Build A Bear Workshop: Zacks’ Bull of the Day Play

Thanks to lower gas prices and improving labor markets, consumers have started spending more on discretionary items, like toys. Better than expected sales during the holiday quarter have led to rising estimates for this stuffed toy maker, sending the stock to a Zacks Rank # 1 (Strong Buy)

About the Company

Founded in 1997 and headquartered in St. Louis, Build-A-Bear Workshop (BBWSnapshot Report) –Snapshot Reportis the only global company that provides an interactive make-your-own stuffed animal entertainment experience. The company has approximately 400 stores worldwide, including company-owned stores and franchise stores.

Excellent Quarterly Results

The company reported its Q4 financial results on February 19. Net sales for the quarter were $130.0 million, up about 22% from $106.3 million in the same quarter a year ago. Same-store sales increased 9.9%, including an 8.5% increase in North America and a 14% increase in Europe. Gross margin was up 730 basis points to 52.2% from 44.9% in Q4 2013.

Net income surged to $11.8 million, or 67 cents per share, up from $5.45 million, or 31 cents per share, in the previous-year quarter. Adjusted net income was $0.73 per share, compared to adjusted net income of $0.40 per share, a year ago. Results beat the Zacks Consensus Estimate of $0.68 per share.

According to the management, strong sales of licensed Teenage Mutant Ninja Turtles and Frozen products led to better-than-expected results.

Estimates Rising

As a result of strong quarterly report, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and the next fiscal year now stand at $1.13 per share and $1.37 per share respectively, up from $1.00 per share and $1.35 per share, 60 days ago.

Rising estimates sent the stock back to a Zacks Rank #1 (Strong Buy) last month. The company has beaten Zacks Consensus Estimates in three out of the last four quarters, with an average quarterly surprise of 97%.

The Bottom Line

The stock has a style score of “A” both for Growth and Value. Further the industry is currently ranked 80 out of 265 Zacks industries (top 30%), suggesting solid potential for outperformance in the short-to-medium term.

The turnaround plan implemented by the company after many years of disappointing performance appears to be working well and it may be a good time to add this stock to your portfolio.

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