BUILD-A-BEAR WORKSHOP INC 10-Q

Item 1. Financial Statements BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share and per share data) August 1, January 31, August 2, 2026 2026 2025 (Unaudited) (Unaudited) ASSETS Current assets: Cash, cash equivalents and restricted cash $ 14,004 $ 26,755 $ 39,108 Inventories, net 81,130 82,203 81,758 Receivables, net 16,383 21,459 13,526 Prepaid expenses and other current assets 11,378 9,603 10,026 Total current assets 122,895 140,020 144,418 Operating lease right-of-use asset 119,760 121,129 100,950 Property and equipment, net 79,058 70,926 58,804 Deferred tax assets 7,180 7,370 8,045 Other assets, net 5,208 6,008 6,021 Total Assets $ 334,101 $ 345,453 $ 318,238 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 16,017 $ 15,318 $ 16,659 Accrued expenses 14,731 26,104 19,110 Operating lease liability short term 28,138 28,651 26,996 Gift cards and customer deposits 13,789 15,289 14,343 Deferred revenue and other 3,925 5,264 3,964 Total current liabilities 76,600 90,626 81,072 Operating lease liability long term 97,373 98,647 80,365 Other long-term liabilities 1,131 1,152 1,406 Stockholders' equity: Preferred stock, par value $ 0.01 , Shares authorized: 15,000,000 ; No shares issued or outstanding at August 1, 2026, January 31, 2026 and August 2, 2025 - - - Common stock, par value $ 0.01 , Shares authorized: 50,000,000 ; Issued and outstanding: 12,467,170 , 12,808,954 , and 13,159,408 shares, respectively 126 128 132 Additional paid-in capital 59,113 60,821 61,701 Accumulated other comprehensive loss ( 11,132 ) ( 10,760 ) ( 11,304 ) Retained earnings 110,890 104,839 104,866 Total stockholders' equity 158,997 155,028 155,395 Total Liabilities and Stockholders' Equity $ 334,101 $ 345,453 $ 318,238 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) (Dollars in thousands, except share and per share data) Thirteen weeks ended Twenty-six weeks ended August 1, August 2, August 1, August 2, 2026 2025 2026 2025 Revenues: Net retail sales $ 106,544 $ 114,635 $ 220,010 $ 234,224 Commercial revenue 8,086 8,629 19,034 16,251 International franchising 661 983 1,517 2,167 Total revenues 115,291 124,247 240,561 252,642 Costs and expenses: Cost of merchandise sold - retail 48,982 48,552 89,320 100,123 Cost of merchandise sold - commercial 3,383 3,419 7,802 6,433 Cost of merchandise sold - international franchising 437 765 1,078 1,588 Total cost of merchandise sold 52,802 52,736 98,200 108,144 Consolidated gross profit 62,489 71,511 142,361 144,498 Selling, general and administrative expense 51,410 56,399 107,536 109,955 Interest income, net ( 552 ) ( 206 ) ( 686 ) ( 406 ) Income before income taxes 11,631 15,318 35,511 34,949 Income tax expense 2,871 2,951 8,452 7,263 Net income $ 8,760 $ 12,367 $ 27,059 $ 27,686 Foreign currency translation adjustment ( 193 ) ( 9 ) ( 372 ) 1,250 Comprehensive income $ 8,567 $ 12,358 $ 26,687 $ 28,936 Income per common share: Basic $ 0.71 $ 0.94 $ 2.16 $ 2.11 Diluted $ 0.70 $ 0.94 $ 2.16 $ 2.11 Shares used in computing common per share amounts: Basic 12,420,379 13,111,615 12,502,383 13,095,958 Diluted 12,431,533 13,139,470 12,526,722 13,142,443 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Twenty-six weeks ended August 1, August 2, 2026 2025 Cash flows provided by operating activities: Net income $ 27,059 $ 27,686 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,114 7,368 Share-based and performance-based stock compensation ( 189 ) 1,172 Provision/adjustments for doubtful accounts ( 44 ) ( 27 ) Gain on disposal of property and equipment ( 17 ) ( 17 ) Net change in film costs and advances ( 66 ) - Deferred taxes 165 ( 383 ) Change in assets and liabilities: Inventories, net 881 ( 11,240 ) Receivables, net 5,066 2,928 Prepaid expenses and other assets ( 1,730 ) 2,950 Accounts payable and accrued expenses ( 9,813 ) 3,657 Operating leases ( 399 ) ( 481 ) Gift cards and customer deposits ( 1,482 ) ( 1,513 ) Deferred revenue ( 1,399 ) ( 83 ) Net cash provided by operating activities 26,146 32,017 Cash flows used in investing activities: Purchases of property and equipment ( 15,421 ) ( 6,328 ) Net cash used in investing activities ( 15,421 ) ( 6,328 ) Cash flows used in financing activities: Purchases of common stock for employee equity awards, net of tax ( 453 ) ( 1,266 ) Cash dividends paid on vested participating securities ( 5,768 ) ( 5,836 ) Purchases of Company’s common stock ( 17,153 ) ( 7,323 ) Net cash used in financing activities ( 23,374 ) ( 14,425 ) Effect of exchange rates on cash ( 102 ) 86 (Decrease)/Increase in cash, cash equivalents, and restricted cash ( 12,751 ) 11,350 Cash, cash equivalents and restricted cash, beginning of period 26,755 27,758 Cash, cash equivalents and restricted cash, end of period $ 14,004 $ 39,108 Supplemental disclosure of cash flow information: Cash and cash equivalents $ 13,601 $ 38,707 Restricted cash from long-term deposits $ 403 $ 401 Total cash, cash equivalents and restricted cash $ 14,004 $ 39,108 Net cash paid during the period for income taxes $ 11,212 $ 4,697 See accompanying notes to condensed consolidated financial statements. 6 Table of Contents Notes to Condensed Consolidated Financial Statements 1. Basis of Presentation The condensed consolidated financial statements included herein are unaudited and have been prepared by Build-A-Bear Workshop, Inc. and its subsidiaries (collectively, the “Company”) pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States ("U.S.") generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet of the Company as of January 31, 2026 , was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to summarize fairly the financial position of the Company and the results of the Company’s operations and cash flows for the periods presented. All of these adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. Because of the seasonal nature of the Company’s operations, results of operations of any single reporting period should not be considered as indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended January 31, 2026 , which were included in the Company’s Annual Report on Form 10 -K filed with the SEC on April 16, 2026, as amended by Amendment No. 1 filed with the SEC on April 17, 2026 ( the "2025 Form 10 -K"). Significant Accounting Policies The Company's significant accounting policies are summarized in Note 2 to the consolidated financial statements included in its 2025 Form 10 -K. Recently Adopted Accounting Pronouncements In July 2025, the FASB issued ASU 2025 - 05, Financial Instruments—Credit Losses (Topic 326 ): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025 - 05 provides the option to apply a practical expedient to address implementation challenges related to the estimation of expected credit losses for current accounts receivable and current assets arising from transactions accounted for under revenue recognition (Topic 606 ) and assets acquired through business combinations. The practical expedient allows entities to assume that current conditions as of the balance sheet date remain unchanged over the life of these assets when developing forecasts. The guidance allows entities to bypass the requirement to incorporate macro-economic data into their forecast when such data is not expected to materially affect the estimate. The Company adopted the guidance in ASU 2025 - 05 effective February 1, 2026 prospectively and applied the practical expedient. The adoption of this new accounting standard did not have a material impact on the Company's condensed consolidated financial statements. 7 Table of Contents 2. Revenue Currently, most of the Company’s revenue is derived from direct-to-consumer ("DTC") retail sales (including from its e-commerce sites) and is recognized when control of the merchandise is transferred to the customer. The Company's disaggregated revenue is fully disclosed as net sales to external customers by reporting segment and by geographic area (See Note 11 — Segment Information for additional information). The Company's direct-to-consumer reporting segment represents 92 % of consolidated revenue for the second quarter of fiscal 2026 . The majority of these sales transactions were single performance obligations that were recorded when control of merchandise was transferred to the customer. The following is a description of principal activities from which the Company generates its revenue through three reportable segments. The Company’s direct-to-consumer segment includes the operating activities of corporately-managed stores, other retail-delivered operations and online sales. Direct-to-consumer revenue is recognized when control of the merchandise is transferred to the customer and for the Company's online sales, control generally transfers upon delivery to the customer. Revenue is measured as the amount of consideration, including any discounts or incentives, the Company expects to receive in exchange for transferring the merchandise. Product returns have historically averaged less than one -half of one percent due to the personalized and interactive nature of sales, where consumers customize their own stuffed animal. The Company has elected to exclude from revenue all collected sales, value-added, and other taxes paid by its customers. For the Company’s gift cards, revenue is deferred for single transactions until redemption including any related gift card discounts. Approximately 80 % of gift cards issued are redeemed within three years of issuance and over the last three years, approximately 65 % of gift cards issued have been redeemed within the first twelve months. In addition, unredeemed gift cards or breakage revenue is recorded in proportion to the consumers’ redemption pattern using an estimated breakage rate based on historical experience. Following the reopening of stores after the pandemic, the Company experienced lower gift card redemption rates for all periods of outstanding activated cards compared to historical redemption patterns observed prior to fiscal year 2020, which impacted the gift card breakage rate. Management believes that the redemption behavior observed during the pandemic was not indicative of long-term customer behavior and accordingly adjusted the historical redemption data used to calculate the breakage rate. In more recent periods, gift card redemption patterns have generally returned to levels consistent with pre- 2020 experience. The Company continues to evaluate expected breakage annually and adjusts the breakage rates in the fourth quarter of each year, or at other times if significant changes in consumer behavior are detected. Changes to breakage estimates impact revenue recognition prospectively. Further, given the magnitude of the Company's gift card liability, the changes in breakage rates could have a significant impact on the amount of breakage revenue recognized in future periods. As a matter of sensitivity, a hypothetical 1% change in our gift card breakage rate in fiscal 2025 would have resulted in a change in breakage revenue of $ 1.3 million. For certain qualifying transactions, a portion of revenue transactions are deferred for the obligation related to the Company’s loyalty program or when a material right in the form of a future discount is granted. In these transactions, the transaction price is allocated to the separate performance obligations based on the relative standalone selling price. The standalone selling price for the points earned for the Company’s loyalty program is estimated using the net retail value of the merchandise purchased, adjusted for estimated breakage based on historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired. Loyalty program points expire if there is no qualifying account activity for a period of 12 months. The Company issues certificates daily to loyalty program members who have earned 100 or more points in North America and 50 points or more in the United Kingdom (the "U.K.") with certificates historically expiring in four months if not redeemed. The Company assesses the redemption rates of its certifications on a quarterly basis to update the rate at which loyalty program points turn into certifications and the rate that certifications are redeemed. The Company classifies contract liabilities related to the loyalty program as deferred revenue and other on the condensed consolidated balance sheet. The Company’s commercial segment includes transactions with other businesses and is mainly comprised of wholesale sales of merchandise, supplies and fixtures, licensing the Company's intellectual properties for third -party use, and revenues generated from entertainment activities. Revenue for wholesale sales is recognized when the control of the merchandise or fixtures is transferred to the customer, which generally occurs upon shipment to the customer. The license agreements provide the customer with highly interrelated rights, including the Build-A-Bear retail operations proprietary process, that are not distinct in the context of the contract and, therefore, have been accounted for as a single performance obligation and recognized as licensee sales occur. If the contract includes a guaranteed minimum, the minimum guarantee is recognized on a straight-line basis over the guarantee term until such time as royalties earned through licensee sales exceed the minimum guarantee. The Company classifies these guaranteed minimum contract liabilities as deferred revenue and other on the condensed consolidated balance sheet. Entertainment revenue is generated through the sale of entertainment assets directly to customers or through licensing agreements. The Company’s international franchising segment includes the activities with franchisees who operate store locations in certain countries and includes development fees, sales-based royalties and merchandise, including supplies and fixture sales. The Company's obligations under the franchise agreements are ongoing and include operations and product development support and training, generally concentrated around initial store openings. These obligations are highly interrelated rights that are not distinct in the context of the contract and, therefore, have been accounted for as a single performance obligation and recognized as franchisee sales occur. If the contract includes an initial, one -time nonrefundable development fee, this fee is recognized on a straight-line basis over the term of the franchise agreement, which may extend for periods up to 25 years. The Company classifies these initial, one -time nonrefundable franchise fee contract liabilities as deferred revenue and other on its condensed consolidated balance sheet. Revenue from merchandise and fixture sales is recognized when control is transferred to the franchisee, which generally occurs upon delivery. The Company also incurs expenses directly related to the startup of new franchises, which may include finder’s fees, legal and travel costs, expenses related to its ongoing support of the franchises and employee compensation. Accordingly, the Company’s policy is to capitalize any finder’s fee, as an incremental cost, and expense all other costs as incurred. The Company amortizes these capitalized costs into expense in the same pattern as the development fee as described previously. These capitalized costs for the thirteen and twenty-six weeks ended August 1, 2026 are not material to the financial statements. The Company reserves for “expected” credit losses on financial instruments and other commitments to extend credit rather than the “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions and reasonable and supportable forecasts. For the twenty-six weeks ended August 1, 2026 and August 2, 2025 , the Company's accounts receivable are net of $ 4.2 million and $ 6.9 million, respectively, inclusive of the allowance for credit losses and the reserve for the UK's customs authority "HMRC" matter of $ 0.6 million and $ 3.6 million, respectively. See Note 12 for further discussion of the HMRC matter. During the first quarter of fiscal 2026, following Supreme Court rulings regarding tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"), the Company determined that it was entitled to recover approximately $ 13.2 million of previously paid tariffs. The Company recorded the related receivable, recognized a $ 10.4 million benefit in cost of merchandise sold-retail, including approximately $ 7.0 million related to prior fiscal year costs, and reduced the carrying value of inventory by approximately $ 2.8 million for tariffs attributable to inventory remaining on hand. During the second quarter of fiscal 2026, the Company collected the refund including interest and recognized the remaining inventory-related benefit as the underlying inventory was sold. As a result, the Company has substantially completed recognition of the financial statement impacts associated with the IEEPA tariff refund. 8 Table of Contents 3. Leases The majority of the Company's leases relate to retail stores and corporate offices. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Most new retail store leases have an original term of a five to ten -year base period and may include renewal options to extend the lease term beyond the initial base period. The extension periods are typically much shorter than the original lease term given the Company's strategic decision to maintain a high level of lease optionality. Some leases also include early termination options, which can be exercised under specific conditions. Additionally, the Company may operate stores for a period of time on a month-to-month basis after the expiration of the lease term. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Additionally, certain leases contain incentives, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property. The table below presents certain information related to the lease costs for operating leases for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025 (in thousands). Thirteen weeks ended Twenty-six weeks ended August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025 Operating lease costs $ 11,418 $ 10,765 $ 22,827 $ 21,208 Variable lease costs (1) 2,112 2,509 4,326 4,889 Short term lease costs 34 21 61 49 Total Operating Lease costs $ 13,564 $ 13,295 $ 27,214 $ 26,146 ( 1 ) Variable lease costs consist of leases with variable rent structures, which are intended to increase flexibility in an environment with expected high sales volatility and provide a natural hedge against potential sales declines. Other information The table below presents supplemental cash flow information related to leases for the thirteen and twenty-six weeks ended August 1, 2026 and August 2, 2025 (in thousands). Thirteen weeks ended Twenty-six weeks ended August 1, 2026 August 2, 2025 August 1, 2026 August 2, 2025 Operating cash flows for operating leases $ 11,153 $ 10,633 $ 22,215 $ 20,848 As of August 1, 2026 and August 2, 2025 , the weighted-average remaining operating lease term was 6.2 years and 6.1 years, respectively, and the weighted-average discount rate was 6.9 % and 7.1 %, respectively, for operating leases recognized on the Company's condensed consolidated balance sheets. The value of our operating lease asset was $ 119.8 million and $ 101.0 million as of August 1, 2026 and August 2, 2025 , respectively. The increase was driven by the Company entering into leases for new stores as well as securing longer-term extensions for existing stores resulting in contracts with more favorable terms. For the thirteen and twenty-six weeks ended August 1, 2026 and the thirteen and twenty-six weeks ended August 2, 2025 , the Company incurred no impairment charges against its right-of-use operating lease assets. Undiscounted cash flows The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet (in thousands). Operating Leases 2026 $ 15,887 2027 33,912 2028 26,510 2029 20,987 2030 16,540 Thereafter 43,184 Total minimum lease payments 157,020 Less: amount of lease payments representing interest ( 31,509 ) Present value of future minimum lease payments 125,511 Less: current obligations under leases ( 28,138 ) Long-term lease obligations $ 97,373 As of August 1, 2026 , the Company had additional executed leases that had not yet commenced with operating lease liabilities of $ 0.9 million. These leases are expected to commence in the third quarter of fiscal 2026 with lease terms of three to ten years. 9 Table of Contents 4. Other Assets Prepaid expenses and other current assets consist of the following (in thousands): August 1, January 31, August 2, 2026 2026 2025 Prepaid occupancy (1) $ 3,478 $ 2,570 $ 3,757 Prepaid insurance 1,603 1,068 451 Prepaid taxes (2) 327 81 143 Prepaid gift card fees 432 511 388 Prepaid royalties 396 111 203 Other (3) 5,142 5,262 5,084 Total $ 11,378 $ 9,603 $ 10,026 ( 1 ) Prepaid occupancy consists of prepaid expenses related to variable non-lease components. ( 2 ) Prepaid taxes consist of prepaid federal and state income tax. ( 3 ) Other consists primarily of prepaid expense related to information technology maintenance contracts and software as a service. Other non-current assets consist of the following (in thousands): August 1, January 31, August 2, 2026 2026 2025 Entertainment production asset (1) $ 3,726 $ 4,493 $ 4,336 Deferred compensation 1,391 1,356 1,549 Other (2) 91 159 136 Total $ 5,208 $ 6,008 $ 6,021 ( 1 ) Entertainment production asset includes the direct costs, production overhead and development costs in producing entertainment assets such as films or music. ( 2 ) Other consists primarily of deferred financing costs related to the Company's credit facility. 5. Accrued Expenses Accrued expenses consist of the following (in thousands): August 1, January 31, August 2, 2026 2026 2025 Accrued wages, bonuses and related expenses $ 9,177 $ 16,824 $ 12,122 Sales and value added taxes payable 2,325 3,341 2,597 Current income taxes payable 1,262 3,943 2,156 Accrued rent and related expenses (1) 1,017 1,046 885 Accrued expense - other (2) 950 950 1,350 Total $ 14,731 $ 26,104 $ 19,110 ( 1 ) Accrued rent and related expenses consist of accrued costs associated with non-lease components. ( 2 ) Accrued expense - other consists of costs associated with legal accruals. 10 Table of Contents 6. Stock-based Compensation On April 14, 2020, the Company's Board of Directors (the “Board”) adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. 2020 Omnibus Incentive Plan (the “2020 Incentive Plan”). On June 11, 2020, the Company’s stockholders approved the 2020 Incentive Plan. On April 11, 2023, the Board adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. Amended and Restated 2020 Omnibus Incentive Plan (the “Restated 2020 Incentive Plan”). On June 8, 2023, at the Company’s 2023 Annual Meeting of Stockholders, the Company’s stockholders approved the Restated 2020 Incentive Plan. The Restated 2020 Incentive Plan, which is administered by the Compensation and Human Capital Committee of the Board, permits the grant of stock options (including both incentive and non-qualified stock options), stock appreciation rights, other stock-based awards, including restricted stock and restricted stock units, cash-based awards, and performance awards pursuant to the terms of the Restated 2020 Incentive Plan. The Restated 2020 Incentive Plan will terminate on April 11, 2033, unless earlier terminated by the Board. The total number of shares of the Company’s common stock authorized for issuance under the Restated 2020 Incentive Plan increased by 800,000 to a maximum of 1,800,000 since its inception as the 2020 Incentive Plan, subject to customary capitalization adjustments, substitutions of acquired company awards and certain additions of acquired company plan shares, plus shares that are subject to outstanding awards made under the Build-A-Bear Workshop, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”) that on or after April 14, 2020, may be forfeited, expire or be settled for cash. For the thirteen weeks ended August 1, 2026 and August 2, 2025 , selling, general and administrative expense included stock-based compensation expense of $( 0.8 ) million and $ 0.7 million, respectively. For the twenty-six weeks ended August 1, 2026 and August 2, 2025 selling, general and administrative expense included stock-based compensation expense of $( 0.1 ) million and $ 1.2 million, respectively. As of August 1, 2026 , there was $ 5.4 million of total unrecognized compensation expense related to unvested restricted stock awards which is expected to be recognized over a weighted-average period of 2.0 years. As of August 1, 2026 and January 31, 2026 , the Company had no outstanding stock options. The following table is a summary of the balances and activity related to time-based and performance-based restricted stock for the twenty-six weeks ended August 1, 2026 : Time-Based Restricted Stock Performance-Based Restricted Stock Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Outstanding, January 31, 2026 (1) 73,588 $ 37.97 156,665 $ 32.82 Granted (1) 87,383 37.11 110,337 37.39 Vested ( 41,415 ) 37.08 - - Adjustment for performance achievement - - ( 40,494 ) 24.75 Earned and vested - - ( 9,810 ) 24.75 Forfeited (1) ( 23,336 ) 38.61 ( 70,549 ) 33.90 Outstanding, August 1, 2026 (1) 96,220 $ 37.76 146,149 $ 38.59 ( 1 ) Performance-based restricted stock outstanding, granted, and forfeited are presented at 100% of target. The total fair value of shares vested during the twenty-six weeks ended August 1, 2026 and August 2, 2025 was $ 1.8 million and $ 2.5 million, respectively. The outstanding performance shares as of August 1, 2026 consist of the following: Performance Shares Unearned shares subject to performance-based restrictions at target: 2024 - 2026 consolidated, cumulative EBITDA objectives 18,398 2024 - 2026 consolidated, cumulative revenue objectives 6,133 2025 - 2027 consolidated revenue growth objectives 37,832 2026 - 2028 consolidated revenue growth objectives 83,786 Performance shares outstanding, August 1, 2026 146,149 7. Income Taxes The Company's effective tax rate was 24.7 % and 23.8 % for the thirteen and twenty-six weeks ended August 1, 2026 , respectively, compared to 19.3 % and 20.8 % for the thirteen and twenty-six weeks ended August 2, 2025 , respectively. The fiscal 2026 effective tax rate differed from the statutory rate of 21 % primarily due to state income tax expense offset partially by the tax impact of equity awards vesting and the foreign-derived deduction eligible income (formerly foreign derived intangible income). The fiscal 2025 effective tax rate differed from the statutory rate of 21 % primarily due to state income tax expense offset by the tax impact of equity awards vesting, the foreign-derived intangible income deduction and discrete benefits related to settlement of a prior period tax position. In addition, in the second quarter of fiscal 2026 and 2025, the Company remains in a full valuation allowance in certain foreign jurisdictions. 11 Table of Contents 8. Stockholders’ Equity The following table sets forth the changes in stockholders’ equity (in thousands) for the thirteen weeks ended August 1, 2026 and August 2, 2025 (in thousands). For the thirteen weeks ended August 1, 2026 For the thirteen weeks ended August 2, 2025 Common Retained Common Retained stock APIC (1) AOCI (2) earnings Total stock APIC (1) AOCI (2) earnings Total Balance, beginning $ 126 $ 59,919 $ ( 10,939 ) $ 109,913 $ 159,019 $ 132 $ 61,602 $ ( 11,295 ) $ 98,243 $ 148,682 Shares issued under employee stock plans 2 ( 2 ) - - Stock-based compensation 34 34 375 375 Shares withheld in lieu of tax withholdings - ( 104 ) ( 104 ) - Share repurchase ( 2 ) ( 734 ) ( 4,909 ) ( 5,645 ) ( 276 ) ( 2,839 ) ( 3,115 ) Cash dividends ( 2,874 ) ( 2,874 ) ( 2,905 ) ( 2,905 ) Other - - - Other comprehensive income (193 ) ( 193 ) ( 9 ) ( 9 ) Net income 8,760 8,760 12,367 12,367 Balance, ending $ 126 $ 59,113 $ ( 11,132 ) $ 110,890 $ 158,997 $ 132 $ 61,701 $ ( 11,304 ) $ 104,866 $ 155,395 ( 1 ) Additional paid-in capital (“APIC”) ( 2 ) Accumulated other comprehensive loss (“AOCI”) The following table sets forth the changes in stockholders’ equity for the twenty-six weeks ended August 1, 2026 and August 2, 2025 (in thousands). For the twenty-six weeks ended August 1, 2026 For the twenty-six weeks ended August 2, 2025 Common Retained Common Retained stock APIC (1) AOCI (2) earnings Total stock APIC (1) AOCI (2) earnings Total Balance, beginning $ 128 $ 60,821 $ ( 10,760 ) $ 104,839 $ 155,028 $ 133 $ 61,987 $ ( 12,554 ) $ 89,516 $ 139,082 Shares issued under employee stock plans 2 241 243 1,103 1,103 Stock-based compensation 414 414 659 659 Shares withheld in lieu of tax withholdings - ( 454 ) ( 454 ) ( 1,266 ) ( 1,266 ) Share repurchase ( 4 ) ( 1,909 ) ( 15,240 ) ( 17,153 ) ( 1 ) ( 782 ) ( 6,540 ) ( 7,323 ) Cash dividends ( 5,768 ) ( 5,768 ) ( 5,796 ) ( 5,796 ) Other - - - Other comprehensive income ( 372 ) ( 372 ) 1,250 1,250 Net income 27,059 27,059 27,686 27,686 Balance, ending $ 126 $ 59,113 $ ( 11,132 ) $ 110,890 $ 158,997 $ 132 $ 61,701 $ ( 11,304 ) $ 104,866 $ 155,395 ( 1 ) Additional paid-in capital (“APIC”) ( 2 ) Accumulated other comprehensive loss (“AOCI”) During the thirteen and twenty-six weeks ended August 1, 2026 , the Company utilized $ 5.6 million in cash to repurchase 155,118 shares and utilized $ 17.0 million in cash to repurchase 403,236 shares, respectively, under its $ 100 million stock repurchase program that was authorized by the Board on September 11, 2024 ( the "September 2024 Stock Repurchase Program"). Between the end of the second fiscal quarter of 2026 and September 8, 2026, the Company utilized an additional $ 4.2 million in cash to repurchase 129,194 shares under the September 2024 Stock Repurchase Program, leaving an aggregate of $ 40.5 million available for future repurchases under that plan. For the thirteen and twenty-six weeks ended August 1, 2026 , the Board authorized cash dividends to stockholders of $ 2.9 million and $ 5.8 million, respectively. During the thirteen and twenty-six weeks ended August 2, 2025 , the Company utilized $ 3.1 million in cash to repurchase 59,083 shares and utilized $ 7.3 million to repurchase 167,585 shares, respectively, under the September 2024 Stock Repurchase Program. For the thirteen and twenty-six weeks ended August 2, 2025 , the Company's Board of Directors authorized cash dividends to stockholders of $ 2.9 million and $ 5.8 million, respectively. 12 Table of Contents 9. Income per Share The following table sets forth the computation of basic and diluted net income per share (in thousands, except share and per share data): Thirteen weeks ended Twenty-six weeks ended August 1, August 2, August 1, August 2, 2026 2025 2026 2025 NUMERATOR: Net income $ 8,760 $ 12,367 $ 27,059 $ 27,686 DENOMINATOR: Weighted average number of common shares outstanding - basic 12,420,379 13,111,615 12,502,383 13,095,958 Dilutive effect of share-based awards: 11,154 27,855 24,339 46,485 Weighted average number of common shares outstanding - dilutive 12,431,533 13,139,470 12,526,722 13,142,443 Basic net income per common share $ 0.71 $ 0.94 $ 2.16 $ 2.11 Diluted net income per common share $ 0.70 $ 0.94 $ 2.16 $ 2.11 In calculating the diluted income per share for the thirteen and twenty-six weeks ended August 1, 2026 , respectively, there were 162,065 and 115,630 shares of common stock that were outstanding at the end of the period that were not included in the computation of diluted income per share due to their anti-dilutive effect. For the thirteen and twenty-six weeks ended August 2, 2025 , respectively, there were 28,036 and 14,018 shares of common stock that were outstanding at the end of the period that were not included in the computation of diluted income per share due to their anti-dilutive effect. 10. Comprehensive Income The difference between comprehensive income or loss and net income or loss is the result of foreign currency translation adjustments on the balance sheets of subsidiaries whose functional currency is not the U.S. dollar. The accumulated other comprehensive loss balance on August 1, 2026 and August 2, 2025 was comprised entirely of foreign currency translation. For the thirteen weeks ended August 1, 2026 and August 2, 2025 , the Company had no reclassifications out of accumulated other comprehensive loss. 13 Table of Contents 11. Segment Information The Company’s operations are conducted through three operating segments, consisting of DTC, commercial and international franchising. The DTC segment includes the operating activities of corporately-managed locations and other retail delivery operations in the U.S., Canada, Puerto Rico, the Republic of Ireland and the U.K., including the Company’s e-commerce sites and temporary stores. The commercial segment includes the Company’s transactions with other businesses, mainly comprised of wholesale sales of merchandise, supplies and fixtures, licensing the Company's intellectual properties for third party use, and revenues generated from entertainment activities. The international franchising segment includes the licensing activities of the Company’s franchise agreements with store locations in select countries in Asia, Australia, the Middle East, Africa, and South America. The operating segments have discrete sources of revenue, different capital structures and different cost structures. These operating segments represent the basis on which the Company’s chief operating decision maker regularly evaluates the business in assessing performance, determining the allocation of resources and the pursuit of future growth opportunities. Accordingly, the Company has determined that each of its operating segments represent a reportable segment. The three reportable segments follow the same accounting policies used for the Company’s consolidated financial statements. The following is a summary of the financial information for the Company’s reportable segments (in thousands): Direct-to- International Consumer Commercial Franchising Total Thirteen weeks ended August 1, 2026 Total Revenue $ 106,544 $ 8,086 $ 661 $ 115,291 Cost of Goods Sold 48,982 3,383 437 52,802 Gross Profit 57,562 4,703 224 62,489 Selling, General & Administrative 34,767 987 306 36,060 Contribution Margin 22,795 3,716 ( 82 ) 26,429 Overhead Expenses (1) 15,350 Interest Income ( 552 ) Income before income taxes $ 11,631 Thirteen weeks ended August 2, 2025 Total Revenue $ 114,635 $ 8,629 $ 983 $ 124,247 Cost of Goods Sold 48,552 3,419 765 52,736 Gross Profit 66,083 5,210 218 71,511 Selling, General & Administrative 34,183 97 - 34,280 Contribution Margin 31,900 5,113 218 37,231 Overhead Expenses (1) 22,119 Interest Income ( 206 ) Income before income taxes $ 15,318 Twenty-six weeks ended August 1, 2026 Total Revenue $ 220,010 $ 19,034 $ 1,517 $ 240,561 Cost of Goods Sold 89,320 7,802 1,078 98,200 Gross Profit 130,690 11,232 439 142,361 Selling, General & Administrative 70,847 1,090 306 72,243 Contribution Margin 59,843 10,142 133 70,118 Overhead Expenses (1) 35,293 Interest Income ( 686 ) Income before income taxes $ 35,511 Twenty-six weeks ended August 2, 2025 Total Revenue $ 234,224 $ 16,251 $ 2,167 $ 252,642 Cost of Goods Sold 100,123 6,433 1,588 108,144 Gross Profit 134,101 9,818 579 144,498 Selling, General & Administrative 68,535 193 - 68,728 Contribution Margin 65,566 9,625 579 75,770 Overhead Expenses (1) 41,227 Interest Income ( 406 ) Income before income taxes $ 34,949 ( 1 ) Overhead expenses contain selling, general and administrative expenses not attributable to a segment. 14 Table of Contents Total assets, depreciation and amortization, and capital expenditures for the Company's segments, as well as for Corporate and support, are as follows (in thousands): Direct-to- International Consumer Commercial Franchising Corporate Total Thirteen weeks ended August 1, 2026 Total Assets $ 243,692 $ 13,562 $ 1,336 $ 75,511 $ 334,101 Depreciation and amortization 2,671 467 - 974 4,112 Capital Expenditures 7,690 - 862 8,552 Thirteen weeks ended August 2, 2025 Total Assets $ 219,168 $ 11,466 $ 1,648 $ 85,956 $ 318,238 Depreciation and amortization 2,691 35 - 942 3,668 Capital Expenditures 2,381 - - 984 3,365 Twenty-six weeks ended August 1, 2026 Total Assets $ 243,692 $ 13,562 $ 1,336 $ 75,511 $ 334,101 Depreciation and amortization 5,235 825 - 2,054 8,114 Capital Expenditures 13,101 - - 2,320 15,421 Twenty-six weeks ended August 2, 2025 Total Assets $ 219,168 $ 11,466 $ 1,648 $ 85,956 $ 318,238 Depreciation and amortization 5,425 74 - 1,869 7,368 Capital Expenditures 4,021 - - 2,307 6,328 The Company’s reportable segments are primarily determined by the types of products and services that they offer. Each reportable segment may operate in many geographic areas. Revenues are recognized in the geographic areas based on the location of the customer or franchisee. The following schedule is a summary of the Company’s sales to external customers and long-lived assets by geographic area (in thousands): North America (1) Europe (2) Other (3) Total Thirteen weeks ended August 1, 2026 Net sales to external customers $ 101,011 $ 13,272 $ 1,008 $ 115,291 Thirteen weeks ended August 2, 2025 Net sales to external customers $ 107,066 $ 15,775 $ 1,406 $ 124,247 Twenty-six weeks ended August 1, 2026 Net sales to external customers $ 208,509 $ 27,607 $ 4,445 $ 240,561 Property and equipment, net 74,493 4,565 79,058 Twenty-six weeks ended August 2, 2025 Net sales to external customers $ 218,339 $ 31,402 $ 2,901 $ 252,642 Property and equipment, net 54,121 4,683 58,804 For purposes of this table only: ( 1 ) North America includes corporately-managed locations and sales to wholesale customers in the United States and Canada. ( 2 ) Europe includes corporately-managed locations in the U.K. and the Republic of Ireland and sales to wholesale customers in Europe. ( 3 ) Other includes wholesale and franchise businesses outside of North America and Europe. 15 Table of Contents 12. Contingencies In the normal course of business, the Company is subject to legal proceedings, government inquiries and claims, and other commercial disputes. If one or more of these matters has an unfavorable resolution, it is possible that the results of operations, liquidity or financial position of the Company could be materially affected in any particular period. The Company accrues a liability for these types of contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. Gain contingencies are recorded when the underlying uncertainty has been settled. Assessments made by the U.K. customs authority in 2012 were appealed by the Company, which has paid the disputed duty, strictly under protest, pending the outcome of the continuing dispute, and this is included in receivables, net in the DTC segment. The U.K. customs authority contested the Company's appeal. Rulings by the First Tier Tribunal in November 2019 and Upper Tribunal in March 2021 held that duty was due on some, but not all, of the products at issue. The Company petitioned the Court of Appeal for permission to appeal certain elements of the Upper Tribunal decision, and in early November 2021, a judge granted the Company's petition for permission to appeal those elements of the Upper Tribunal decision on some, but not all, of the grounds of appeal that the Company had put forward. An appeal was heard by the Court of Appeal during the first quarter of fiscal 2022, and the Court of Appeal dismissed the appeal in the third quarter of fiscal 2022. During the fourth quarter of fiscal 2022 , the UK Supreme Court declined to hear the appeal. The Company is engaging with the customs authority to attempt to resolve all outstanding issues following the application of the determined principles. The case will return to the lower tribunal for a final ruling if outstanding issues cannot be resolved. The Company maintains a provision against the related receivable, based on a current evaluation of collectability, using the latest facts available in the dispute. During the first quarter of fiscal 2026, the Company received approximately $ 0.6 million from His Majesty's Revenue and Customs ("HMRC"). Following this receipt, the Company reassessed the collectability of the related receivable and adjusted both the gross receivable balance and the associated reserve by $ 3.2 million, leaving a gross receivable balance of $ 0.8 million, a reserve of $ 0.6 million, and a net receivable of $ 0.2 million as of August 1, 2026. The Company believes that the outcome of this dispute will not have a material adverse impact on the results of operations, liquidity, or financial position of the Company. 16 Table of Contents