Why Build-a-Bear Workshop is outpacing big tech

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0:29I recently was thinking about how to invest a little bit of money. And specifically, what companies would be good to buy stock in? The names that came to mind were the usual suspects. The ones dominating the headlines and selling popular tech or AI. Companies like Microsoft, Apple, Oracle. But my colleague Jackie Peiser had a different company in mind. She's a retail reporter for The Post and recently looked into a business that's been outperforming all of the ones I just mentioned. The company? Build-A-Bear Workshop. Usually when retailers put out their earnings, we kind of just take a peek at how their stock price is doing because it can give an indication on what analysts are thinking and how well the company did.

1:19And we were really surprised to see how well Build-A-Bear stock has done in the last couple of years and even more surprised when we compared it to some of the biggest companies in the world.

1:32From the newsroom of The Washington Post, this is Post Reports. I'm Elahey Izadi. It's Tuesday, October 28th. Today, Jackie explains how a store selling custom stuffed animals in the mall became a financial success story.

1:54Build-A-Bear, as we said, is doing well as a company. But just how well, like what numbers are we talking about here? BuildsBear is doing extremely well. I mean, if you just look at its stock price for the last five years, it's at more than 1 ,200%. Okay, so wow, that is a huge jump. Jackie, how does that compare to some of the other companies I mentioned, like Apple and Microsoft or any other ones? Yeah, I mean, if you look at just the stock price and all these other large tech companies, the stock price is a lot higher, but the trajectory of how much they've grown doesn't even reach Build-A-Bear.

2:28So like those companies, it might be way more expensive for me to buy a single share, but the potential for growth isn't what we've seen with Build-A-Bear. Yes, that's right. How remarkable is that? I mean, for a toy company, specifically one that's in a mall, that's pretty remarkable. It's unheard of. Has this company ever performed this well before or even been close to this before? The short answer is no. And even during the pandemic, they really bottomed out. I mean, their stock price went as low as$1, which wasn't abnormal for specifically mall brands, but no, they've never seen success like this.

3:02I mean, they're on track for their fifth consecutive year of record revenue growth. I mean, is part of the growth because they bottomed out so much or no? It's definitely part of it. I mean, that definitely shows a more dramatic increase, but if you look at the last couple of years, they've just still been growing. So yes, the increase certainly is exaggerated because they hit a dollar back during the pandemic, but you can't deny that they've grown a lot since then. Okay, so now let's talk about why this is happening. Why is Build-A-Bear performing so well in this particular moment? Well, their in-store experience is really singular.

3:38They have a really unique way of bringing in customers at a really young age and also as an activity that parents can bring their kids to. And it's step-by-step building a bear, literally. Okay, so pretend we're walking in, take me into the Build-A-Bear experience. How does it work? Because I have to say, like, I've always walked by it as a kid and I never got to build a bear. So, like, what would it be like? So you walk in and there are all different kinds of, they call them furry friends. Are they always bears? No. Okay. No. So you can get a bat. You can get an axolotl. You can get, like, a dragon.

4:10You can get a cat. So there's a lot of different options. But you go through and you can choose which one you want to make. And then you can choose an outfit for them. So there's all different kinds of styles you can choose from. There's also seasonal ones. So if you want to dress them up for Halloween, you can. So then once you've picked out which one you want, you bring it over and they stuff it. Wait, it's not even stuffed? No. I hate saying it, but it's like a skin. Okay. A furry skin. All right. Wow. I'm wondering, like, wow, I don't know how I would have taken it as a child. I mean, they have the pre-stuffed ones there for you to choose from.

4:47Okay. Okay, so they're stuffing it and then what happens? And they get the kids involved. So they can press on the pedal to stuff themselves. Then they go through like a heart ceremony where it's like little, kind of fits in the palm of your hand, satin textured heart. And they put it inside the bear. So the kids can rub it. They can make a wish to it. And then they put it in the bear so they know that they were part of bringing the bear to life. And then they can upgrade it. You can add a sound to it so you can get a recording of your cat or of your mom saying I love you or your grandmother saying something.

5:19And then you can also get a scent. So they have some scents you can choose. So you can really personalize it. Generally, how much do they cost? It ranges. So for a standard Build-A-Bear, basic, without like buying an outfit for it, it can be around$36 to$38. And then for the higher end ones, it can get to like$85. And then there's like super limited edition ones and big ones that can go into the hundreds. Oh, wow. So when I think of Build-A-Bear, I think this is a store that I've only seen them in malls. But aren't malls dying? So like how come Build-A-Bear is doing well despite the decline of the shopping mall?

6:01Yeah, malls aren't doing great. I mean, there are obviously exceptions, but mall brands specifically are not doing well, especially like legacy mall brands, which I would equate Build-A-Bear to be kind of in that category. And why is that? Why are legacy mall brands not doing well? People are changing how they shop, especially younger consumers. I mean, Gen Z, Gen Alpha specifically are shopping on their phones. They're discovering things on their phones. We used to walk around the mall and, you know, go into Claire's. Oh, yeah. That was a Friday night. Yeah. It was peak entertainment at that time, but they don't need to do that anymore.

6:36And we saw that with Claire's exactly. They just filed her bankruptcy. I mean, they were just bought out, but they're closing a lot of stores. So how does Build-A-Bear explain why they are still around despite these kinds of trends and, in general, mall brands declining? Yeah, I mean, they call it the halo effect. They bring in these kids at a really young age, get them acquainted with the brand. And then as they get older, maybe they're not buying bears anymore, but maybe they become an adult and they want to buy their kid one. And so there's this nostalgia aspect to it. parents want to have something to bring their kids to or grandparents want to have something, an experience to treat their grandchild to.

7:15But it's also something that has now translated into adults as well. So in the last several years, they've been really strategic about setting themselves up to be secure in times of uncertainty, which is what we're entering into right now. But they were very surgical about going through every store, assessing if they were profitable, closing ones that weren't. They also adjusted their supply chain. So they do a lot of their fulfillment of online orders in stores. So they're kind of like double dipping on labor and you can get it a lot faster. Wait, explain to me how that works when you mean double dipping on labor.

7:48Yeah. So they still have a warehouse where they had to hire people. There was a big staff that was fulfilling all the online orders. Now they already have staff in stores. So there's a lull and not everyone is busy at all times. Kids are in school in the middle of the day. They have labor. They have staff that's already there. And they have all the materials to build Build-A-Bear that they can then mail out. So they're there so they can, you know, stuff the bear and put the package together to then send to you. Yeah, we're also like in this economic moment with tariffs. And so how is Build-A-Bear doing well right now when so many toy makers and companies that are putting out products like toys have been struggling with the uncertainty that tariffs bring?

8:29Yeah, I mean, the toy industry is particularly vulnerable to tariffs right now. majority of their inventory comes from China. And they didn't move their manufacturing during Trump's last administration because they didn't get tariffed. They weren't exempt, but they just weren't getting tariffed on toys. So that's left a lot of companies really vulnerable right now. And most of them, including Build-A-Bear, really front-loaded their inventory in preparation for these tariffs to kick in. So they had kind of a backlog. They had some inventory ready to go that was pre-tariffed. But like most companies, they've kind of been flexible in upping prices on certain items.

9:06They've been really surgical about that. So for example, they have these mini beans, which is a newer product. They're kind of like mini Build-A-Bears. And they were$9.50. Now they're$10. An analyst I spoke to said that the company will probably raise prices on certain things also throughout the rest of the year. But that's pretty common that what we're seeing across the board.

9:30After the break, the surprising customer base that's helping to fuel Build-A-Bear's success, and whether the company can keep that success going. We'll be right back.

9:50Hi, I'm Susan Glasser. I'm Jane Mayer. And I'm Evan Osnos. And we host the Washington Roundtable from the New Yorker's Political Scene podcast. For me, this is the water cooler. This is a wonderful chance to sit down with two of the smartest colleagues in the country and, you know, just kind of compare notes. No, that's so true, because first of all, we are actually friends in real life. But I can't wait till Fridays to hear what you guys think. Everybody sees the headlines, but you guys fill in the gaps. I also think, though, occasionally we get somebody to come on, and I'm always smarter for it.

10:24And if you get a great historian who can tell you about a presidential election 50, 60 years ago, often it can help you understand about what's happening today. So if you're looking for weekly insights into what's going on inside the Beltway, please join us every Friday on the Washington Roundtable, part of the New Yorker's Political Scene podcast.

10:46Right now, during the President's Day sale, you can get a Washington Post premium subscription for just$3 every four weeks. And that includes three extra accounts to share with friends or family. After your first year, renews at$19 every four weeks. The Washington Post. Power. Perspective. Premium. Learn more at WashingtonPost.com slash subscribe.

11:17So, Jackie, let's talk a little bit more about the customers here. So they're presumably kids and their parents or grandparents or other adults in their lives are paying for this, right? So majority of the customers are children. I mean, they're parents or grandparents buying it for them. But 40 % are adults buying them for themselves. Wait, not for kids? No, for themselves. Okay, tell me about this. Why are adults buying it for themselves? Okay, this is actually a really fascinating trend in the toy industry, and they call it kidulting. And I've actually written a couple stories about this trend.

11:51like Hot Wheels, for example, their growth is being driven by adults. Squishmallows, another plushie is also selling really well with adults. I mean, we have LaBooBoos. Oh, yeah. We did an episode about LaBooBoos and it's all about adults really loving them. Yeah. And it's all about nostalgia. I mean, there's a couple of reasons, but that's a big one. And I think, you know, specifically in the millennial, you know, age range, that's, it's just been really popular. So I think it's just people want something to make them, remind them of their childhood, something of simpler and happier times. And so, you know, seeing a toy that maybe you loved when you were a kid and now having adult money and being able to buy it for yourself can be exciting.

12:30And they've also just been like very smart about keeping track of social media. They have a whole team that's tracking what's going viral. I mean, that was another reason why they've gotten so popular with adults is because they're seeing this like really cute, like there was a bat that they released during Halloween and it was so popular. It's sold out online. It's sold out in stores. I mean, everyone wanted it. And they were keeping an eye on that. So they know kind of when to restock, what's trending, so they can kind of keep people engaged. Is it like, I'm also thinking about like, I'd never got a Build-A-Bear or an American Girl doll or any of these.

13:05Is it like people who are like, oh, I didn't get to have that as a kid. Now I have the money to get it. A hundred percent. That is part of it. I mean, I talked to a couple of really big Build-A-Bear fans, and I would say 75 % of the ones I talked to said, well, I couldn't afford one when I was a kid, and now I can. And then another big part of it is the licensing of it all. What do you mean by licensing? So, and this is very common across the toy industry. It's basically when these toy companies partner with a brand, and then they make a version of it in their own toy. So, for example, there are Star Wars Build-A-Bears.

13:39There's Hello Kitty. There's Harry Potter, Pokemon, you know, How to Train Your Dragon. So all different kinds. And there's also, and a lot of adults collect based on that specific brand. Yeah, like, okay, you might not be a Build-A-Bear person, but you might be a Star Wars person. Yeah, like I talked to this couple, Bridget and Zach Ray. They're a married couple living out in Texas who have vast collections of Pokemon, Harry Potter, and Star Wars. I mean, we were young when Pokemon first came out. So it kind of appeals to that nostalgia for us. Same with Harry Potter and Star Wars, of course.

14:16The big thing is a lot of nostalgia. And it's not just in Built to Bear. They have all different kinds of toy brands that are of that IP. So, Jackie, you're a retail reporter. You're paying very close attention to retail habits and also how companies are preparing themselves and how they're doing. The fact that this company that seems pretty old school has done well in the market. What does this story tell you? What did you walk away thinking about? I walked away thinking that there is still some value in an in-store experience if you're giving something unique to the customer. And that's something that's been talked about in the retail industry for the last couple of years, at least since I've been covering it.

14:54It's finding ways to create an experience around a brand. And they've really executed that very well. Is there a ceiling to this particular company's success? Like, what does their future look like? I mean, they're still growing tremendously. They're planning on opening 60 more stores by the end of the year. And they have a lot of room to grow overseas. And they're not even a billion-dollar company. I mean, last year, their annual revenue was around$500 million, which is obviously a lot of money. But in the grand scheme of things of toy companies, it's a lot smaller. But they're not exempt from all the challenges that retailers are facing, especially now that tariffs are really ramping up prices and consumers are being really stretched by higher grocery costs and cost of living and everything.

15:38So they are susceptible to folks wanting to pull back and not wanting to splurge on an experience like this. It's not cheap and it's not something that for some folks that they can just, you know, spend on a Tuesday. So they're susceptible to that, but they have also kind of safeguarded themselves in a way and protected themselves a little bit more than maybe some of the other companies in the malls. And they're constantly reinventing themselves and putting out new product. There's constant newness, which is so important in retail to keep people engaged. Well, Jackie, thanks so much for talking today.

16:13Thanks for having me.

16:19Jackie Pizer is a retail reporter for The Post. That's it for Post Reports. Thanks for listening. Today's show was produced by Sabi Robinson. It was edited by Peter Bresnan and mixed by Sean Carter and Sam Baer. Thanks to Helen Fessenden. I'm Elahei Izadi. We'll be back tomorrow with more stories from The Washington Post.

16:54Hi, I'm Susan Glasser. I'm Jane Mayer. And I'm Evan Osnos. And we host the Washington Roundtable from the New Yorker's Political Scene podcast. For me, this is the water cooler. This is a wonderful chance to sit down with two of the smartest colleagues in the country and, you know, just kind of compare notes. No, that's so true. Because first of all, we are actually friends in real life. But I can't wait till Fridays to hear what you guys think. Everybody sees the headlines, but you guys fill in the gaps. I also think, though, occasionally we get somebody to come on, and I'm always smarter for it.

17:28If you get a great historian who can tell you about a presidential election 50, 60 years ago, often it can help you understand about what's happening today. So if you're looking for weekly insights into what's going on inside the Beltway, please join us every Friday on the Washington Roundtable, part of the New Yorker's Political Scene podcast.

17:51Right now, during the President's Day sale, you can get a Washington Post premium subscription for just$3 every four weeks. And that includes three extra accounts to share with friends or family. After your first year, renews at$19 every four weeks. The Washington Post. Power. Perspective. Premium. Learn more at WashingtonPost.com slash subscribe.