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Build a bear international expansion into the chinese

BBW's revenue diversification and margin improvement efforts are paying off.

Build-A-Bear Workshop, Inc – Global Strategy Essay

Build-A-Bear BBW stock just had one of its best days in recent memory after the struggling retailer reported fourth-quarter numbers that illustrated impressive profitability gains. Although we don't believe that this stock is due for a major rebound we feel that the golden days of Build-A-Bear are assuredly in the rear-view mirrorwe do think that BBW is undervalued at current levels given improvements in revenue diversification and overall profitability.

We expected earnings to grow from that base and did not believe BBW stock was priced for such profitability stabilization. BBW is finally starting to realize its international opportunity and is specifically pushing into China, where the company plans to open 5 new stores this year.

Build-A-Bear Stock Is (Still) Undervalued

BBW is also selling products on cruise ships everywhere thanks to a big partnership with Carnival Corporation CCLand the company's licensing pipeline is rapidly expanding. These revenue diversification efforts, namely international expansion and e-comm build-out, will continue to play out and offset traditional mall store declines over the next several years.

That is why management expects low single-digit revenue growth next year and why we believe that low single-digit revenue growth rate will persist over the next 5 years. Meanwhile, margins are roaring higher thanks to cost-cutting initiatives.

  1. Gund Teddy Bears, 2010.
  2. This was mirrored in the way the function of the business was in place, whether on the shop floor, or possibly the lack of research they had done regarding their surrounding environment, which effected the national market responsiveness.
  3. Mass media and direct communication could not be sufficient enough to sustain customers, and gain potential ones.
  4. The would also be in hand with the developing technology that creates opportunities for the business expansion.

Gross margins have expanded 800 basis points since this company's turnaround plan began in 2013. That implies another 250 basis points of margin expansion potential.

Assuming all that margin expansion flows through to the pre-tax line, then BBW is looking at pre-tax profit margins of roughly 6. This represents a long-term earnings growth rate for BBW from 2017 to 2022 of 19.

Any prices above that feel stretched. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it other than from Seeking Alpha.

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