June 29, 2007, 12:00 AM

Build-A-Bear mulls over its strategic development options

Build-A-Bear Workshop Inc. joins the growing ranks of retailers evaluating their strategic options, though the company isn’t saying if that includes a possible sale.

Build-A-Bear Workshop Inc. is joining the growing ranks of retailers evaluating their strategic options, though the company isn’t saying if the alternatives include a possible sale.

The retailer, which operates a highly interactive e-commerce site and is No. 411 in the Internet Retailer Top 500 Guide, has retained investment banking firm Lehman Brothers Inc. to assist with an analysis of a broad range of potential strategic alternatives. The company provided no detail on its specific intentions and future direction.

"We believe that through our highly profitable business model and unique retail entertainment concept we will continue to grow,” says chairman and chief executive Maxine Clark. “We also believe that we have an obligation to consider a broad range of potential strategic alternatives that could further enhance shareholder value.”

Build-A-Bear has aggressive business development plans to grow its store count to 470, including 350 in North America and 120 in Europe. The retailer also has bigger video and interactive features planned for its e-commerce site, which recorded sales of $3.1 million in the first quarter. The company currently operates more than 275 stores in the United States, Canada, the United Kingdom and Ireland.

In Q1 Build-A-Bear reported net income of $8 million on revenue of $116.8 million vs. net income of $8.3 million on sales of $98.6 million in the prior year. But the retailer also told Wall Street analysts that Q2 earnings, which are scheduled to be released July 26, will be below previous expectations. Though the company didn’t break out a specific forecast for sales or net income, Build-A-Bear says its earnings per diluted share for the second quarter ending June 30, 2007, will be in the range of 7 cents to 10 cents, compared with an earlier forecast of 15 cents to 19 cents.

“During this evaluation process we will continue to remain focused on business as usual for all operations of our company and on executing our plans,” says Clark.

In recent months other retailers, including Genesco Inc., which is merging with The Finish Line Inc., have retained investment banking firms to evaluate strategic alternatives, potential mergers with other retail companies or investment offers from private equity firms.

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