Build-A-Bear Workshop, Inc. Reports Fiscal 2006 Second Quarter Results

-- Earnings per diluted share were $0.15, including U.K. acquisition dilution of $0.15 and stock-based compensation expense of $0.02, vs. $0.17 in 2005.

-- Company confirms previously announced guidance for 2006 earnings at the low end of the $1.44 to $1.53 range. Guidance includes U.K. acquisition dilution of approximately $0.13, stock-based compensation expense of approximately $0.08 and distribution center transition cost of approximately $0.04.

-- Company updates investors on strategic initiatives including U.K. acquisition integration and company-owned distribution center.

Build-A-Bear Workshop, Inc. (NYSE: BBW), an interactiveentertainment retailer of customized stuffed animals, today announcedthat total revenue for the fiscal 2006 second quarter (13 weeks endedJuly 1, 2006) increased 27.1% to $93.7 million, compared to $73.7million in the prior year's second quarter (13 weeks ended July 2,2005).

Fiscal 2006 second quarter results reflect the company'sacquisition of The Bear Factory Limited, a United Kingdom-basedstuffed animal retailer, and the acquisition of Amsbra, Ltd., itsfranchisee in the U.K.

Second quarter net income was $3.0 million or $0.15 per share.These results, which include the impact of $0.15 per share for U.K.acquisition dilution and $0.02 per share for stock-based compensationexpenses, compare to net income of $3.5 million, or $0.17 per dilutedshare in last year's second quarter.

"We are encouraged by our core North American earnings performancethis quarter and remain confident in our full year earnings outlook,"said Chairman and Chief Executive Bear, Maxine Clark. "While our compstore sales results in the second quarter did not meet ourexpectations, our profitable business model, which includes strong andconsistent merchandise margins, profitable store operations anddisciplined expense control efforts, gives us confidence in ourability to deliver earnings growth even in this difficult consumerenvironment. We continue to make positive progress with our U.K. storeconversions, systems integration and marketing plans. I am alsopleased to report that we are on track with our Ohio distributioncenter, and expect it to become fully operational in September. Thesestrategic initiatives are building blocks for the long term growth ofour business. We remain focused on managing our business for long termgrowth and shareholder value."

Fiscal 2006 Second Quarter

Fiscal 2006 second quarter total revenue includes net retail salesof $93.0 million, an increase of $19.7 million or 27.0% compared tolast year's second quarter. Net retail sales growth was driven by newstores opened during the past twelve months in North America, U.K.acquisition sales, and an increase in Internet sales of 32.3% to $1.7million. Comparable store sales in North America declined 4.4%. Secondquarter total revenue also includes revenue from internationalfranchise fees and third-party licensing.

The second quarter net income of $3.0 million reflects severalitems directly related to the U.K. acquisition, including an operatingloss of $2.7 million, lost interest income and lost franchise revenue,as well as, stock-based compensation expense of $0.8 million pretax($0.4 million net of tax). As anticipated, retail gross margin ratedecreased to 43.9%, from 47.1% in the fiscal 2005 second quarter, dueto higher store occupancy costs in the U.K. Fiscal 2006 second quarterresults also reflect a higher effective tax rate compared to last yearresulting from the impact of the U.K. acquisition.

During the 2006 second quarter, the company opened 14 newBuild-A-Bear Workshop(R) (BABW) retail stores in North America, asplanned, compared with opening 13 new BABW stores during the 2005second quarter. In addition, the company opened two new friends 2Bmade stores inside new BABW stores located in Riverside, Calif.(Promenade at Temecula) and in Boston's historic Faneuil Hall. Alsoduring the quarter the company opened one new ballpark store at thenew Busch Stadium - home of the St. Louis Cardinals - in St. Louis andreopened three ballpark stores in Philadelphia, Cincinnati andCleveland.

Build-A-Bear Workshop stores at the end of the second quartertotaled 205 in the United States and 11 in Canada (excluding ballparkand zoo stores).

U.K. Acquisition

On April 3, 2006, the company announced that it had completed theacquisitions of The Bear Factory Limited and Amsbra, Ltd. The companyended the quarter with 40 stores in the U.K. and Ireland and is in theprocess of converting and rebranding 25 Bear Factory stores. Thecompany began converting the Bear Factory stores to Build-A-BearWorkshop stores in May and expects to complete the store conversionsin time for the 2006 holiday season.

As previously disclosed, the company anticipates U.K. acquisitiondilution of approximately $0.10 -$0.12 per share in the fiscal 2006third quarter (13 weeks ended September 30, 2006) and accretion ofapproximately $0.11 - $0.15 per share in the fiscal 2006 fourthquarter (13 weeks ended December 30, 2006).

The company further expects the acquisition to be accretive toearnings per share in fiscal 2007.

International Franchising

During the quarter international franchisees opened three newinternational stores; international stores totaled 21 at the end ofthe second quarter. The company recently signed a franchise agreementto open Build-A-Bear Workshop stores in Russia. This agreement bringsthe total number of international countries with franchise agreementsto 15.

In fiscal 2006 the company expects international franchise feerevenue to total approximately $3.0 million. International franchisefee revenue excludes the company's U.K.-based stores which are nowreflected in retail sales following the acquisition of Amsbra, Ltd.

Outlook

The company also reaffirmed its previously disclosed guidance forfiscal 2006 (52 weeks ended Dec. 30, 2006) earnings per share (EPS) tobe at the low end of the range of $1.44 - $1.53. This guidanceincludes the anticipated U.K. acquisition dilution of approximately$0.13 per diluted share, stock-based compensation expense ofapproximately $0.08 per diluted share ($2.7 million pretax, $1.6million net of tax) and distribution center transition costs ofapproximately $0.04 per diluted share ($1.4 million pretax, $0.8million net of tax). The company expects fiscal 2006 North Americancomparable store sales will be in the flat to negative low singledigit range.

The guidance also assumes that earnings per diluted share for thethird quarter will be between $0.09 - $0.12, which includes U.K.acquisition dilution of approximately $0.10-$0.12 per diluted share,stock-based compensation expense of approximately $0.02 per dilutedshare, and distribution center transition costs of $0.04 per dilutedshare. North American comp store sales in the fiscal 2006 thirdquarter are expected to decline in the mid-single digit range, whilefourth quarter North American comparable store sales are expected tobe in the flat to negative low single digit range.

In North America, Build-A-Bear Workshop expects to open a total of31 new BABW stores and four new friends 2B made stores, one that willbe separate from BABW stores, in fiscal 2006. In the U.K., the companyplans to open approximately three new Build-A-Bear Workshop stores infiscal 2006; we expect international franchisees to open 10 to 12 newstores.

Ten new North America BABW stores are planned to open in the thirdquarter, compared with opening seven new BABW stores during the 2005third quarter.

Today's Conference Call Webcast

Today at 8:30 a.m. EST, Build-A-Bear Workshop(R) will host a liveaudio webcast of its discussion with the investment communityregarding the company's fiscal 2006 second quarter results. Thewebcast can be accessed at http://ir.buildabear.com. Following thelive discussion, a replay of the webcast will be available until thenext quarterly conference call.

About Build-A-Bear Workshop, Inc.

Build-A-Bear Workshop, Inc. is the only global company that offersan interactive make-your-own stuffed animal retail-entertainmentexperience. Founded in St. Louis in 1997, the company currentlyoperates more than 255 stores in the United States, Canada, the UnitedKingdom and Ireland. The addition of franchise stores in Europe, Asiaand Australia make Build-A-Bear Workshop the leader in interactiveretail. In November 2004, the company expanded the make-your-ownconcept from stuffed animals to dolls with the opening of its firstfriends 2B made(R) stores, where Guests can make their own dollfriends. In April 2006, Build-A-Bear Workshop acquired The BearFactory Limited and Amsbra, Ltd. adding company-owned stores in theUnited Kingdom and Ireland. Build-A-Bear Workshop (NYSE: BBW) postedtotal revenue of $362 million in fiscal 2005. For more information,call 888.560.BEAR (2327) or visit the company's award-winning Websites at www.buildabear.com and www.friends2bmade.com.

Forward-Looking Statements

This press release contains "forward-looking statements" (withinthe meaning of the federal securities laws) which represent theBuild-A-Bear Workshop's expectations or beliefs with respect to futureevents. These forward-looking statements are subject to certain risksand uncertainties that could cause actual results to differ materiallyfrom those anticipated. Those factors include, without limitation: wemay not realize some of the expected benefits of the acquisition ofAmsbra and The Bear Factory; we may be unable to generate comparablestore sales growth; our marketing initiatives may not generatesufficient brand awareness and sales; we may be unable to effectivelymanage our international franchises or comply with changing lawsrelating thereto; we may be unable to generate demand for our retailexperience, or to respond to consumer preferences; customer malltraffic may decrease, as a result of various factors, including areduction of consumer confidence because of terrorism or war; generaleconomic conditions may worsen; our market share could be adverselyaffected by competitors; we may lose key personnel, or be unable tohire qualified additional personnel; vendor deliveries may bedisrupted; the availability and costs of our products could beimpacted by international manufacturing and trade issues; ourwarehousing and distribution vendors may perform poorly; we may failto protect our intellectual property and may have infringement,misappropriation or other disputes or litigation with third parties;we may be unable to open new stores, renew or replace our storeleases, enter into leases for new stores on favorable terms, orcontinue to comply with our current leases; we may experiencecommunications or information systems failures; we may suffer negativepublicity or be sued due to alleged violations of labor laws, employeeregulations or unethical practices, either by the Company or itsmerchandise manufacturers; and we may violate or be accused ofviolating privacy or security laws by reason of improperly obtainingor failing to adequately protect Guest information. These and otherapplicable risks, cautionary statements and factors that could causeactual results to differ from the Company's forward-looking statementsare included in the Company's filings with the SEC, including asdescribed in the Company's annual report on Form 10-K for the fiscalyear ended December 31, 2005. The Company undertakes no obligation toupdate or revise any forward- looking statements to reflect subsequentevents or circumstances even if experience or future changes make itclear that any projected results expressed or implied therein will notbe realized.

BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)

13 Weeks % of 13 Weeks % of
Ended Total Ended Total
July 1, Revenues July 2, Revenues
2006 (1) 2005 (1)
----------- -------- ----------- --------
Revenues:
Net retail sales $ 92,962 99.3 $ 73,279 99.4
Franchise fees 636 0.7 334 0.5
Licensing revenue 59 0.1 86 0.1
----------- ------- ----------- --------
Total revenues 93,656 100.0 73,699 100.0
----------- ------- ----------- --------
Costs and expenses:
Cost of merchandise sold 52,190 56.1 38,778 52.9
Selling, general and
administrative 34,783 37.1 27,728 37.6
Store preopening 1,582 1.7 1,929 2.6
Interest expense
(income), net (299) (0.3) (378) (0.5)
----------- ------- ----------- --------
Total costs and
expenses 88,256 94.2 68,057 92.3
----------- ------- ----------- --------
Income before income
taxes 5,400 5.8 5,642 7.7
Income tax expense 2,402 2.6 2,147 2.9
----------- ------- ----------- --------
Net income $ 2,999 3.2 $ 3,495 4.7
=========== ===========

Earnings per common share:
Basic $ 0.15 $ 0.18
=========== ===========
Diluted $ 0.15 $ 0.17
=========== ===========
Shares used in computing
common per share amounts:
Basic 20,152,761 19,801,598
Diluted 20,425,749 20,223,601

(1) Selected statement of operations data expressed as a percentage
of total revenues, except cost of merchandise sold which is expressed
as a percentage of net retail sales. Percentages will not total due
to cost of merchandise sold being expressed as a percentage of net
retail sales and rounding.



BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands, except share and per share data)

% of % of
26 Weeks Total 26 Weeks Total
Ended July Revenue Ended July Revenue
1, 2006 (1) 2, 2005 (1)
----------- ------- ----------- -------
Revenues:
Net retail sales $ 190,692 99.2 $ 159,002 99.5
Franchise fees 1,326 0.7 640 0.4
Licensing revenue 270 0.1 116 0.1
----------- ------ ----------- -------
Total revenues 192,287 100.0 159,758 100.0
----------- ------ ----------- -------
Costs and expenses:
Cost of merchandise sold 102,050 53.5 81,175 51.1
Selling, general and
administrative 70,234 36.5 57,573 36.0
Store preopening 2,197 1.1 3,117 2.0
Interest expense (income),
net (1,165) -0.6 (746) -0.5
----------- ------ ----------- -------
Total costs and expenses 173,316 90.1 141,119 88.3
----------- ------ ----------- -------
Income before income taxes 18,971 9.9 18,639 11.7
Income tax expense 7,627 4.0 7,176 4.5
----------- ------ ----------- -------
Net income 11,345 5.9 11,463 7.2

Earnings per common share:
Basic $ 0.56 $ 0.59
=========== ===========
Diluted $ 0.56 $ 0.57
=========== ===========
Shares used in computing
common per share amounts:
Basic 20,115,818 19,538,111
Diluted 20,413,563 20,173,764

(1) Selected statement of operations data expressed as a percentage
of total revenues, except cost of merchandise sold which is expressed
as a percentage of net retail sales. Percentages will not total due
to cost of merchandise sold being expressed as a percentage of net
retail sales and rounding.



BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(dollars in thousands, except share and per share data)

July 1 December 31,
2006 2005
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 10,554 $ 90,950
Inventories 48,029 40,157
Receivables 10,781 6,629
Prepaid expenses and other current assets 14,174 6,839
Deferred tax assets 3,636 3,232
----------- -----------
Total current assets 87,174 147,807

Property and equipment, net 117,504 89,973
Note receivable from franchisee - 4,518
Goodwill 31,074 -
Other intangible assets, net 3,301 1,454
Other assets, net 3,715 2,356
----------- -----------
Total Assets $ 242,768 $ 246,108
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,069 $ 34,996
Accrued expenses 5,712 15,792
Gift cards and customer deposits 15,201 22,865
Deferred revenue 8,362 7,508
----------- -----------
Total current liabilities 60,343 81,161
----------- -----------

Deferred franchise revenue 2,764 2,306
Deferred rent 34,399 30,687
Other liabilities 529 586
Deferred tax liabilities 426 1,011

Stockholders' equity:
Common stock, par value $0.01 per share 205 201
Additional paid-in capital 86,595 85,259
Other comprehensive income (98) -
Retained earnings 57,759 46,700
Notes receivable from officers (154) (151)
Unearned compensation - (1,652)
----------- -----------
Total stockholders' equity 144,307 130,357
----------- -----------
Total Liabilities and Stockholders' Equity $ 242,768 $ 246,108
=========== ===========



BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES
Unaudited Selected Financial and Store Data
(dollars in thousands, except square foot data)

13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
July 1, July 2, July 1, July 2,
2006 2005 2006 2005
-------- -------- -------- --------

Other financial data:
Gross margin ($) (1) $ 40,772 34,501 $ 88,642 77,827
Gross Margin (%) (1) 43.9% 47.1% 46.5% 48.9%
Capital expenditures $ 21,416 10,590 $ 31,082 16,091
Depreciation and amortization $ 5,801 4,352 $ 10,583 8,517


Store data (2):
Number of stores at end of
period 256 186 256 186
Store square footage at end of
period 732,620 575,682 732,620 575,682
Comparable store sales change
(%) (3) -4.4% -6.9% -4.1% -0.6%


(1)Gross margin represents net retail sales less cost of merchandise
sold. Gross margin percentage represents gross margin divided by
net retail sales.
(2)Excludes our webstore and seasonal and event-based locations.
(3)Comparable store sales percentage changes are based on net retail
sales and stores are considered comparable beginning in their
thirteenth full month of operation.