You know something isn't not quite right when the best some analysts can say about a company is that it might be a candidate to be bought or go private. That, of course, is what everybody is saying about every company these days, especially those that aren't quite meeting Wall Street expectations. (Hint: They all won't be bought.)
Enter Build-A-Bear (NYSE:BBW), which yesterday reported fourth quarter earnings. Backing out adjustments and lower-than-expected taxes, earnings per share for the quarter were 53 cents per share versus the consensus of 73 cents and the 75 cents that was reported. That included $1.2 million, which represented lower cost-of-goods sold due to an "inventory cost adjustment," which helped boost margins.
Just what was the gist of that inventory cost adjustment? The company didn't say until pressed by an analyst on its earnings call. Turns out it was a purchase-accounting adjustment, tied to its acquisition last April of the Bear Factory Ltd. in the UK. "As you know," said CEO Maxine Clark said, before quickly ending the call, "when you purchase an entity, you have approximately a year to finalize the purchase accounting." (Teddy bears, convenient cookie jars -- don't get me started.)
Finally, there's the issue of comp-store sales. Not only did they fall 10.4% in what arguably should have been a strong quarter. More disconcerting is that based on the company's disclosure, for the year comp-store sales also fell at stores three-to-five years old, with the change from a year earlier worse the older the stores. Also falling in each age group and as a whole for the year: Sales per square foot. Compare that to a quarter ago, when Clark said, "Although not all comp positive this year, our older stores consistently performed the best on a comp store sales basis, and our youngest stores consistently generated the highest sales per square foot..."
No wonder there's a bit of "they should go private" chatter.
It appears this could be one fad that is fading.
BBW 1-yr chart: