Build-A-Bear Workshop (BBW) risk factors, FY2025 10-K

MACROECONOMIC AND INDUSTRY RISKS

1. 01The impact of the significant tariffs on countries from which we import is expected to have an impact on our business, mainly our cost of goods and profit margin
2. 02The tariffs may lead to higher prices for our products, potentially reducing consumer demand and impacting our sales volume. Additionally, the increased costs could force us to seek alternative suppliers, which may result in supply chain disruptions and further cost increases
3. 03Consumer interests can change rapidly, and our success depends on the ongoing effectiveness of our marketing and online initiatives to build consumer affinity for our brand and drive consumer demand for our products and services
4. 04effectively manage marketing costs (including creative and media) to maintain acceptable operating margins and return on marketing investment
5. 05We depend upon the shopping malls and tourist locations in which our stores are located to attract guests. Continued or further volatility in retail consumer traffic could adversely affect our financial performance and profitability
6. 06Our business may be adversely impacted at any time by various significant competitive threats
7. 07Global or regional health pandemics or epidemics could negatively impact our business, financial position and results of operations
8. 08Our profitability could be adversely affected by fluctuations in petroleum product prices

OPERATIONAL RISKS

1. 09If we are unable to generate interest in and demand for our interactive retail experience and products, including being able to identify and respond to consumer preferences in a timely manner, our sales, financial condition and profitability could be adversely affected
2. 10If we cannot renew, renegotiate or replace our store leases or enter into leases for new stores on favorable terms, or if we violate any of the terms of our current leases, our revenue and profitability could be harmed
3. 11and consumers continue to embrace digital shopping. As a result, the portion of total consumer expenditures with retailers occurring through digital platforms is increasing, and the pace of this increase could continue to accelerate
4. 12We are subject to risks associated with technology and digital operations
5. 13Our company-owned distribution center that services the majority of our stores in North America and our third-party distribution center providers used in the western U.S. and Europe may be required to close and operations may experience disruptions or may operate inefficiently

INTERNATIONAL RISKS

1. 14We rely on a few global supply chain vendors to supply substantially all of our materials and merchandise, and significant price increases or any disruption in their ability to deliver materials and merchandise could harm our ability to source products and supply inventory to our stores
2. 15Our merchandise is manufactured by foreign manufacturers, we transact business in various foreign countries, and the availability and costs of our products, as well as our product pricing, may be negatively affected by risks associated with international manufacturing and trade and foreign currency fluctuations
3. 16We may not be able to operate our international corporately-managed locations profitably
4. 17If we cannot effectively manage our international partner-operated locations, attract new partners or if the laws relating to our international partners change, our growth and profitability could be adversely affected, and we could be exposed to additional liability

LEGAL, TECHNOLOGY AND INTELLECTUAL PROPERTY RISKS

1. 18We are subject to a number of risks related to disruptions, failures or security breaches of our information technology infrastructure. If we improperly obtain or are unable to protect our data or violate privacy or security laws or expectations, we could be subject to liability as well as damage to our reputation
2. 19We may suffer negative publicity or be sued if the manufacturers of our merchandise or of Build-A-Bear branded merchandise sold by our licensees ship any products that do not meet current safety standards or production requirements or if such products are recalled or cause injuries
3. 20We may suffer negative publicity or be sued if the manufacturers of our merchandise violate labor laws or engage in practices that consumers believe are unethical
4. 21We may suffer negative publicity or a decrease in sales or profitability if the products from other companies that we sell in our stores do not meet our quality standards or fail to achieve our sales expectations
5. 22We may suffer negative publicity and damage to our reputation if we do not continue to evolve environmental, social, and governance initiatives in a timely manner

Risks Related to Owning Our Common Stock

1. 23Fluctuations in our quarterly results of operations could cause the price of our common stock to substantially decline
2. 24If our future quarterly results fluctuate significantly or fail to meet the expectations of the investment community, then the market price of our common stock could decline substantially
3. 25Our relatively low market capitalization can cause the market price of our common stock to become volatile
4. 26Our certificate of incorporation and bylaws and Delaware law contain provisions that may prevent or frustrate attempts to replace or remove our current management by our stockholders, even if such replacement or removal may be in our stockholders’ best interests
5. 27authorize the issuance of preferred stock with any voting rights, dividend rights, conversion privileges, redemption rights and liquidation rights and other rights, preferences, privileges, powers, qualifications, limitations or restrictions as may be specified by our board of directors

GENERAL RISKS

1. 28We may not be able to operate successfully if we lose key personnel, are unable to hire qualified additional personnel, or experience turnover of our management team
2. 29We may be unsuccessful in acquiring businesses or engaging in other strategic transactions, which may negatively affect our financial condition and profitability