Build-A-Bear Workshop Inc. is shifting its strategy on store locations, setting its sights on locations that will attract families on vacation rather than stores in traditional malls.
Mall traffic has declined by about half over the last five to six years, according to Sharon Price John, Build-A-Bear’s BBW, -13.24% chief executive, though she acknowledges that not all malls are created equal.
And when adults go to the mall, it has become more likely that they won’t take children with them.
Now that the mall “is no longer the ubiquitous place for family fun and entertainment,” the company is looking for alternative locations to attract this target market. So they’re crashing the family vacation.
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“[W]e have strategically added tourist sites with new locations in 2018 such as our very successful Stop and Shop at FAO Schwarz in New York City and a store near the London Eye in the U.K., which has been a bright spot for that market, further validating the importance of our tourist strategy,” John said, according to a FactSet transcript.
The company has recently announced a partnership with Great Wolf Lodge, an American operator of family-focused indoor water park resorts, with four shops launched in the fourth quarter and 17 more expected in 2019.
Build-A-Bear has also had a partnership with Carnival Corp. CCL, -0.10% since 2016.
Build-A-Bear also launched a six-shop pilot with Walmart Inc. WMT, -0.68% in October, which John said, was a way to bring together two retailers at a time when toy sales are shifting after the liquidation of Toys ‘R’ Us, which was an earnings headwind.
At the same time, the company expects to shutter 30 stores over the next two years. About half of those will be outside of North America.
“The early results indicate that new consumers are being introduced to our brand, with the majority of Bonus Club enrollees at the Walmart site identified as first-time Build-A-Bear guests,” John said.
Bonus Club is Build-A-Bear’s loyalty program.
Still, Build-A-Bear shares are down 13.6% in Thursday trading after the company reported a fourth-quarter loss. Among the problems were weakness in North America and Brexit, which the company says “weighed on consumer confidence.”
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Build-A-Bear says the new GDPR consumer privacy laws also hurt results, though the company is rebuilding its database of shoppers.
Finally, John said there was a lack family-focused films.
“Given that over 80% of Build-A-Bear workshops are located within 2 miles of a movie theater, our total footfall can benefit from the millions of dollars spent on movie marketing, simply because it gives families with children a reason to go to the mall,” she said.
Family movies also add to conversion rates, as shoppers head to stores with the intent to buy a toy based on a character from a film, and arrive willing to spend more when add-ons are included.
“So solid movie property partnerships tend to benefit the total sales volume at Build-A-Bear Workshop beyond just the license themselves, by positively impacting multiple retail levers, traffic, conversion, units per transaction, and dollars per transaction,” John said.
Build-A-Bear stock is up more than 29% for the year to date, but is down 41% over the last year. The S&P 500 index SPX, -0.10% is up 12.1% for 2019 so far.