Back in March, I penned an article about specialty plush-toy retailer Build-A-Bear Workshop (NYSE: BBW) with the prophetic title "Build-A-Bear Could Get Mauled". Well, as you probably guessed from the title of my latest entry, it looks like I was right.

Back then, the stock was trading at $27.10 per share. This past Tuesday, it closed at $23.05.

That's a roughly 15% mangling!

The logic behind my bearish sentiment in the first piece was simple. The company's declining same store sales numbers could be a sign that the business was headed for a rough patch. I also fretted over the growing unwillingness among consumers to part with their hard-earned cash and how that might impact the company.

Many signs seemed to point to the company having problems in the future, and now the most recent earnings guidance seems to confirm these fears


Poor Guidance

The company recently cut its second-quarter earnings forecast from 15-19 cents per share to 7-10 cents per share. Analysts had expected the company to earn roughly 19 cents per share.

In addition, the company predicted its full-year earnings would come in somewhere between $1.55 per share and $1.65 per share. That's down from the $1.65-$1.75 per share it had previously been expecting. There was one thing behind

the revised numbers: lower-than-expected North American comps numbers.

The Worst Isn't Over

Although management has been promoting the brand, its bread-and-butter North American comps continue to trend in the red.

I also worry that management's revised Q2 estimate might be too high.

If you were a kid and your birthday party was in the heart of the summer, you'd probably want it at a park, or at a swimming pool. You'd want it to involve some sort of physical activity. How many kids and parents do you know are going to want to assemble 10 or 20 children in a shopping mall just so they can stuff a bear? (To learn more, see Demographic Trends And The Implications For Investment.)

In the days and weeks ahead, the sell side analysts that follow the company will probably be disseminating research to their clients that incorporates management's latest comments. I suspect this could add some selling pressure to the stock as well.

Mall Traffic On The Decline

Nobody seems to be mentioning that mall traffic is on the wane. This poses a threat to Build-A-Bear.

Don't believe me about mall traffic?

Just check out some of the more recent sales results at big name anchor stores like Sears (NYSE: SHLD), JC Penney (NYSE: JCP) and Macy's (NYSE: M). If the big guys aren't faring well, why would a small specialty shop like Build-A-Bear be any different?

Insider Timing On The Mark
As an interesting tidbit, over the last six months insiders have sold off more than 284,000 shares and have not purchased a single share.

A large number of these transactions were conducted when the stock was in the upper $20s.

Good timing... I

f insiders are selling, why should I be buying?

The Bottom Line
The Build-A-Bear concept remains fairly popular despite the company's recent woes. However, at this point, I fail to see a catalyst on the horizon that can help the stock rebound, and for that reason I wouldn't even consider bottom fishing the stock.

Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center