Build-A-Bear Workshop (BBW)
Company Profile: Build-A-Bear Workshop is a retailer of plush animals and related products, allowing customers to create their own plush bears.
Current Share Price: $7.44 (Jan. 6)2010 Share Price Gain: 58% Comeback Story: Build-A-Bear went public in 2004 and aggressively grew the number of stores globally. However, the recession took its toll on the retailer, and same-store sales cratered. The stock fell from $30 in June 2007 to below $4 by the end of 2008. One of Build-A-Bear's biggest catalysts has been reported interest from private-equity groups. Bloomberg reported in December that Build-A-Bear is seeking a buyer and has approached private-equity firms, citing people with knowledge of the matter. Susquehanna International Group analyst Thomas Filandro wrote in a recent research report that he believes a deal makes sense for Build-A-Bear. He also notes several positive attributes of the company, including "high cash flow generation, healthy balance sheet, reasonable inside ownership, unique brand concept offering an emotionally connective product and shopping experience, and brand presence both domestically and internationally provide a solid platform for future growth." Filandro has a "positive" rating on the stock and a 12-month price target of $10, although he adds that the Build-A-Bear concept is "a faddish business, with limited barriers to entry. Stores are highly reliant on mall traffic to drive transactions and comp growth."
Fossil (FOSL) Company Profile: Fossil designs and sells consumer fashion accessories, including popular lines of watches, belts and handbags. Current Share Price: $72 (Jan. 6) 2010 Share Price Gain: 108% Comeback Story: Fossil shares could be bought in 1993 shortly after the company's IPO for roughly $2 on a split-adjusted basis. The stock rallied to $30 in 2004, but the company was hurt by soft sales and margins heading into 2006. At the time, Fossil's CFO said the company would be forced to hold itself to "more modest sales growth expectations and focus on reducing our expenses accordingly" until it could generate a catalyst to reinvigorate watch sales. By early 2009, shares of Fossil could be bought for less than $12. "This was very much a fad for a while with the watch business," says Hodges. "They restructured and moved into the retail store business. Fossil, of course, has continued with the watch business but I wouldn't consider it a fad now. It's a staple now." Hodges offers the example where Fossil recreated the diamond-crusted white watch Sandra Bullock wore in the popular movie The Blind Side. "They do a lot of that stuff where they hit areas that are popular. Fossil has been the exception in that they've transformed the business and they're fantastic at what they do. They're great marketers."