This is why Construct-A-Bear Workshop is prospering whilst retail struggles

For 26-year-old Cammie Craycroft’s pals, the right birthday exercise this summer time was a bunch journey to Construct-A-Bear Workshop.

Craycroft stated she and her pals grew up going to the retailer, which is thought for its experiential purchasing product the place clients can select their stuffed animal after which choose its outfits, equipment and extra.

“Construct-A-Bear means so much to me. I had so many birthday events at Construct-A-Bear,” Craycroft instructed CNBC. “It truly is a nostalgic place, and I’ve so many blissful recollections there.”

The corporate has not too long ago been focusing on adults like Craycroft because it diversifies its portfolio and leans into the nostalgia of the model. Regardless of macroeconomic headwinds, the corporate posted record-breaking income within the first half of fiscal 2025, reaching $252.6 million, a rise of almost 12% from the year-ago interval.

And in its second-quarter earnings report on the finish of August, the retailer raised its outlook after the success of its tariff mitigation methods — particularly, rising its stock within the first quarter whereas working below the belief that tariffs would increase costs.

Construct-A-Bear’s inventory is up roughly 60% year-to-date and is quick approaching a $1 billion market cap, whilst different retailers battle to get well losses from tariffs.

Based in 1997, the corporate has been targeted on scenario-planning and guaranteeing its model stays true to its nostalgic roots whereas additionally adapting to the ever-changing macroenvironment, in response to CEO Sharon Value John, who took over the corporate in 2013.

Although the “retail apocalypse” means retailers have seen much less foot visitors in malls over the previous decade, John stated Construct-A-Bear has advanced to be “a lot extra” than only a storefront. The corporate has diversified its positions past malls into cruise ships, amusement parks, hospitality and extra.

“It is a actually emotional, memorable expertise that creates an amazing quantity of of fairness,” John instructed CNBC. “These sturdy emotions that customers have for manufacturers are very stretchable past simply that one expertise.”

With greater than 600 shops throughout 32 nations, the corporate has been exploring new choices to supply its signature expertise in several methods, together with increasing with a bunch of worldwide shops and making a line of “Mini Beans,” that are smaller, pre-stuffed toys.

John attributed the corporate’s success to its forward-looking methods. Although Construct-A-Bear imports a “overwhelming majority” of its merchandise from China and Vietnam, John stated the tariff impacts weren’t as drastic as they may have been as a result of the corporate deliberate forward.

“Success is not an accident, and it usually takes years of planning to have the ability to climate troublesome conditions,” John stated.

However the firm’s core model success goes past simply the holding the stability sheet clear, she added.

“The opposite piece is that I believe that we’re in the best place on the proper time,” John stated. “There’s numerous planning, however typically you simply occur to be in the best zeitgeist. Gifting is within the zeitgeist, ‘kidulting’ is part of the zeitgeist, personalization is part of the zeitgeist, returning to consolation issues is part of the zeitgeist, stuffed animals is within the zeitgeist proper now.”

D. A. Davidson analyst Keegan Cox stated there are a mess of causes that Construct-A-Bear has seen progress even because the macroenvironment exhibits indicators of a possible financial slowdown.

One of many components that is serving to the corporate, Cox stated, is its means to “discreetly” increase costs of sure gadgets with out clients noticing as a result of it is continuously creating new merchandise to stay with present developments which might be priced otherwise.

“No shopper is de facto going to have the ability to inform, as a result of there is not any direct comparable product,” he instructed CNBC. “I believe that is a very good little tariff mitigation technique that is form of simply constructed into their mannequin.”

Cox stated the corporate’s numerous income stream, between new merchandise and new demographics, has been considerably serving to it to remain afloat and profitable. The analyst stated he is seeing “momentum” within the firm, particularly because it ramps up stock forward of the vacation season.

Its enlargement into worldwide shops has been a very efficient device, he added.

“In my view, these shops simply are an excellent excessive return on capital, and there is a massive runway for progress there that I believe is lastly beginning to present up within the share worth,” Cox stated.

Craycroft and her pals aren’t the one ones leaning into the model. After making a TikTok about her grownup relationship with the toy firm, she stated she noticed most of her views on the video got here from folks looking for “Construct-A-Bear” on the app.

In line with a current survey carried out by Construct-A-Bear, 92% of adults nonetheless personal their childhood teddy bears, and almost 100% of the respondents stated stuffed animals are for all ages, not simply children.

The nostalgia of Construct-A-Bear for its older clients, and people who wish to carry it on for the following technology, is a large think about repeatedly driving gross sales, in response to College of Pennsylvania advertising professor Americus Reed.

“If we study something from the Cracker Barrel saga,” Reed stated, referring to the web turmoil over the restaurant chain’s try at a rebrand, “it’s that nostalgia issues, and I believe it is a huge a part of it.”

In what’s develop into an “consideration deficit” financial system, with a plethora of choices accessible to shoppers always, Reed stated Construct-A-Bear’s means to construct upon its present footprint whereas additionally innovating its digital and social media presence has helped it to retain its consideration amongst shoppers of all ages.

Due to the “ritualistic” expertise of shopping for a stuffed animal at Construct-A-Bear, Reed stated, the identification of the model turns into carefully intertwined with the purchasers.

“As you toil with placing one thing collectively and personalizing it, you are primarily creating this extension of your self, and that is extremely highly effective,” Reed stated. “And you then go dwelling with it, and you’ll give it some thought and have a look at it. That is actually arduous to copy.”

Reed added that Construct-A-Bear has develop into a very good case instance of tips on how to successfully construct a model that creates deeper relationships with its shoppers than others, creating a way of loyalty.

“The stress to create one thing that is particular sufficient to interrupt via the type of consideration deficit financial system goes to be the stress take a look at of who’s going to have the ability to achieve success sooner or later,” he stated. “They’ll have probably the most traction.”