Build-A-Bear, great idea, awful business?

[rukawa]

I walked into a build-a-bear store. This is a store where kids can build their own teddy bears. They can accessorize the bears with little outfits, shoes etc. The bears are cheap...the accessories are pricey. I remember thinking wow what a fantastic idea ... this must be a great business. I checked it out on valueline today. The company is unprofitable. I was really amazed. It appeared to me to be an interesting case study of how a great idea doesn't guarantee a great business.

 

The stores have good gross margins, good inventory turn over but the company has high SG&A. I think it is just a case of over-expansion and bad management. Not sure if anyone knows the story here. I am Canadian so this is the first time I have ever seen a store like this.

[DCG]

They've been around here in the U.S. for a while and have always seemed to have a hard time being profitable.

[Icarus]

I think they offer a unique experience and the stores around me usually have customers in them. VIC has a few write ups on this name.

[SmallCap]

Rukawa,

 

I had the same experience that you did. I saw them in the mall and thought what a great business with excellent margins and thought I might have stumbled upon the Peter Lynch style growth company. But I could never get comfortable with what I saw in the financials.

 

I am still not fully sure why they aren't doing better.