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.

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