Magazine

Build-A-Bear Workshop


At a Build-A-Bear Workshop in Chicago, little Emily Gusich skips excitedly from one end of the store to the other in search of her mom. "Look, Mommy," she yells, proudly holding up a caramel-colored teddy bear. Not just any ol' bear, mind you. Emily, 7, has stuffed this cub herself, given it a cloth heart, and dressed it with pink panties adorned with one of her favorite characters, Hello Kitty. Within minutes, Emily has created a new friend, complete with a special bear condo and a birth certificate. "Her name is Fluffy," Emily says. "It's a girl."

EARNINGS

$22.7

million

SALES

$318.1

million

RANKING

#25

LOCATION

St. Louis, Missouri

WHAT'S HOT

Stuffed bears that tots can't wait to build themselves. That has made for average annual profit growth of 108.8% over the past three years.

Kids all over the world are stuffing millions of these furry creatures, making No. 25 Build-A-Bear Workshop Inc. (BBW) the latest high-flying retail concept. At an average price of $32, the bears, dogs, and other creatures are far from cheap. Every piece of clothing hikes the price, and has helped Build-A-Bear roar to $600 per square foot in annual sales -- double the U.S. average for mall stores. The 176-store chain boosted sales 41%, to $301.7 million, in 2004, while net income nearly tripled, to $20 million.

Build-A-Bear is the brainchild of Maxine K. Clark, 56, the company's energetic CEO. After 25 years with May Department Stores Co. (MAY), she stepped away in 1996 to find something more creative. Clark, who loves children but doesn't have any of her own, became intrigued with the idea of stuffed animals while taking her neighbor's kids to the mall. During the Internet boom, malls were considered dinosaur destinations. But Clark figured they just needed some imagination. "Ray Kroc didn't invent hamburgers," she says of McDonald's Corp. (MCD) entrepreneur. "He just invented a way to do it differently."

FENDING OFF THE FAD CURSE

Clark is well aware of the risk that the Build-A-Bear concept could grow stale, like all the Cabbage Patch Dolls and Beanie Babies of years gone by. She's working hard to fend off the fad curse. The bear accessories sold at the stores change along with children's fickle tastes. After Spider-Man hysteria hit full throttle, for example, Build-A-Bear added bear-size Spidey costumes. Retail experts say the experience of making a bear -- nearly theatrical for boys and girls alike -- sets Build-A-Bear apart from past kid crazes. And similar to Harley-Davidson (HDI) motorcycles or Dell (DELL) computers, the customization feature is so satisfying, says analyst Jaison Blair of Rochdale Securities Corp., that it "builds fiercely loyal customers."

Maintaining Build-A-Bear's torrid pace will present significant hurdles. Clark plans to open at least 25 North American locations every year, plus additional outlets overseas, where there are already 15 franchises. But in some cities, new stores have cannibalized sales at existing locations -- a problem that could continue to dog the company. In 2002 and 2003, same-store sales at Build-A-Bears open for more than one year fell 10% and 16%, respectively. In 2004 they rebounded 18%, but that was partly due to a $24 million ad campaign, which included a blitz during Saturday television cartoons.

Rather than sit on her paws, Clark is rapidly extending the brand. The company is testing a new concept, dubbed Friends 2B Made, which lets creative kids build their own humanlike doll with contemporary clothing and accessories. Clark believes the universal appeal of customized toys will resonate with old and young. "The customer likes to smile," she says. With so many more opportunities to dress toys in Hello Kitty panties or Bear boxers, plenty of other kids, just like Emily, will be skipping with joy. By Roger O. Crockett in Chicago


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