EQUITY RESEARCH REPORT

March 21, 2024

BUILD-A-BEAR WORKSHOP, INC.

(NYSE: BBW)

Based in Missouri, Build-A-Bear Workshop, Inc. is a global brand that develops and KEY STATISTICS
markets a wide array of consumer focused toys and experiences through more than Key Stock Statistics
500 interactive brick and mortar locations, with an array of corporately-managed, Recent price (3/20/24) $29.19
third-party retail, and international franchise models. The company also markets its
Fair Value Estimate $47.00
products through e-commerce/digital channels and is expanding its brand beyond
52 week high/low $30.49-$17.85
retail by creating engaging content through social media channels.
Shares outstanding (M) 14.0
Market cap ($M) 408.7
COMPANY HIGHLIGHTS Dividend $0.80
* A Driver of Mall Traffic: Build-A-Bear Workshop is a global brand that creates Yield 2.7%
unique consumer experiences and personalized customer relationships by mar-
keting a wide array of customized plush toys and accessories. We see Build-A- Sector Overview
Bear Workshop’s prime retail thrust driving traffic to malls. Through fiscal 2023, Sector Consumer Discretionary
corporate-owned locations accounted for more than two-thirds of its locations. Sector % of S&P 500 10.6%
The company leverages data from its customer database that drives planned and
repeat visits, which we think represents a significant barrier to entry for potential
Financials ($M, as of 2/3/24)
competitors.
Cash & Mkt Securities 44.3
* Expansion of “Asset Light” Location Footprint: We view positively Build-A- Debt/Lease Liabilities 0/83.6
Bear’s further leveraging its renowned brand by expanding into more third-party Working Capital 44.0
operated retail locations, including leading global tourist destinations, as well as Current Ratio 1.5
international locations, mostly through franchise relationships. Through these third Payout ratio NM
party (wholesale) and franchise (royalty) models, we see Build-A-Bear driving Revenue (TTM) 486.1
brand expansion, using modest capital compared with its company-operated Net Income (TTM) 52.8
stores, thus achieving and increasing its sustainable free cash flow. Third-party Net Margin (TTM) 10.9%
partners accounted for around 60% of fiscal 2023’s 37 new location openings, and
we expect a comparable breakdown among from the more than 50 new locations Risk
planned for fiscal 2024. Beta 1.65

(continued on next page) Inst. ownership 83%

Valuation
P/E Forward EPS 8.1
PRICE CHART
EV/Revenue (TTM) 0.9
EV/EBITDA (TTM) 3.6
Free Cash Flow Margin (%, TTM) NA

Top Holders
Vanguard Group Inc.
BlackRock Inc.
Cannell Capital LLC

Management
President/CEO Ms. Sharon Price John
CFO Mr. Voin Todorovic
COO Mr. Christopher Hurt
Company website www.buildabear.com

COMPANY SPONSORED REPORT. SEE LAST PAGE FOR DISCLOSURES.

A R G U S R E S E A R C H C O M P A N Y • 6 1 B R O A D W A Y • N E W Y O R K, N.Y. 1 0 0 0 6
 EQUITY RESEARCH REPORT

* Profitable Across All Retail Segments: In our view, Build-
A-Bear has achieved robust operational results, with all of its
North America retail stores being profitable, with an average
contribution margin of over 25% and a less than two-year
investment payback period. These results have driven higher
returns on invested capital compared with retail peers. We also
like its profitable e-commerce business (despite some recent
softness) and expect investments to position that segment
positively, noting its large potential in the multibillion-dollar
gifting category. We think these factors are underappreciated
by investors.
* Improving Margin Profile: Despite navigating inflation across
its footprint, particularly in wages and global freight cost chal-
lenges, we are encouraged by the company’s 190 basis point
gross margin improvement in fiscal 2023 (up nearly 900 basis
points compared with pre-pandemic levels in fiscal 2019.) We
see Build-A-Bear as having strong control over its inventory
and distribution efficiencies, which are driving robust cash
flows.
* Robust Licensing Model: Build-A-Bear Workshop enhanc-
es its visibility and organic growth by creating proprietary
products and content, which are complemented by strong
licensing partnerships with over 75 world-class collaborators.
Its customer reach and focus has expanded to include adults
and collectors, who now account for approximately 40% of
end users.
* Emerging Omni-Channel Capabilities: In recent years, Build-
A-Bear has expanded its digital strategy to use data and tech-
nology to provide customers with value-added sales channels,
new products and media content distribution. Initiatives have
improved warehouse, inventory and distribution efficiencies,
and the company focuses on permanently integrating these
efforts across multiple touch points in the customer chain.
* Strong Balance Sheet: As of February 3, 2024, Build-A-Bear
Workshop had cash and cash equivalents of $44.3 million,
compared to $42.2 million as of January 28, 2023, despite
having returned $42.4 million to shareholders through dividend
payments and share repurchases in fiscal 2023, and more than
$90 million over the past three years. Importantly, the company
had no borrowings on its revolving credit facility. We view
positively BBW’s recent launch of a quarterly dividend program
of $0.20 per share, with an annualized yield of 2.7% at current
levels, beginning in April 2024.
* Fiscal 2024 Outlook: The company’s fiscal 2024 guidance
calls for revenue growth in the low-to-mid single digit range
over fiscal 2023, despite one less week in the 2024 fiscal year.
It also anticipates pretax income growth in the low single digit
range in fiscal 2024.
* Fair Value: Based on its strong fundamentals and return of
capital to its shareholders, we see the current valuation, trading
around 8-times our fiscal 2024 EPS estimate of $3.62 and less
than one-times our fiscal 2024 revenue estimate of 498.5 million,
as considerably below what we think is warranted, compared
with a peer EPS multiple around 16-times. Applying what we
view as a reasonable multiple of 13-times to our fiscal 2024
EPS estimate of $3.62, which is a nearly 20% discount to its
peer group, we arrive at a fair value estimate of $47 per share.
COMPANY/INDUSTRY BACKGROUND
Build-A-Bear Workshop was founded in 1997 as a mall-based
vertical retailer and has since become a globally recognized brand,
delivering positive customer experiences through its sale of nearly
250 million teddy bear and animal friends and the associated store
experiences.
As of February 3, 2024, the company had 525 global
locations, through a combination of corporately managed, (di-
rect-to-consumer, 359), third-party retail, (wholesale, 92) and
international franchise (royalty, 74) models. All of these entities
operate under the Build-A-Bear Workshop brand. In addition to
stores, its products are sold on the company’s e-commerce sites,
third-party marketplaces and franchisee sites and through retailers’
wholesale agreements.
In fiscal 2023, the company opened 37 new corporate and
partner-operated stores. In March 2024, Build-A-Bear announced
plans to open more than 50 new locations in fiscal 2024.
In our view, the Build-A-Bear experience is unique and
supportive of its premium market position, in that customers can
create their own products to feature customized sounds, scents,
accessories and names, each with a product birth certificate. Fur-
thermore, in-store products are stuffed in front of the customer,
creating a very personalized experience that we think represents
significant barriers to entry for potential competitors. We believe
these features differentiate Build-A-Bear products from peers
including Vermont Teddy Bear and Funko and Ty, as well as more
general toy manufacturers including Mattel, Hasbro, Lego, Ganz,
and Steiff.
Importantly, the Build-A-Bear Workshop experience is atyp-
ical among retailers, as it tends to be a driver of mall traffic, rather
than being reliant upon it for its sales. According to company exit
(continued on next page)

PEER COMPARISON
Recent 52-Week 52-Week Mkt. Cap 1-yr Price 1-yr Rev 1 YR EPS
Company Ticker Price ($) High ($) Low ($) ($MIL) Change (%) Growth (%) Growth (%) P/E Ratio Beta Yield (%)

BUILD-A-BEAR WORKSHOP INC NYSE: BBW 29.19 30.49 17.85 409 20 4 19 8.0 1.65 2.7

HASBRO INC NASDAQ: HAS 54.28 73.58 42.66 7545 9 -15 NM NM 0.71 5.2

MATTEL INC NASDAQ: MAT 19.54 22.64 16.00 6842 17 0 NM 32.6 0.96 NA

1-800-FLOWERS.COM INC NASDAQ: FLWS 10.79 12.09 5.98 668 2 -9 NM NM 1.67 NA

A R G U S R E S E A R C H C O M P A N Y • 6 1 B R O A D W A Y • N E W Y O R K, N.Y. 1 0 0 0 6

surveys, it estimates that up to 80% of its store visits are planned
as a special trip rather than being a by-product of a typical trip to
the mall. For the third consecutive year, in fiscal 2023, all of its
retail stores in North America were profitable on an EBIT basis,
with an average contribution margin over 25%, which has more
than doubled since 2012.
Over time, the company has improved its footprint to opti-
mize its locations, thus achieving superior sales per square foot.
In fiscal 2023, average net retail sales per store were nearly $1.3
million, more than double the $0.6 million of fiscal 2020, which
marked the start of the COVID-19 pandemic. Also, the company
is successfully diversifying its revenue base with the emergence of
new channels, including e-commerce, third-party, and franchising,
which has resulted in more than 35% of its locations being located
outside of traditional malls. We believe these factors will continue
to provide leverage in negotiating favorable lease terms with mall
operators, since company locations tend to drive traffic to other
stores in the malls in which they operate.
In recent years, Build-A-Bear Workshop has also diversified
through its use of data and technology to provide customers with
value-added sales channels, new products and media content
distribution. In our view, this digital transformation has enabled
the company to broaden its consumer base beyond the traditional
children’s demographic, to be more multi-generational and achieve
penetration among teens and adults as well, who currently repre-
sent approximately 40% of its customers. This user base has been
expanded to include collectible enthusiasts, corporate gifting and
brand building, among other groups.
We view Build-A-Bear’s brand as a key value driver, and
think that recognition among North America’s most influential
retailers, as recently recognized by brand analytics platform BAV
underscores the customer experience it has cultivated. In our view,
this visibility and growth has been supported by Build-A-Bear’s
emergence as a co-brand, with a strong licensing portfolio of more
than 75 world-class collaborators and licensees, many of which
are pop culture icons such as Harry Potter, Pokemon, Star Wars
and TV show Ted Lasso.
Importantly, these relationships and co-branded products
retain the essence of the Build-A-Bear brand while appealing to the
licensor’s fans who tend to be in an older targeted demographic. We
estimate that licensing activity impacts more than one-third of its
total business. We also see licensing supporting a premium-pricing
model that enables Build-A-Bear Workshop to maintain and, in
some cases, expand its product gross margin.
Through its third-party retail model, partner companies bear
the cost of workshop build out and operation, while Build-A-Bear
Workshop sells them inventory on a wholesale basis. Revenue
from the commercial segment increased by approximately 37%
in fiscal 2023, following a 60% increase in fiscal 2022. While
currently accounting for a modest 5% of Build-A-Bear’s fiscal
2023 revenues, we view the profitability of these locations, the
minimal capital requirements and their high margins as accretive
to Build-A-Bear’s cash flow, which supports its capacity to invest
across the business.
We are encouraged by the strategic partnerships in this seg-
ment to date, with such leading hospitality vendors as Carnival
A R G U S R E S E A R C H C O M P A N Y • 6 1
EQUITY RESEARCH REPORT
Cruise Line, Great Wolf Lodge Resorts, Six Flags, and Kalahari
Resorts. These relationships enable Build-A-Bear to drive en-
gagement in additional markets, particularly among tourists. We
view positively recent market research that has correlated store
performance to customer distance from their homes, and tourist
purchases driving future traditional in-store traffic.
Lastly, the company appears to be at an early-stage of pen-
etrating additional global markets, both under company owned
and franchising models. Under the franchise model, Build-A-Bear
can produce solid returns on capital from product royalties, with
modest direct investment required. To date, it has entered fewer
than 10 countries, including China, India, England, Ireland and,
most recently, Italy with two locations. We think the latter can serve
as an entry point towards penetrating the high-growth continental
European market and see this effort as a potential growth driver
over time.
INVESTMENT THESIS
In fiscal 2023, revenues increased by approximately 4%, navigating
several retail sector challenges, related to inclement weather and
consumer spending trends, as well as delays in e-commerce sales
due to the revamping of its website. Despite near-term choppiness,
we see Build-A-Bear executing its growth strategy by maintaining
sufficient capital to invest in growth initiatives, while expanding the
brand’s global footprint and returning capital to shareholders. For
fiscal 2024, the company expects to achieve its fourth consecutive
record year for revenues and pre-tax revenue.
As mentioned earlier, Build-A-Bear is a driver of traffic to
its company operated locations, many of which are in mall-based
settings. In our view, the company’s strong fundamentals are driven
by its ability to capture first-party customer data during its inter-
actions, including customer demographics, which it can leverage
to offer new loyalty club and marketing programs, increase store
traffic and repeat transactions.
We see these capabilities having supported overall store
traffic growth in fiscal 2023, despite periods of softness seen
across the retail sector, albeit at a low single digit revenue per
transaction decrease compared with fiscal 2022. Between fiscal
2012 and 2021, Build-A-Bear was able to leverage its brand value
and pricing power with co-developed product tie-ins to produce
a 50% increase in average dollar per transaction to over $53 from
$35. Over the last two years, the company has seen retail traffic
supported by marketing promotions that tend to result in lower
average revenue per transaction over the short-term, but are a key
customer acquisition tool to drive loyalty club expansion, and re-
turn store traffic that has consistently remained ahead of national
store traffic rates, and ultimately lead to increased total revenue.
These marketing programs include the company’s loyalty
club’s Count Your Candles program and the sale of Birthday Treat
Bears, where a customer can purchase a bear for the age they
are turning. We see these programs driving long-term customer
acquisition and loyalty and, in turn, driving future purchases. In
addition, we see the re-opening of in-store parties, which resumed
during fiscal 2022 (following the pandemic) and that historically
accounted for around 5% of sales, as providing a longer-term
tailwind for store activity and customer acquisition.
B R O A D W A Y • N E W Y O R K, N.Y. 1 0 0 0 6

Overall, we think that the company’s inventory management
is an under-appreciated aspect of its broader execution, as its verti-
cal retail model provides flexibility in its inventory management to
help drive higher margins. Build-A-Bear Workshop is able to test
new products in various channels, including e-commerce, before
introducing them to its physical store locations. The company is
also diversifying its sourcing factory footprint and ships product
directly from its stores, leveraging its store fixed costs to serve as
distribution centers for online orders, while utilizing technology
to determine optimized shipping routes. We note that the
company tends to realize swift redemptions of gift cards, with
many customers spending more than the value of the redeemed gift
card. In addition, it sees below industry-average product returns,
given the ubiquitous sizing of many of its items. We believe these
trends contribute to effective inventory management.
In addition to the favorable in-store operating metrics, we
believe that Build-A-Bear Workshop remains in the early-stages
of driving additional organic revenue growth through its emerging
digital and omnichannel approach. In recent years, the company
has made significant investments in its IT infrastructure, including
its e-commerce business that experienced softness in fiscal 2023,
but has since tripled its sales from pre-pandemic levels. We expect
these investments to begin to yield positive results in fiscal 2024,
and are encouraged by early signs in this regard. We believe this
should play a large role in supporting the continued evolution of
the brand towards appealing to an older customer base, particularly
in the multi-billion dollar gifting industry, beyond the traditional
children’s experience market.
Beyond traditional e-commerce, we have a positive view
of Build-A-Bear’s digital transformation that is integrating its
products into new mediums and digital channels to expand the
company’s marketing and customer engagement ecosystem. The
company leverages its social media platform to generate incremen-
tal annual media impressions. Recent programs include its After
Dark product line, Baby Yoda (Star Wars) and a its partnership
with Axion Space to fly a teddy bear named GiGi into space along
with a team of astronauts.
Additionally, the company has driven viewership and interest
through digital content, including film production, new digital
games on leading social platforms such as Roblox (where its
Build-A-Bear Tycoon game, among other properties and tie-ins
based on intellectual property.
All of these capabilities were highlighted in Build-A-Bear’s
first animated feature for the 2023 holiday season, which was based
on its seasonal Glisten and the Merry Mission collection. Since its
2014 launch, the Merry Mission product line has generated more
than $150 million in revenue. The film was released digitally
on streaming devices and in limited theatrical release, through a
partnership with movie chain Cinemark to tie-in merchandise with
movie tickets in various co-located U.S. malls. Ahead of the mov-
ie’s release, Build-A-Bear cited more than 4 billion social media
impressions, and the company introduced its first animatronic,
interactive bear based on the movie’s characters. The movie, which
drove Merry Mission sales to increase by 65% year-over-year,
was also supported by the launch of a gaming app, music videos,
a tie-in with the Roblox game, and other integrated features that
A R G U S R E S E A R C H C O M P A N Y • 6 1
EQUITY RESEARCH REPORT
we see as building an evergreen concept for future content releases,
including from the Merry Mission series.
RECENT DEVELOPMENTS
Build-A-Bear Workshop shares are listed on the New York Stock
Exchange (NYSE) under the symbol “BBW”. In 2023, the stock
declined by 4%, compared with a 24% increase for the S&P 500.
Year-to-date in 2024, the stock has risen by 27%, versus an increase
of 10% for the S&P 500.
In March 2024, Build-A-Bear reported results for the fourth
quarter and full-year of fiscal 2023, ended February 3, 2024.
Full-year results were highlighted by 4% revenue growth to $486
million, representing its third consecutive all-time-high. Revenue
growth benefited from a 53rd week in fiscal 2023. EPS amounted
to $3.65, compared with $3.08 for fiscal 2022. Excluding tax
benefits from the release of a prior valuation allowance related to
tax assets in the UK, adjusted EPS was $3.42.
In March 2024, Build-A-Bear issued guidance for fiscal
2024, calling for revenue growth and pretax income growth in the
mid-single digit range, compared with the non-GAAP, normalized
52-week fiscal 2023.
In March 2024, Build-A-Bear announced that its board of
directors authorized a quarterly dividend of $0.20 per share, ini-
tially payable in April 2024.
In March 2024, Build-A-Bear disclosed the opening of a
second retail location in continental Europe, in Rome, Italy. During
fiscal 2023, a store was opened in Milan, Italy.
In November 2023, Build-A-Bear partnered with U.S. movie
chain Cinemark to cross-promote Glisten and the Merry Mission
in select theatres for the U.S. holiday season.
In May 2023, Build-A-Bear Workshop and Kalahari Resorts
& Conventions entered into a partnership to include Kalahari’s four
resort locations in Wisconsin, Ohio, Pennsylvania, and Texas.
In May 2023, Build-A-Bear Workshop and Axiom Space
partnered to include a teddy bear named GiGi along with Axiom
Mission 2 astronauts. The campaign generated more than 500
million PR impressions following its launch.
In April 2023, Build-A-Bear Entertainment, a subsidiary of
the company, entered into a content development relationship with
Odd Dot, a division of Macmillan Publishing, to create and pro-
duce an offering of books inspired by Build-A-Bear brand-related
characters and stories.
In April 2023, Build-A-Bear Workshop paid a special cash
dividend of $1.50 per share.
In January 2023, the company announced the hiring of Dara
Meath as senior vice president, chief technology officer and a mem-
ber of the company’s Senior Leadership Committee, reflecting its
commitment to its digital transformation and expanded technical
capabilities. Ms. Meath brings more than 20 years of experience in
various technologic leadership roles to Build-A-Bear Workshop.
In December 2022, it announced the release of a new virtual
community space, “Build-A-Bear Tycoon”, over the popular global
online platform Roblox. The offering represents the next launch
into the Metaverse in partnership with Gamefam and enables users
to build their own fantastical Build-A-Bear universe and experience
the brand in a new way.
B R O A D W A Y • N E W Y O R K, N.Y. 1 0 0 0 6

In July 2022, Build-A-Bear Workshop was recognized as
one of Newsweek’s ‘America’s Best Retailers of 2022’ as well as
being named on Newsweek’s list of ‘America’s Fastest Growing
Online Shops 2022.’
EARNINGS & GROWTH ANALYSIS
We forecast fiscal 2024 revenues of $498.5 million and fiscal
2025 revenues of $520 million, which would represent growth
of 3% and 4%, respectively, compared with fiscal 2023’s $486.1
million. We expect revenue growth will be somewhat back-half
weighted, as new locations, both company-owned and partnered,
open throughout the year. We also expect incremental improvement
from e-commerce channels, which saw lower sales in fiscal 2023,
but note that Build-A-Bear has invested heavily to enhance this
channel and has already noted early momentum in this regard.
While we expect commercial revenues, which currently represent
only 6% of revenues, to increase at a higher percentage rate than
company-owned stores, given a robust share of Build-A-Bear’s
new store openings across fiscal 2023 and 2024, over a smaller
revenue base. We also note that the current fiscal year will be 52
weeks long rather than the 53 weeks of the prior fiscal year.
In our view, the company is well positioned to maintain its
gross margins near fiscal 2023 levels above 54%. This compares
favorably to the 40%-45% prior to the COVID-19 pandemic, as
Build-A-Bear has realized efficiencies in its retail footprint, and
leveraged its fixed occupancy costs across an expanding revenue
and merchandise base. We forecast gross margins of 54.4% in fiscal
2024 and 54.5% in fiscal 2025, though we see potential for some
volatility from elevating freight costs amid geopolitical conflicts
globally. We expect operating expenses to remain somewhat ele-
vated compared to fiscal 2023, as Build-A-Bear invests in its digital
infrastructure and marketing for long-term growth, and navigates
the impact of inflation in the retail channel, particularly from higher
labor costs. In fiscal 2023, SG&A expenses were 40.9% of total
revenues, compared to 39.3% in fiscal 2022. We anticipate SG&A
expenses inching up to around 41% of revenues in fiscal 2024 but
foresee a slight moderation to 40.5% in fiscal 2025.
We also expect that the company’s long-term margin profile
will be boosted by expansion of its partner-operated model, which
sells products at wholesale, but requires minimal internal resource
allocation besides product inventory. Based on an estimated
depreciation and amortization expense of approximately $15.5
million in fiscal 2024 and $16 million in fiscal 2025, we project
fiscal 2024 EBITDA of $82.8 million and fiscal 2025 EBITDA of
$90.3 million, compared with $79.1 million in fiscal 2023.
We forecast pretax income growth of 3% for fiscal 2024 and
10% in fiscal 2025, compared with 7% in fiscal 2023. We project
earnings per share of $3.62 in fiscal 2024 and $3.98 for fiscal 2025.
That would represent a 1% decline from fiscal 2023’s $3.65 (6%
growth over adjusted fiscal 2023 EPS of $3.42, which excludes a
one-time tax allowance that boosted fiscal 2023 results) and 10%
growth in fiscal 2025, driven by moderating expense growth.
Despite some variability, we forecast a normalized tax rate
around 26%. With around 14 million shares currently outstanding,
supported by share repurchases, we see Build-A-Bear Workshop
having inherent earnings growth leverage.
A R G U S R E S E A R C H C O M P A N Y • 6 1
EQUITY RESEARCH REPORT
FINANCIAL STRENGTH & DIVIDEND
Our financial strength rating for Build-A-Bear Workshop is High.
At February 3, 2024, the company had $44.2 million in cash and
equivalents, compared with $42.2 million at the end of fiscal 2022.
Working capital was $44.0 million, resulting in a current ratio of
near 1.5. Importantly, the company had no borrowings outstanding
on its revolving credit facility.
As of February 4, 2024, inventory was $63.5 million,
down from $70.5 million at the end of fiscal 2022. We note that
prior-year inventories were increased by the company to avoid
potential supply-chain disruptions amid higher freight costs.
Given its strong balance sheet and working capital position,
we see Build-A-Bear as well positioned to continue to manage
its inventory levels, particularly as distribution and inventory
levels can fluctuate as partner-driven locations stock and then
replenish their inventories over time. In addition, the company
has cited some rising freight costs due to global geopolitical
conflicts.
In fiscal 2023, capital expenditures were $18.3 million and
depreciation and amortization amounted to $13.7 million. In our
view, Build-A-Bear Workshop is in an elevated capital expendi-
ture phase as it grows its business. We expect near-term capital
expenditures to remain around $20 million annually, with a focus
on growth and technology investments, over those aimed at store
maintenance. In fiscal 2023, Build-A-Bear incurred $13.7 million
in depreciation and amortization expense, up from $12.5 million
in fiscal 2022. We expect such expenses to rise to around $15-$16
million in fiscal 2024.
We view Build-A-Bear Workshop as well positioned to
maintain robust free cash flow that enable continued investments
and capital returns to its shareholders. We think that the company
has generated superior returns on invested capital compared to its
retail peers, which is underappreciated by investors.
Over the past three years, Build-A-Bear has returned more
than $90 million to its shareholders, through the issuance of special
dividends and share repurchases. The company has paid special
one-time dividends of $1.50 and $1.25 per share in fiscal 2023 and
fiscal 2021, respectively. In March 2024, it initiated a quarterly
dividend of $0.20 per share, initially to be paid in April 2024, which
represents an annualized yield of 2.7% at the company’s current
stock price.
In fiscal 2023, Build-A-Bear Workshop used $20.4 million
to repurchase shares, and subsequent to fiscal year end, it had used
$2.6 million towards share repurchases. As of March 11, 2024, it
had approximately $23.5 million available under its $50 million
board authorized stock repurchase program.
With approximately 14 million shares outstanding, we note
that the company has repurchased more than 10% of its outstanding
shares since the end of fiscal 2021.
In fiscal 2022, net cash provided by operating activities was
$3.5 million ($39.8 million provided in fiscal 2021, $59.5 million
used in fiscal 2020). Cash provided by financing activities in fiscal
2022 was $26.4 million ($6.9 million used in fiscal 2021, $30.2
million provided in fiscal 2020). Cash used in investing activities
in fiscal 2022 amounted to $60.1 million ($27.4 million in fiscal
2021 and $18.1 million in fiscal 2020).
B R O A D W A Y • N E W Y O R K, N.Y. 1 0 0 0 6

MANAGEMENT
Sharon Price John has served as Build-A-Bear’s president and
chief executive officer (CEO) since March 2016, and had been
was appointed to the Board of Directors in June 2013. Previously,
Ms. John served as president of children footwear designer and
marketer Stride Rite Children’s Group. Earlier in her career, she
had held various roles of increasing responsibility at multi-national
toy company Hasbro, Inc. and Mattel Inc., and founded and served
as CEO of Checkerboard Toys and as vice president of the U.S.
toy division at VTech Industries, Inc. She also serves on the Board
of Directors of Jack in the Box Inc., a publicly traded restaurant
company.
Voin Todorovic has served as Build-A-Bear Workshop’s
chief financial officer (CFO) since September 2014. Previously,
Mr. Todorovic served as the head of finance and operations for the
Lifestyle Group of global footwear and apparel company Wolverine
Worldwide, Inc. His experience also includes executive leadership
roles at brands such as Stride Rite, Collective Brands, Inc. and
Payless ShoeSource.
Build-A-Bear’s board of directors includes six independent
directors of the seven total members, which we view favorably for
its corporate governance.
RISKS
Risks for an investment in Build-A-Bear Workshop include its
sensitivity to discretionary spending by consumers, which can
be affected by economic conditions including inflation, levels of
employment and consumer confidence and weather related issues
that can reduce store traffic or result in closures; profitability that
can be impacted by supply chain issues such as freight costs and
inventory transportation availability; demand from and continuity
in relationships with brand licensors for its co-branded products
and experiences; and reliance upon maintaining an available
e-commerce platform to test various products and direct consumer
traffic. Lastly, we note that Build-A-Bear Workshop does not own
or operate its production factories and that in recent years, the
company has purchased 77% of its merchandise from five vendors,
which represents some concentration risk.
A R G U S R E S E A R C H C O M P A N Y • 6 1
EQUITY RESEARCH REPORT
VALUATION
Since 2023, the shares have traded in a range between $17.85
and $30.50, and are currently trading near the high end of the
range, which we attribute to investor confidence in the company’s
prospects, upon its initiation of a quarterly dividend, as well as
execution on its omni-channel growth strategy.
Despite its robust stock performance year-to-date, increasing
by more than 30%, the shares continue to trade below a basket of
leisure-product peer companies that includes toy makers Mattel and
Hasbro, among others. This is based on various metrics, including
forward P/E (around 8.1-times our 2024 EPS estimate versus near
16-times for the peer group) and Enterprise Value-to-Revenues
(below 1-times versus 1.2-times) and EV/EBITDA (5.6-times
versus 8.7-times).
We believe the company’s pricing power as a premium brand
can be impacted by broader measures of consumer sentiment and
macro-economic factors, such as the company experienced during
the fourth quarter of fiscal 2023, which, along with costs associ-
ated with operating its corporate-managed store footprint, does
represent some risk during declining economic periods. That said,
over the past three years, the company has successively produced
its best periods since inception.
That said, the current valuation does not, in our opinion,
appropriately reflect Build-A-Bear Workshop’s long-term organic
revenue growth, margin expansion, proprietary media creation,
superior inventory management, strong balance sheet, and com-
mitment to returning capital to investors. Additionally, we think
the company is poised to continue expanding its footprint, with
additional store openings planned, further supporting its revenue
growth prospects.
While we foresee some of these challenges persisting over
the near-term, we expect the labor market will remain tight and the
company will continue to leverage its premium market reputation,
which we believe warrants a valuation closer to this market peer
group.
Thus, we apply a multiple of 13 to our 2024 EPS estimate of
$3.62 to arrive at a fair value of $47, compared with current levels
above $29.
Steve Silver,
Argus Research Analyst
B R O A D W A Y • N E W Y O R K, N.Y. 1 0 0 0 6
 EQUITY RESEARCH REPORT

INCOME STATEMENT
Growth Analysis ($MIL) FY 2021 FY 2022 FY 2023 Q1 2024E Q2 2024E Q3 2024E Q4 2024E 2024E Q1 2025E Q2 2025E Q3 2025E Q4 2025E 2025E
Revenue 411.5 467.9 486.1 121.6 113.0 112.0 151.9 498.5 127.2 117.7 116.4 158.7 520.0
Gross Profit 218.0 245.9 264.4 271.2 283.3
SG&A 167.7 183.9 199.0 203.9 209.0
Operating lncome 50.3 61.9 65.4 67.3 74.3
EBITDA 62.6 75.0 79,1 22.1 14.8 14.2 31.7 82.8 24.4 18.9 15.2 34.8 90.3
Net Interest 0.0 0.0 0.8 1.1 1.0
Pretax Income 49.4 61.9 66.3 18.5 11.2 10.6 28.2 68.5 20.6 12.1 11.5 31 75.3
Tax Rate (%) 23 24 22 26 26
Net Income 38.3 47.0 52.8 50.7 55.7
EPS 2.37 3.08 3.65 0.98 0.59 0.56 1.49 3.62 1.09 0.64 0.61 1.64 3.98
Diluted Shares 16.1 15.2 14.5 14.0 14.0
Dividend Per Share NA NA NA 0.8 0.8

Growth Rates (%)

Revenue 61 14 4 3 4
Operating Income NM 23 6 3 10
Pre-Tax Income NM 25 7 3 10
Net Income NM 30 12 -4 10
EPS NM 23 19 -1 10

Valuation Analysis
Price ($): High 23.50 26.87 30.49 NA NA
Price ($): Low 4.65 12.47 17.85 NA NA
PE: High NA 11.3 9.9 NA NA
PE: Low NA 5.3 5.8 NA NA
PS: High 1.5 1.0 0.9 NA NA
PS: Low 0.3 0.5 0.6 NA NA
Yield: High NA NA NA NA NA
Yield: Low NA NA NA NA NA

Financial & Risk Analysis ($MIL)

Cash 32.8 42.2 44.3 NA NA
Working Capital 32.6 46.2 44.0 NA NA
Current Ratio 1.3 1.5 1.5 NA NA
LTDebt/Equity (%) NA NA NA NA NA
Total Debt/Equity (%) NA NA NA NA NA

Ratio Analysis
Gross Profit Margin 53.0% 52.5% 54.4% 54.4% 54.5%
Operating Margin 12% 13% 13% 14% 14%
Net Margin 9% 10% 11% 10% 11%
Return on Assets 11.9% 14.2% 14.8% NA NA
Return on Equity 58.7% 45.1% 42.5% NA NA
Op Inc/Int Exp NM NM NM NM NM

A R G U S R E S E A R C H C O M P A N Y • 6 1 B R O A D W A Y • N E W Y O R K, N.Y. 1 0 0 0 6
 EQUITY RESEARCH REPORT

DISCLAIMER
Argus Research Co. has received a flat fee from the company discussed in this report as part of an “Equity Report” agreement
between Argus and the company. No part of Argus Research’s compensation is directly or indirectly related to the content of this
assessment or to other opinions expressed in this report. Argus Research provides a suite of Equity Report services including but
not limited to initial reports with ongoing coverage and updates; distribution to Argus Research’s clients; a license to enable the
company to proactively use and distribute the report ; a press release announcing our initial coverage and updates; and optional
access to the Vickers Research database. The price for this suite of services generally ranges from $10,000 to $15,000 depending on
the level of services selected. Argus Research receives no part of its compensation in the form of stock or other securities issued by
the company discussed in this report, and has no long equity position or short sale position in the company’s stock. Argus Research
is not involved in underwriting securities for the subject company, and will receive no proceeds or other financial benefit from any
securities offering by the company. Argus Research; its officers, directors, and affiliates; and the author of this report have no finan-
cial interest in, or affiliation with, the subject firm. The report is disseminated primarily in electronic form and is made available at
approximately the same time to all eligible recipients.
Argus Research Co. (ARC) is an independent investment research provider whose parent company, Argus Investors’ Counsel, Inc.
(AIC), is registered with the U.S. Securities and Exchange Commission. Argus Investors’ Counsel is a subsidiary of The Argus
Research Group, Inc. Neither The Argus Research Group nor any affiliate is a member of the FINRA or the SIPC. Argus Research
is not a registered broker dealer and does not have investment banking operations. The Argus trademark, service mark and logo are
the intellectual property of The Argus Research Group, Inc.
The information contained in this research report is produced and copyrighted by Argus Research Co., and any unauthorized use,
duplication, redistribution or disclosure is prohibited by law and can result in prosecution. The content of this report may be derived
from Argus research reports, notes, or analyses. The opinions and information contained herein have been obtained or derived from
sources believed to be reliable, but Argus makes no representation as to their timeliness, accuracy or completeness or for their fitness
for any particular purpose. This report is not an offer to sell or a solicitation of an offer to buy any security. The information and
material presented in this report are for general information only and do not specifically address individual investment objectives,
financial situations or the particular needs of any specific person who may receive this report. Investing in any security or invest-
ment strategies discussed may not be suitable for you and it is recommended that you consult an independent investment advisor.
Nothing in this report constitutes individual investment, legal or tax advice. Argus may issue or may have issued other reports that
are inconsistent with or may reach different conclusions than those represented in this report, and all opinions are reflective of judg-
ments made on the original date of publication. Argus is under no obligation to ensure that other reports are brought to the attention
of any recipient of this report. Argus shall accept no liability for any loss arising from the use of this report, nor shall Argus treat all
recipients of this report as customers simply by virtue of their receipt of this material. Investments involve risk and an investor may
incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance.
Argus has provided independent research since 1934. Argus Investors’ Counsel (AIC), a portfolio management business based
in Stamford, Connecticut, is a customer of Argus Research Co. (ARC), based in New York. Argus Investors’ Counsel pays Argus
Research Co. for research used in the management of the AIC core equity strategy and model portfolio and UIT products, and has
the same access to Argus Research Co. reports as other customers. However, clients and prospective clients should note that Argus
Investors’ Counsel and Argus Research Co., as units of The Argus Research Group, have certain employees in common, including
those with both research and portfolio management responsibilities, and that Argus Research Co. employees participate in the man-
agement and marketing of the AIC core equity strategy and UIT and model portfolio products.

A R G U S R E S E A R C H C O M P A N Y • 6 1 B R O A D W A Y • N E W Y O R K, N.Y. 1 0 0 0 6