Is Build-A-Bear's Commercial Arm Driving Its Next Revenue Surge?

Build-A-Bear Workshop, Inc.’s BBW Commercial arm is emerging as a powerful engine for diversifying revenues and profitability beyond its traditional retail locations. In the second quarter of fiscal 2025, Commercial revenues grew 18.3%, while Commercial and International franchise revenues combined rose 15.2%. The Commercial segment — comprising wholesale sales to partner-operated stores and licensed distributors — has expanded at a 63% compound annual rate between fiscal 2020 and 2024.

The company’s partner-operated model underpins this surge. These locations require minimal capital expenditure from Build-A-Bear and allow the company to realize high-margin wholesale revenues by leveraging its partners' existing infrastructure and inventory management. With 157 partner-operated stores, now covering 25% of Build-A-Bear’s 627 global locations, this network is scaling faster than corporate stores. 

CEO Sharon Price John credits the “capital-light partner-operated retail model” for accelerating profitability and broadening brand reach. CFO Voin Todorovic highlighted that higher Commercial gross margins helped lift the company’s total gross margin by 340 basis points year over year in the second quarter.

Management now expects at least 60 net new locations in fiscal 2025, mostly through partners. Beyond store sales, wholesale distribution of new collectibles such as Mini Beans and licensed collaborations adds recurring volume streams. The Commercial arm’s success reflects a structural shift as Build-A-Bear is evolving from an experiential retailer into a hybrid consumer-products brand. If this trajectory holds, the Commercial segment could soon rival its retail business in margin contribution, establishing itself as the company’s next long-term growth engine.

What the Latest Metrics Say About Build-A-Bear

Build-A-Bear, which competes with Walmart Inc. WMT and Target Corporation TGT, has surged 50.8% over the past year, outperforming the industry’s growth of 7.3%. While Walmart shares have rallied 30.5%, Target has declined 38.7% in the aforementioned period.
 

From a valuation standpoint, Build-A-Bear's forward 12-month price-to-earnings ratio stands at 12.79, lower than the industry’s ratio of 17.84. BBW carries a Value Score of B. Build-A-Bear is trading at a discount to Walmart (with a forward 12-month P/E ratio of 37.74) but at a premium to Target (11.58). 
 

The Zacks Consensus Estimate for Build-A-Bear's current financial-year sales and earnings per share implies year-over-year growth of 7.4% and 6.9%, respectively. 
 

Build-A-Bear currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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