Here is why Construct-A-Bear Workshop is flourishing at the same time as retail struggles

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

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

“Construct-A-Bear means loads to me. I had so many birthday events at Construct-A-Bear,” Craycroft advised CNBC. “It truly is a nostalgic place, and I’ve so many comfortable reminiscences there.”

The corporate has just lately been concentrating 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 — specifically, 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, at the same time as different retailers wrestle to get better losses from tariffs.

Based in 1997, the corporate has been centered on scenario-planning and guaranteeing its model stays true to its nostalgic roots whereas additionally adapting to the ever-changing macroenvironment, based on 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 mentioned Construct-A-Bear has developed 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 advised CNBC. “These sturdy emotions that customers have for manufacturers are very stretchable past simply that one expertise.”

With greater than 600 shops throughout 32 international locations, 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 mentioned the tariff impacts weren’t as drastic as they might 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 tough conditions,” John mentioned.

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

“The opposite piece is that I believe that we’re in the precise place on the proper time,” John mentioned. “There’s a whole lot of planning, however typically you simply occur to be in the precise 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 mentioned 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 mentioned, is its means to “discreetly” increase costs of sure objects with out prospects noticing as a result of it is always creating new merchandise to stay with present developments which are priced in another way.

“No shopper is actually going to have the ability to inform, as a result of there is not any direct comparable product,” he advised CNBC. “I believe that is a superb little tariff mitigation technique that is sort of simply constructed into their mannequin.”

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

Its growth into worldwide shops has been a very efficient software, 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 value,” Cox mentioned.

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 mentioned she noticed most of her views on the video got here from individuals trying to find “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 mentioned stuffed animals are for all ages, not simply children.

The nostalgia of Construct-A-Bear for its older prospects, and people who wish to carry it on for the subsequent era, is a big think about constantly driving gross sales, based on College of Pennsylvania advertising and marketing professor Americus Reed.

“If we study something from the Cracker Barrel saga,” Reed mentioned, 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 large a part of it.”

In what’s turn out to be an “consideration deficit” financial system, with a plethora of choices out there to customers always, Reed mentioned Construct-A-Bear’s means to construct upon its current footprint whereas additionally innovating its digital and social media presence has helped it to retain its consideration amongst customers of all ages.

Due to the “ritualistic” expertise of shopping for a stuffed animal at Construct-A-Bear, Reed mentioned, the id of the model turns into intently intertwined with the shoppers.

“As you toil with placing one thing collectively and personalizing it, you are basically creating this extension of your self, and that is extremely highly effective,” Reed mentioned. “And then you definitely go residence with it, and you may give it some thought and take a look at it. That is actually laborious to duplicate.”

Reed added that Construct-A-Bear has turn out to be a superb case instance of find out how to successfully construct a model that creates deeper relationships with its customers 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 check of who’s going to have the ability to achieve success sooner or later,” he mentioned. “They will have essentially the most traction.”