How Build-A-Bear went from a penny stock to a retail winner

Build-A-Bear Workshop wasn't always a retail winner.The toy store, known for its interactive experience of building and accessorizing stuffed animals, has gone through a significant turnaround since CEO Sharon Price John took the helm of the company over a decade ago."When I first came in 2013, that assessment of the brand was strong," she told CNBC. "We don't have a broken brand, we have a broken business, and when you started doing interviews, you really understood how much this brand meant to people."The company found initial success in malls in the early 2000s, but Build-A-Bear's stock plunged after the 2008 financial crisis, with the company reporting a $49 million loss in fiscal 2012.Under Price John, the company began investing in e-commerce, shifting orders to stores instead of its distribution center and diversifying its sales beyond just malls to turn around the company."Our goal overall was to create sustained, profitable growth, but the profitable was first," Price John said.That strategy worked. Virtually all of Build-A-Bear's stores are now profitable, and the stock experienced an Nvidia-like run earlier this year, hitting an all-time high of about $76 in September. The stock has come down some since then, but it's still up more than 125% over the past two years.But tariffs have taken a hit to the business. Build-A-Bear imports over 90% of its products from China and Vietnam, and the company said in its third-quarter earnings report in early December that it expects to take a roughly $11 million hit from tariffs for fiscal 2025.Company executives also said on a call with analysts that the company experienced a slowdown in traffic in October during the government shutdown.Small Cap Consumer Research analyst Eric Beder wrote in a note this month that the firm was lowering projections and reducing its price target by $10 due to the company reporting lighter-than-expected revenue and the "implied deep tariff impacts."Still, the company is outperforming most of its retail competitors, expecting to reach $500 million in annual revenue for the first time."You can buy stuffed animals or a plush pretty much everywhere, right from Target to FAO Schwarz and every place in between," Beder told CNBC. "The difference is that at Build-A-Bear, it's yours. You helped make it."Watch the video to learn more about how Build-A-Bear has made its comeback.