A joke in 'Avengers: Endgame' boosted sales at Build-A-Bear Workshop

Marvel

• A joke about Build-A-Bear Workshop in "Avengers: Endgame" boosted the toy retailer's sales last quarter.
• Its CEO highlighted a "generous and welcome nod to Build-A-Bear in the movie's first 10 minutes, when Tony Stark told Rocket Raccoon, 'I thought you were Build-A-Bear."
• Build-A-Bear also benefited from strong interest in Pokémon ahead of "Detective Pikachu."
• The company has raised prices as threatened tariffs on Chinese imports would have a "meaningful impact on our overall cost," management said.
• Watch Build-A-Bear Workshop trade live.

A joke about Build-A-Bear Workshop in "Avengers: Endgame" boosted the toy retailer's sales last quarter.

The hype around the superhero movie fueled demand for its plush toys of characters such as Thor, Hulk, and Captain America. Sales "were further enhanced by Marvel's generous and welcome nod to Build-A-Bear in the movie's first 10 minutes, when Tony Stark commented to Rocket Raccoon directly, 'I thought you were Build-A-Bear,'" said CEO Sharon Price John on the company's first-quarter earnings call.

Pokémon fans also stocked up on their favorite characters ahead of the release of "Detective Pikachu." The average value of purchases including Pokémon toys was $70 - more than 50% higher than Build-A-Bear's average transaction, Price John said on the call. The company expects the July release of "The Lion King" to continue propping up margins.

Build-A-Bear has also raised its prices to offset higher costs if President Donald Trump follows through on his threat to slap tariffs on virtually all US imports from China.

As the toy retailer imports a large chunk of its products from China, the duties would "definitely have a meaningful impact on our overall cost," said CFO Voin Todorovic on the call. Build-A-Bear has already "taken some actions to mitigate the anticipated increase in tariffs, which unfortunately includes retail price increases," he added. Longer term, he plans to cut costs by diversifying the company's sourcing and rejigging its supply chain.

Build-A-Bear's net retail sales dipped 0.5% in the first quarter ended May 4, but higher commercial revenue from wholesale deals and licensing fees meant overall revenue inched up 1.4% to $84.4 million. The company also drove bigger purchases by selling pricier, online-exclusive bundles, which helped to lift its retail gross margin by 0.9 percentage points to 45.2%, and quadruple its pre-tax income to $2.4 million.

Build-A-Bear's profits have come under pressure since its "Pay Your Age Day" event last summer, when it offered children the chance to buy a bear of their choice and pay an amount equal to their age. Its stores couldn't cope with the crowds that turned out, leading to long lines, crying kids, bad press, and an early end to the event due to safety concerns.

The promotion led to a "significant number of transactions at the lower margin," said Todorovic on the call. He added that Build-A-Bear handed out vouchers to disappointed families and their full impact on the business remains unclear.