BUILD-A-BEAR WORKSHOP INC

Previous wording

As of May 2, 2026, the Company had 669 global locations through a combination of its corporately-managed, partner-operated, and franchise models. This reflects 376 corporately-managed locations, including 334 stores in the United States (“U.S.”) and Canada and 42 stores in the United Kingdom ("U.K.") and the Republic of Ireland, 181 partner-operated locations in which we sell our products on a wholesale basis to other companies that then, in turn, execute our retail experience, and 112 international franchise locations , all under the Build-A-Bear Workshop brand. In addition to these stores, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements. For the 2026 fiscal year to date, the Company had net new unit growth of 7 experience locations, comprised of one corporately managed location, 3 partner-operated locations, and 3 international franchise locations.

Current wording

As of August 1, 2026, the Company had 674 global locations through a combination of its corporately-managed, partner-operated, and franchise models. This reflects 379 corporately-managed locations, including 337 stores in the United States (“U.S.”) and Canada and 42 stores in the United Kingdom ("U.K.") and the Republic of Ireland, 177 partner-operated locations in which we sell our products on a wholesale basis to other companies that then, in turn, execute our retail experience, and 118 international franchise locations, all under the Build-A-Bear Workshop brand. In addition to these locations, we sell products on our company-owned e-commerce sites and third-party marketplace sites, our franchisees sell products through sites that they manage as well as other third-party marketplace sites and other parties sell products on their sites under wholesale agreements. For fiscal year 2026 year-to-date, the Company achieved net new unit growth of 12 experience locations, comprising four corporately managed locations and nine international franchise locations, partially offset by one fewer partner-operated location compared with the prior fiscal year.

Previous wording

Selected financial data attributable to each segment for the thirteen weeks ended May 2, 2026 and May 3, 2025 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

Selected financial data attributable to each segment for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

Global trade policy continues to evolve and the ultimate impact of recent developments with respect to U.S. tariffs is unclear. On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). On March 4, 2026, the Court of International Trade ordered U.S. Customs and Border Protection ("CBP") to begin the refund process for all importers who were subject to the IEEPA duties. In April 2026, the CBP opened a portal for the refund process to begin for certain importers. Based on these court rulings affirming the Company's legal right to recover IEEPA tariffs, the Company determined that it is entitled to a tariff refund of approximately $13.2 million, which was recorded in receivables, net on the condensed consolidated balance sheet. For the thirteen weeks ended May 2, 2026, the Company recorded a $10.4 million benefit for these tariffs in cost of merchandise sold-retail on the condensed consolidated statements of operations and comprehensive income, $7.0 million of which related to prior fiscal year costs, and reduced the carrying value of inventory by $2.8 million on the condensed consolidated balance sheet as of May 2, 2026. The related inventory with tariffs is expected to be substantially sold in the second fiscal quarter of 2026.

Current wording

Global trade policy continues to evolve and the ultimate impact of recent developments with respect to U.S. tariffs is unclear. During the first quarter of fiscal 2026, following Supreme Court rulings regarding tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"), the Company determined that it was entitled to recover approximately $13.2 million of previously paid tariffs. The Company recorded the related receivable, recognized a $10.4 million benefit in cost of merchandise sold-retail, including approximately $7.0 million related to prior fiscal year costs, and reduced the carrying value of inventory by approximately $2.8 million for tariffs attributable to inventory remaining on hand. During the second quarter of fiscal 2026, the Company collected the refund including interest and recognized the remaining inventory-related benefit as the underlying inventory was sold. As a result, the Company has substantially completed recognition of the financial statement impacts associated with the IEEPA tariff refund.

Previous wording

Since we import the vast majority of our products from vendors outside the U.S., we face uncertainty and risks related to tariffs and other trade policies that could negatively impact our Company. Tariffs and other non-tariff trade practices can adversely affect our business in multiple ways, including increased costs of our products. While we have taken steps in recent years to diversify our supply chain and reduce China sourcing by shifting primarily to Vietnam, we remain subject to substantial potential exposure to tariffs. Specifically, the latest tariffs implemented by the U.S. continues to have an impact on our cost structure and product margins. Additionally, the uncertainty about trade policy, tariff rates, and other changes in practices affecting international trade, including whether such tariffs or other measures will be withdrawn, or modified in the future, makes it difficult for us to operate optimally. Depending on the level and longevity of the tariff disruption, we will continue to adjust our pricing while monitoring the impact of inflation and consumer confidence, on both a micro and macro basis.

Current wording

Since we import the vast majority of our products from vendors outside the U.S., we face uncertainty and risks related to tariffs and other trade policies that could negatively impact our Company. Tariffs and other non-tariff trade practices can adversely affect our business in multiple ways, including increased costs of our products. While we have taken steps in recent years to diversify our supply chain and reduce China sourcing by shifting primarily to Vietnam, we remain subject to substantial potential exposure to tariffs. Specifically, the latest tariffs implemented by the U.S. continue to have an impact on our cost structure and product margins. Additionally, the uncertainty about trade policy, tariff rates, and other changes in practices affecting international trade, including whether such tariffs or other measures will be withdrawn, or modified in the future, makes it difficult for us to operate optimally. Depending on the level and longevity of the tariff disruption, we will continue to adjust our pricing while monitoring the impact of inflation and consumer confidence, on both a micro and macro basis.

Previous wording

We seek to provide outstanding guest experiences across all channels and touch points including our retail locations, our e-commerce sites, our mobile sites and apps as well as traditional, digital, and social media. We believe the hands-on and interactive nature of our experience locations, our personal service model and engaging digital shopping experiences result in guests forming an emotional connection with our brand which has multi-generational appeal that captures today’s zeitgeist including desire for engaging experiences, personalization and “DIY” while being recognized as trusted, giving, and a part of pop culture.

Current wording

We seek to provide outstanding guest experiences across all channels and touch points including our retail locations, our e-commerce sites, our mobile sites and apps as well as traditional, digital, and social media. We believe the hands-on and interactive nature of our experiencial locations, our personal service model and engaging digital shopping experiences result in guests forming an emotional connection with our brand which has multi-generational appeal that captures today’s zeitgeist including desire for engaging experiences, personalization and “DIY” while being recognized as trusted, giving, and a part of pop culture.

Previous wording

As of May 2, 2026, 53% of our corporately-managed stores were in an updated Discovery format. We also expect to close certain stores in accordance with natural lease events as an ongoing part of our real estate management and day-to-day operational plans. The future of our retail store fleet may include expansion into more non-traditional locations, including concourse format shops and by expansion in other locations outside of traditional malls.

Current wording

As of August 1, 2026, 55% of our corporately-managed stores were in an updated Discovery format. We also expect to close certain stores in accordance with natural lease events as an ongoing part of our real estate management and day-to-day operational plans. The future of our retail store fleet may include expansion into more non-traditional locations, including concourse format shops, and expansion in other locations outside of traditional malls.

Previous wording

Through our partner-operated model, there were 181 stores in operation at the end of the first quarter of 2026 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Girl Scouts of the USA. The partner-operated model is capital light for us, with the partner company building out and operating the workshops including providing the real estate location and covering the cost of labor and inventory, which is purchased from us on a wholesale basis. These locations are heavily weighted to the hospitality industry, which allow us to further advance our focus on experience location expansion in non-traditional and tourist areas, as well as shop-in-shop arrangements within other retailers’ stores.

Current wording

Through our partner-operated model, there were 177 stores in operation at the end of the second quarter of 2026 with relationships that included Carnival Cruise Line, Great Wolf Lodge Resorts, Landry's and Girl Scouts of the USA. The partner-operated model is capital light for us, with the partner company building out and operating the workshops including providing the real estate location and covering the cost of labor and inventory, which is purchased from us on a wholesale basis. These locations are heavily weighted to the hospitality industry, which allow us to further advance our focus on experience location expansion in non-traditional and tourist areas, as well as shop-in-shop arrangements within other retailers’ stores.

Previous wording

The number of international franchise locations opened and closed for the periods presented below are summarized as follows:

Current wording

The number of international franchise locations opened and closed for the periods presented below is summarized as follows:

Previous wording

Net retail sales for the thirteen weeks ended May 2, 2026 were $113.5 million, compared to $119.6 million for the thirteen weeks ended May 3, 2025. The components of the performance are as follows (dollars in thousands):

Current wording

Net retail sales for the thirteen weeks ended August 1, 2026 were $106.5 million, compared to $114.6 million for the thirteen weeks ended August 2, 2025. The components of the performance are as follows (dollars in thousands):

Previous wording

The lower retail revenue performance was primarily due to lower sales at existing stores, decreased e-commerce demand offset by sales at new stores.

Current wording

The lower retail revenue performance was primarily due to lower sales at existing stores and decreased e-commerce demand offset by sales at new stores.

Previous wording

International franchising revenue was $0.9 million for the thirteen weeks ended May 2, 2026 compared to $1.2 million for the thirteen weeks ended May 3, 2025. The $0.3 million decrease is primarily due to timing of product shipments.

Current wording

International franchising revenue was $0.7 million for the thirteen weeks ended August 1, 2026 compared to $1.0 million for the thirteen weeks ended August 2, 2025. The $0.3 million decrease was primarily due to lower royalties and other sales to franchisees.

Previous wording

*Selling, general and administrative.*SG&A expenses were $56.1 million, or 44.8% of consolidated revenue, for the thirteen weeks ended May 2, 2026, compared to $53.6 million, or 41.7% of consolidated revenue, for the thirteen weeks ended May 3, 2025. The increasewas driven by higher total compensation costs, general inflationary pressures, and longer-range investments.

Current wording

*Selling, general and administrative.*SG&A expenses were $51.4 million, or 44.6% of consolidated revenue, for the thirteen weeks ended August 1, 2026, compared to $56.4 million, or 45.4% of consolidated revenue, for the thirteen weeks ended August 2, 2025. The decrease was primarily driven by lower incentive compensation.

Previous wording

*Interest income, net.*Interest income was $0.1 million for the thirteen weeks ended May 2, 2026, compared to interest income of $0.2 million for the thirteen weeks ended May 3, 2025.

Current wording

*Interest income, net.*Interest income was $0.6 million for the thirteen weeks ended August 1, 2026, compared to interest income of $0.2 million for the thirteen weeks ended August 2, 2025. The increase was driven by higher interest income from IEEPA tariff refunds.

Previous wording

Provision for income taxes. Income tax expense was $5.6 million with a tax rate of 23.4% for the thirteen weeks ended May 2, 2026, as compared to $4.3 million with a tax rate of 22.0% for the thirteen weeks ended May 3, 2025. In the first quarter of fiscal 2026, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and the foreign-derived deduction eligible income (formerly foreign derived intangible income). In the first quarter of fiscal 2025, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and foreign derived intangible income. In addition, in the first quarter of fiscal 2026 and 2025, the Company remains in a full valuation allowance in certain foreign jurisdictions.

Current wording

Provision for income taxes. Income tax expense was $2.9 million with a tax rate of 24.7% for the thirteen weeks ended August 1, 2026, as compared to $3.0 million with a tax rate of 19.3% for the thirteen weeks ended August 2, 2025. In the second quarter of fiscal 2026, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting and the foreign-derived eligible income deduction (formerly foreign derived intangible income). In the second quarter of fiscal 2025, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense offset by the tax impact of equity awards vesting, the foreign-derived intangible income deduction and discrete benefits related to settlement of a prior period tax position. In addition, in the second quarter of fiscal 2026 and 2025, the Company remains in a full valuation allowance in certain foreign jurisdictions.

Previous wording

*Total revenues.*Consolidated revenues decreased$3.1 million or 2.4%, primarily driven by a $6.1 million or 5.1% decrease in Net Retail sales partially offset by a $3.3 million or 44%increase in Commercial revenue when compared to the first fiscal quarter of 2025. Thedecrease in net retail sales was driven by lower sales at existing stores, decreased e-commerce demand offset by sales at new stores. The increased commercial revenue was due to higher sales to our wholesale customers, including sales to new wholesale customers resulting from a net increase of 54 partner-operated locations since the first quarter of 2025.

Current wording

*Total revenues.*Consolidated revenues decreased $12.1 million or 4.8%, primarily driven by a $14.2 million or 6.1% decrease in net retail sales partially offset by a $2.1 million or 11.6% increase in combined commercial and international franchising revenue when compared to the same period of 2025. The decrease in net retail sales was driven by lower sales at existing stores and decreased e-commerce demand. The increase in commercial revenue was due to higher sales to our wholesale customers, including sales to new wholesale customers resulting from a net increase of 16 partner-operated locations since the second quarter of 2025.

Previous wording

Commercial revenue was $10.9 million for the thirteen weeks ended May 2, 2026 compared to $7.6 million for the thirteen weeks ended May 3, 2025. The $3.3 million increase is prima rily due to increased sales volume from our wholesale accounts through our partner-operated retail model.

Current wording

Commercial revenue was $19.0 million for the twenty-six weeks ended August 1, 2026 compared to $16.3 million for the twenty-six weeks ended August 2, 2025. The $2.8 million increase is primarily due to increased sales volume from our wholesale accounts.

Previous wording

*Retail gross margin.*Retail gross margin dollars increased$5.1 million to$73.1 million from$68.0 million for the thirteen weeks ended May 3, 2025. The retail gross margin rate increased 750 basis points compared to the prior year, including a 560 basis-point benefit from the $7.0 million IEEPA tariff refund related to prior fiscal year costs, with the remaining 190 basis-points primarily driven by selective price increases.

Current wording

*Retail gross margin.*Retail gross margin dollars decreased $3.4 million to $130.7 million from $134.1 million for thetwenty-six weeks ended August 2, 2025. The retail gross margin rate increased 210 basis points compared to the prior year. Excluding a 535 basis-point benefit from the $7.0 million IEEPA tariff refund related to prior fiscal year costs, retail gross margin increased primarily driven by selective price increases partially offset by occupancy cost deleverage and higher promotional activity.

Previous wording

EBITDA for the thirteen weeks ended May 2, 2026 increased$4.6 million, or 20.0% to $27.7 million from $23.1 million for the thirteen weeks ended May 3, 2025. The increasewas driven by higher gross profit resulting from increased retail and commercial margins partially offset by higher SG&A expenses. The increase to retail margin primarily resulted from the benefit of IEEPA tariff refund, $7 million of which related to prior fiscal year costs.

Current wording

EBITDA for the twenty-six weeks ended August 1, 2026 increased $1.0 million, or 2.5% to $42.9 million from $41.9 million for the twenty-six weeks ended August 2, 2025. The increase was driven by higher gross profit resulting from increased retail and commercial margins partially offset by higher SG&A expenses. The increase to retail margin primarily resulted from the benefit of IEEPA tariff refund, $7.0 million of which related to prior fiscal year costs.

Previous wording

Operating Activities. Cash provided by operating activities decreased $6.6 million for the thirteen weeks ended May 2, 2026, as compared to the thirteen weeks ended May 3, 2025. This decrease in cash from operating activities was primarily driven by increases in prepaid and other assets and receivables from commercial accounts, as well as changes in deferred revenue, accounts payable and accrued expenses, partially offset by higher net income.

Current wording

Operating Activities. Cash provided by operating activities decreased $5.9 million for the twenty-six weeks ended August 1, 2026, as compared to the twenty-six weeks ended August 2, 2025. The decrease in cash from operating activities was driven by changes in working capital balances.

Previous wording

Investing Activities. Cash used in investing activities increased $4.0 million for the thirteen weeks ended May 2, 2026, as compared to the thirteen weeks ended May 3, 2025. The increase in cash used in investing activities was primarily driven by increased spending on capital expenditures.

Current wording

Investing Activities. Cash used in investing activities increased $9.1 million for the twenty-six weeks ended August 1, 2026, as compared to the twenty-six weeks ended August 2, 2025. The increase in cash used in investing activities was primarily driven by increased spending on capital expenditures.

Previous wording

Financing Activities. Cash used in financing activities increased$6.3 million for the thirteen weeks ended May 2, 2026, as compared to the thirteen weeks ended May 3, 2025. This increase in cash used in financing activities during the thirteen weeksof fiscal 2026 was driven by anincrease in the amount utilized to repurchase shares compared to the prior year.

Current wording

Financing Activities. Cash used in financing activities increased$8.9 million for the twenty-six weeks ended August 1, 2026, as compared to the twenty-six weeks ended August 2, 2025. This increase in cash used in financing activities was driven by higher share repurchases compared to the prior year.

Previous wording

*Capital Resources:*As of May 2, 2026, we had a consolidated cash balance of $26.2 million, 73% of which was domiciled within the U.S, after investing $6.9 million in capital projects in the first quarter.

Current wording

*Capital Resources:*As of August 1, 2026, we had a consolidated cash balance of $14.0 million, 66% of which was domiciled within the U.S., after investing $15.4 million in capital projects in fiscal 2026.

Previous wording

We have a revolving credit and security agreement with PNC Bank, as agent, that provides for a secured revolving loan in an aggregate principal amount of up to $40.0 million, subject to a borrowing base formula. As of May 2, 2026, borrowings under the agreement would bear interest at (a) a base rate determined under the agreement, or (b) at a rate based on SOFR reference rate, plus in either case a margin based on average undrawn availability as determined in accordance with the agreement. As of May 2, 2026, our borrowing base was $40.0 million and the Company had no outstanding borrowings as of the end of the quarter.

Current wording

We have a revolving credit and security agreement with PNC Bank, as agent, that provides for a secured revolving loan in an aggregate principal amount of up to $40.0 million, subject to a borrowing base formula. As of August 1, 2026, borrowings under the agreement would bear interest at (a) a base rate determined under the agreement, or (b) at a rate based on SOFR reference rate, plus in either case a margin based on average undrawn availability as determined in accordance with the agreement. As of August 1, 2026, the Company had approximately $39.5 million of available borrowing base, net of a $0.5 million outstanding letter of credit, and no amounts were outstanding under the agreement as of the end of the quarter.

Previous wording

Capital spending for thethirteen weeks ended May 2, 2026 totaled$6.9 million for information technology projects and new store openings, and we expect to spend approximately $22 to $25 million on capital expenditures in fiscal 2026.

Current wording

Capital spending for thetwenty-six weeks ended August 1, 2026 totaled$15.4 million for information technology projects and new store openings, and we expect to spend approximately $25 million on capital expenditures in fiscal 2026.

Previous wording

Total inventory at quarter end was $77.8 million, an increase of $5.5 million or 8% from the end of the fiscal 2025 first quarter. We are comfortable with the level and composition of our inventory to support customer demand and critical seasonal products.

Current wording

Total inventory at quarter end was $81.1 million, a decrease of $0.6 million or 1% from the end of the fiscal 2025 second quarter. We are comfortable with the level and composition of our inventory to support customer demand and critical seasonal products.

Previous wording

We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. As of May 2, 2026, we had purchase obligations totaling approximately $127.0 million, of which $28.6 million are due in the next 12 months. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.

Current wording

We have various contractual or other obligations, including operating lease commitments and obligations under deferred compensation plans. As of August 1, 2026, we had purchase obligations totaling approximately $126.8 million, of which $28.4 million are due in the next 12 months. We believe our operating cash flows are sufficient to meet our material cash requirements for at least the next 12 months.

Previous wording

Weutilized $11.4 million in cash to repurchase 248,118 shares during the thirteen weeks ended May 2, 2026 under our current September 2024 Stock Repurchase Program, compared to using $4.2 million in cash to repurchase 108,502 shares during the thirteen weeks ended May 3, 2025 under our September 2024 Stock Repurchase Program and completed August 2022 program.

Current wording

Weutilized $17.0 million in cash to repurchase 403,236 shares during the twenty-six weeks ended August 1, 2026 under our current September 2024 Stock Repurchase Program, compared to using $7.3 million in cash to repurchase 167,585 shares during the twenty-six weeks ended August 2, 2025 under our September 2024 Stock Repurchase Program and completed August 2022 program.

Previous wording

The Company continued to experience inflationary pressures during the first quarter of fiscal 2026, primarily through higher store labor, product, freight, transportation and other supply chain costs. In addition, evolving tariffs and trade policies have increased cost and pricing pressure and created additional uncertainty across our sourcing and supply chain activities. We have taken actions to help mitigate these pressures, including cost reduction initiatives, process efficiencies, supplier negotiations, sourcing actions and selective pricing and assortment decisions. We expect inflationary and trade-related pressures to continue during fiscal 2026 and they may persist thereafter. The ultimate scope, duration and impact of existing and newly announced tariffs, any changes or pauses to such tariffs, and the timing and amount of any related refunds remain uncertain. These conditions may continue to affect product costs, freight and warehousing expense, other operating costs, customer spending patterns and our gross margins. In addition, broader geopolitical and macroeconomic developments may further increase transportation and supply chain costs or otherwise adversely affect our business.

Current wording

The Company continued to experience inflationary pressures during the first half of fiscal 2026, primarily through higher store labor, product, freight, transportation and other supply chain costs. In addition, evolving tariffs and trade policies have increased cost and pricing pressure and created additional uncertainty across our sourcing and supply chain activities. We have taken actions to help mitigate these pressures, including cost reduction initiatives, process efficiencies, supplier negotiations, sourcing actions and selective pricing and assortment decisions. We expect inflationary and trade-related pressures to continue during fiscal 2026 and they may persist thereafter. The ultimate scope, duration and impact of existing and newly announced tariffs, any changes or pauses to such tariffs, and the timing and amount of any related refunds remain uncertain. These conditions may continue to affect product costs, freight and warehousing expense, other operating costs, customer spending patterns and our gross margins. In addition, broader geopolitical and macroeconomic developments may further increase transportation and supply chain costs or otherwise adversely affect our business.