on the revenues and expenses associated with each store location. Expenses related to store closings are typically incurred in stages: when the decision is made to close the store typically associated with a lease event such as an expiration or lease-triggered clause; when the closure is communicated to store associates; and at the time of closure. We typically incur most preopening costs for a new store in the three months immediately preceding the store’s opening.
Because our retail operations include toy products which have sales that historically peak in relation to the holiday season as part of our revenue model, our sales have historically been highest in our fourth quarter. The timing of holidays and school vacations can impact our quarterly results. We cannot provide assurance that this will continue to be the case. In addition, for accounting purposes, the quarters of each fiscal year consist of 13 weeks, although we will have a 14-week quarter approximately once every six years. Our most recent 14-week quarter was the 2023 fiscal fourth quarter.
Liquidity and Capital Resources
Our cash requirements are primarily for the opening, remodeling or reformatting of stores, installation and upgrades of information systems and working capital. Over the past several years, we have met these requirements through cash generated from operations. A summary of cash provided by or used in our operating, investing and financing activities is shown in the following table (dollars in thousands).
Operating Activities. Cash provided by operating activities decreased $6.6 million for the thirteen weeks ended May 2, 2026, as compared to the thirteen weeks ended May 3, 2025. This decrease in cash from operating activities was primarily driven by increases in prepaid and other assets and receivables from commercial accounts, as well as changes in deferred revenue, accounts payable and accrued expenses, partially offset by higher net income.
Investing Activities. Cash used in investing activities increased $4.0 million for the thirteen weeks ended May 2, 2026, as compared to the thirteen weeks ended May 3, 2025. The increase in cash used in investing activities was primarily driven by increased spending on capital expenditures.
Financing Activities. Cash used in financing activities increased $6.3 million for the thirteen weeks ended May 2, 2026, as compared to the thirteen weeks ended May 3, 2025. This increase in cash used in financing activities during the thirteen weeks of fiscal 2026 was driven by an increase in the amount utilized to repurchase shares compared to the prior year.
Capital Resources: As of May 2, 2026, we had a consolidated cash balance of $26.2 million, 73% of which was domiciled within the U.S, after investing $6.9 million in capital projects in the first quarter.
We have a revolving credit and security agreement with PNC Bank, as agent, that provides for a secured revolving loan in an aggregate principal amount of up to $40.0 million, subject to a borrowing base formula. As of May 2, 2026, borrowings under the agreement would bear interest at (a) a base rate determined under the agreement, or (b) at a rate based on SOFR reference rate, plus in either case a margin based on average undrawn availability as determined in accordance with the agreement. As of May 2, 2026, our borrowing base was $40.0 million and the Company had no outstanding borrowings as of the end of the quarter.
Most of our corporately-managed retail stores are located within shopping malls and all are operated under leases classified as operating leases. Our leases in North America tend to be shorter term leases to provide flexibility in aligning stores with market trends. Beginning in fiscal 2023, lease extensions began to have longer terms as we have secured longer contracts with more favorable terms. Our leases typically require us to pay personal property taxes, our pro rata share of real property taxes of the shopping mall, our own utilities, repairs and maintenance in our store, a pro rata share of the malls’ common area maintenance and, in some instances, merchant association fees and media fund contributions. Many leases contain incentives to help defray the cost of construction of a new store. Typically, a portion of the incentive must be repaid to the landlord if we choose to terminate the lease prior to its contracted term. In addition, some of these leases contain various restrictions relating to change in control of our company. Our leases also subject us to risks relating to compliance with changing mall rules and the exercise of discretion by our landlords on various matters, including rights of termination in some cases. Rents are invoiced monthly and paid in advance.
Our leases in the U.K. and the Republic of Ireland also typically contain provisions requiring rent reviews every five years in which the base rent that we pay is adjusted to current market rates. These rent reviews require that base rents cannot be reduced if market conditions have deteriorated but can be changed “upwards only.” We may be required to pay base rents that are significantly higher than we have projected. As a result of these and other factors, we may not be able to operate our European store locations profitably. If we cannot do so, our results of operations and financial condition could be harmed, and we may be required to record significant additional impairment charges.
Capital spending for the thirteen weeks ended May 2, 2026 totaled $6.9 million for information technology projects and new store openings, and we expect to spend approximately $22 to $25 million on capital expenditures in fiscal 2026.
Total inventory at quarter end was $77.8 million, an increase of $5.5 million or 8% from the end of the fiscal 2025 first quarter. We are comfortable with the level and composition of our inventory to support customer demand and critical seasonal products.
We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. As of May 2, 2026, we had purchase obligations totaling approximately $127.0 million, of which $28.6 million are due in the next 12 months. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.
We utilized $11.4 million in cash to repurchase 248,118 shares during the thirteen weeks ended May 2, 2026 under our current September 2024 Stock Repurchase Program, compared to using $4.2 million in cash to repurchase 108,502 shares during the thirteen weeks ended May 3, 2025 under our September 2024 Stock Repurchase Program and completed August 2022 program.
Off-Balance Sheet Arrangements
None.
Inflation
The Company continued to experience inflationary pressures during the first quarter of fiscal 2026, primarily through higher store labor, product, freight, transportation and other supply chain costs. In addition, evolving tariffs and trade policies have increased cost and pricing pressure and created additional uncertainty across our sourcing and supply chain activities. We have taken actions to help mitigate these pressures, including cost reduction initiatives, process efficiencies, supplier negotiations, sourcing actions and selective pricing and assortment decisions. We expect inflationary and trade-related pressures to continue during fiscal 2026 and they may persist thereafter. The ultimate scope, duration and impact of existing and newly announced tariffs, any changes or pauses to such tariffs, and the timing and amount of any related refunds remain uncertain. These conditions may continue to affect product costs, freight and warehousing expense, other operating costs, customer spending patterns and our gross margins. In addition, broader geopolitical and macroeconomic developments may further increase transportation and supply chain costs or otherwise adversely affect our business.
Although we continue to monitor these developments and adjust our operating and pricing strategies as appropriate, we cannot reasonably estimate the ultimate impact of inflation, tariffs, trade policy developments or related macroeconomic uncertainty on our future results. If we are unable to offset these higher costs or if consumer demand weakens, our sales, results of operations, financial condition and cash flows could be adversely affected.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the appropriate application of certain accounting policies, which require us to make estimates and assumptions about future events and their impact on amounts reported in our financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the financial statements.
We believe our application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates, including those related to long-lived assets, leases, revenue recognition and income taxes, are reevaluated on an ongoing basis, and adjustments are made when facts and circumstances dictate a change.
Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates. Our critical accounting policies and estimates are discussed in and should be read in conjunction with our Annual Report on Form 10-K for the year ended January 31, 2026 as filed with the SEC on April 16, 2026, as amended by Amendment No. 1 as filed with the SEC on April 17, 2026 (the"2025 Form 10-K"), which includes audited consolidated financial statements for our 2025 and 2024 fiscal years. There have been no material changes to the critical accounting estimates disclosed in the 2025 Form 10-K.
Recent Accounting Pronouncements
See Note 1 to the Condensed Consolidated Financial Statements — Basis of Presentation — Recent Accounting Pronouncements – Adopted in the Current Year as disclosed in our 2025 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes to our Quantitative and Qualitative Disclosures About Market Risk as disclosed in our 2025 Form 10-K.
Item 4. Controls and Procedures.
Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including our certifying officers, as appropriate to allow timely decisions regarding required disclosure. Based on the foregoing evaluation, our management, including the President and Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of May 2, 2026, the end of the period covered by this Quarterly Report.
It should be noted that our management, including the President and Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal controls will prevent all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting. The Company’s management, with the participation of the Company’s President and Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. There have been no changes in our internal control over financial reporting during the quarter covered by this report that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1A. Risk Factors
There have been no material changes to our risk factors as disclosed in our 2025 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
ISSUER PURCHASES OF EQUITY SECURITIES
Period
(a) Total Number of Shares (or Units) Purchased (1)
(b) Average Price Paid Per Share (or Unit) (2)
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (3)
February 1, 2026 - February 28, 2026
March 1, 2026 - April 4, 2026
April 5, 2026 - May 2, 2026
Item 5. Other Information
Security Trading Plans of Directors and Executive Officers
Item 408(a) of Regulation S-K requires the Company to disclose whether any of its directors or officers have adopted or terminated (i) any trading arrangement that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c); and/or (ii) any written trading arrangement that meets the requirements of a “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K. During the Company's fiscal quarter ended May 2, 2026, the following activity occurred requiring disclosure under Item 408(a) of Regulation S-K
Each of the foregoing trading arrangements is intended to satisfy the affirmative defense of rule 10b5-1(c).
Item 6. Exhibits
The following is a list of exhibits filed as a part of the quarterly report on Form 10-Q:
Exhibit No.
Description
2.1
Agreement and Plan of Merger dated April 3, 2000 between Build-A-Bear Workshop, L.L.C. and the Registrant (incorporated by reference from Exhibit 2.1 to our Registration Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142)
3.1
Third Amended and Restated Certificate of Incorporation (incorporated by reference from Exhibit 3.1 of our Current Report on Form 8-K, filed on November 11, 2004)
3.2
4.1
31.1**
Rule 13a-14(a)/15d-14(a) certification (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by the President and Chief Executive Officer)
31.2**
Rule 13a-14(a)/15d-14(a) certification (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by the Chief Financial Officer)
32.1***
Section 1350 Certification (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the President and Chief Executive Officer)
32.2***
Section 1350 Certification (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Chief Financial Officer)
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Extension Calculation Linkbase Document
101.DEF
Inline XBRL Extension Definition Linkbase Document
101.LAB
Inline XBRL Extension Label Linkbase Document
101.PRE
Inline XBRL Extension Presentation Linkbase Document
** Filed herewith
*** Furnished herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: June 11, 2026
(Registrant)
By:
Sharon John
President and Chief Executive Officer (on behalf of
the registrant and as principal executive officer)
/s/ Voin Todorovic
Voin Todorovic
Chief Financial Officer (on behalf of the registrant and as principal
financial officer)