Build-A-Bear Workshop warns revenue could fall after disappointing 'Frozen 2' sales

Disappointing sales of "Frozen 2" merchandise, combined with tepid mall traffic and the delayed opening of a flagship store, forced the toy retailer to cut its revenue guidance for the three months to February 1.
"Frozen 2" is generating nearly double Build-A-Bear's average dollars per transaction, but it's only generating enough store traffic and transactions to rank as its No. 2 property.
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Disney's "Frozen 2" is making it snow at the box office, but Anna and Elsa have received a frosty reception at Build-A-Bear Workshop .

Disappointing sales of "Frozen 2" merchandise, combined with tepid mall traffic and the delayed opening of a flagship store, forced the toy retailer to cut its revenue guidance for the three months to February 1.

"We expected the successful release of the 'Frozen 2' movie in late November to generate incremental shopping traffic to malls, similar to the prior top-license movies, especially given that the original 'Frozen' film was the best-selling license in our history," CEO Sharon Price John said on Build-A-Bear's third-quarter earnings call last week .

Build-A-Bear previously forecast higher fourth-quarter sales; its new range pegs revenue somewhere between slightly higher and down by a single-digit percentage. It also trimmed its revenue forecast for the year, from low-single-digit growth to between flat and a single-digit decline. On the bright side, it expects less discounting this year and a tight grip on costs to mean a small increase in annual pre-tax income.

While Build-A-Bear's "Frozen 2" products which include stuffed bears inspired by the princesses, and Sven and Olaf plush toys are selling, they aren't drumming up as much demand as the retailer anticipated.

"The property has gained momentum since the movie premiere and is generating nearly double our average dollars per transaction," Price John said on the call. However, it's only generating enough store traffic and transactions to rank as Build-A-Bear's No. 2 property, she added.

Build-A-Bear is trying to drum up sales with promotions, Price John said, especially as other retailers are discounting all kinds of "Frozen 2" merchandise more aggressively than it expected. One reason for the fierce competition could be a shorter holiday season a late Thanksgiving this year means there are six fewer selling days before Christmas .

The toy group's troubles are surprising, given the movie's popularity. "Frozen 2" came out on November 22, and racked up about $338 million at the domestic box office and $920 million worldwide in its first 17 days.

The sequel made nearly double what the original "Frozen" earned during the same timeframe in 2013, adjusted for inflation, according to the New York Times . "Frozen 2" is on track to net about $415 million domestically and $1.9 billion worldwide, according to Forbes , which would make it the sixth highest-grossing movie in history.

Blockbusters have influenced Build-A-Bear's sales before.Price John credited a joke about the brand in "Avengers: Endgame" with enhancing its sales earlier this year.

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