Yahoo Finance

Welcome to a new episode of the opening bid podcast. I'm Yahoo Finance executive editor Brian Sai. This is the podcast that will make you a better investor, period. Now I have to get to our stock of the week here. Stock of the week for me. Toss that timer on the board one minute. It is GameStop, which is, I guess, half retailer, half crypto investment platform slash Berks or Hathaway, Coinbase, Robin Hood all rolled up into one.It's my stock of the week because it's very hard to understand what this company in fact is. The company came out this week, said sales last year fell 27%, operating profits down 95%. It's a company operating over 3200 stores around the world. US's biggest market sales down 25% last year, but the market could care less that GameStop is a retailer because now apparently it has formed an investment committee led by controversial chairman CEO Ryan.And who will look to potentially invest in Bitcoin. So my question to you out there to the opening bid followers is what is GameStop? Is it a retailer? Is it a cryptocurrency play? Is it a Warren Buffett and Berkshire Hathaway play? It is unclear to me. All it is is a high risk investment because nobody knows what it does. That's it for the stock of the week. All right, let's get to our feature interview of this, uh, episode. We're gonna stay on all things.He and bring my, uh, uh, someone who leads one of my favorite retailers, you know, I like stuffed animals. It's Sharon Price John, Bill a Bear CEO. Good to see you. It has been last time I saw you was 2015. I was, I was at the street.com cub reporter. You're kind of just getting started to build a bear and now where's the state of this company?

Oh wow, boy, we changed

a right to the next decade, Sharon. Yeah,

changed a lot since 2015, but a lot has changed. I mean we.You know, everyone talks about this last decade and retail and everything that went on, whether it's the retail apocalypse or Brexit if you were global or COVID, which if you were a retailer, uh, it was, and considered non-essential, which by the way, I take offense, stuffed animals, I think so. In fact, toys are essential to kids and then they'll.Development that's for real, um, but we did have to shut down our entire fleet in a 48 hour period. So, um, and our stock price went to $1. So that just is 2020, only 5 years ago now. What was that

like stock price

go to uh, uh, frightening, um, because you're being priced as if you're going out of business and.Um, we were not because our fundamentals were there and we had done so much work preparing for a diversified omnichannel future where we were expanding our addressable market and expanding and preparing to expand in new countries with new types of categories, new types of products, um, and that was all halted, but in the most.way when you look at challenges sometimes as opportunities, we thought, what can we do with this moment if our entire retail functionality is shut down basically 90+% of our rev stream and we focused entirely on ecom and all of those omnichannel things that most companies just never get to.Um, and we put in what one of my IT guys said we pulled forward probably 3 years of, uh, of actual and not just the investment but the implementation of things, um, and that's really what has helped us jumpstart the company and now you've seen the changes, uh. So

I, before any of these interviews with public company CEOs, I do a lot of research as you can imagine.Uh, I look for stock research and I'm looking for it on Builder. Why aren't more analysts covering this company? I mean, your stock's up 2,000+% in the past five years. You're doing something right. Like, what, what is Wall Street not getting with your story?

I.I think that it is because we are unique is probably one of the reasons why we're successful. We're a combination of experiential retail. In fact, Maxine Clark, who founded the company back in 1997, is often credited with being a pioneer in experiential retail to the Hall of Fame recently? Yes, the Toy Hall of Fame just did that here in, uh, in New York City, uh, just inducted her into the Toy Hall of Fame, which was just a remarkable event.Um, and I, but that, that combination of that now that we're omnichannel that we don't necessarily have one consumer that you can hone in, one idea that you can hone into, we don't fit into a pre-created model and that's tough and we're also, you know, small caps, so we're about.Uh, I think we're $500 million market cap when we closed last night. Uh, so that's, it's hard for people to get over the hump, but the opportunity is clear. We have an incredibly clean balance sheet. We're on our 4th consecutive year of record results with with our guidance we provided just a few weeks ago in our year year in close information. We expect another year of record results, um, and we're now open.stores pretty rapidly on an international basis. We've opened about 100 stores over the last couple of years, uh, and that's with these amazing models. One is our traditional model that everyone would know about. We're, we're investing in the capital. You build your bear, yeah, well, not just that model. I mean, financial models. That model stays the same. That experience is the same. The sun never sets on that experience, but usually our store people are like somewhere in the world right now somebody's going through a heart ceremony and it's sappy, but it's true.Um, and they, so we have that model where we're investing the capital, then we have a partner operating model where our partners are, are investing the capital. And that's here in the US, not just all, not just in the around the world. So like Great Wolf Lodge or even Carnival Cruise Line, um, they put those stores in and operate those and those are their employees and we train them and provide them with all the help that they need from a marketing perspective. Who's

coming into your store? I think.Bear, I think 3 to 5 year old, but I, I don't think that may be correct because I think there are collectors that come intoyour stores.

Oh, that's when I say we've expanded our addressable market. I am not kidding. 40% of our sales are to teens and adults. And that's not just online. That's also in the stores. Teens come into the stores. People come in for the most about 43 year old males, um, yes.No, it's true and, and online, but we have those types of products where they're collectible products, whether it's Pokemon or Star Wars or things like that. Um, absolutely. And it's actually really fun to go into a store. You can imagine I visit stores often, um, every now and then I'm staying behind a 43 year old guy.

No,

and he's not getting something for his daughter.

Itwas probably me, but really, I mean that is, look, I, I, I purposely told our producer Langston I'm like, don't tell me what's in this thing.Because I just want to be surprised.

Are you gonna open it here?

Oh my gosh, OK, so

let me give you a precursor here.

on boxing. Yeah,

so this is an example of new types of products, right, other than just the pre-stuffed items that we've sold for years. People sometimes want to come in and we're here to be of service. Like, no, isn't that cute?

Sure, I put this on my desk at work. I mean,

it's so good.

Wow, you're looking at a, at a, at a 43 year old male that may want to come into your store and get a bunch more of these,

right? And then, you know, so obviously these are.For a seasonal, a seasonal concept for, um, uh, no, yeah, I was gonna say I think it's $10 yeah, so, um, but this is like the, the fun gift to get on Easter morning, right, um, for, for lots of kids and, um, or the, the big egg that you hide, you know, where you've got a lot of other eggs that you're hiding that morning, and this is the golden one, so this is the best one. How,

how I thought the mall was going out of business.

Um, well, what we generally say is when, when people would ask that in the midst of the apocalypse, and I almost hate to use that term because it's not true. And you know, I got asked that a lot apocalypse, the apocalypse. I think of the names that are going on here. The, the, the polar vortex, the mall apocalypse, the, you know, a global pandemic. I mean, it's.Just like we're in like a, I don't know, a superhero

film click, you know, what do you want?I know it's, it is

clickbait, but anyway, the wall, but the truth of the matter is over about 5 or 6 years consecutively, so on a cue basis, small traffic dropped by about 50%. So that is impactful and there were a lot.A lot of mall-based retailers that did file. So that was very difficult. Um, and so sometimes though, there's a tipping point with malls. Um, if your occupancy drops below X, it's really hard, or if you get, uh, uh, an anchor that's, that's no is a really serious anchor that goes out of business or at least moves out of your mall, that's very serious. But we had, um, already done much of that work, uh, of closing some of our stores. So back in 2015,Um, about 20% of our stores were unprofitable, and we had a 9% for wall and now 100% virtually 100% of our corporately operated stores are profitable. You're basically

in America's best malls.

We, and not just in malls. We've diversified significantly, um, but and.So the diversification of is not just about footprint and countries and consumers that diversification is also about where we put a store. We did a lot of research because even when we were 20% unprofitable from a store location perspective, uh, you can always find the ones that are profitable and try to figure out well what's holding those stores together.And we did a cohort analysis to try to figure that out. Like, what's my R squared here? Like what's happening? Why are these? Because they, it wasn't obvious. It wasn't like they were all in the Northeast or they were all in Amos or they were all, whatever, all this 3000 square feet or whatever like that.Um, it was because they were in tourist locations and it seems so obvious now, but most good ideas do when you look back on it, when you're looking into it, it's like, what's going on? And then you're like, of course, that's it. But hospitality and tourist locations. So we put together a very strategic approach to identifying and entering into permanent locations. Some of it was this partner operated location and like all the great Wolf Lodges as a tourist location.Um, or, or some of the, you know, theme parks are like I said, Carnival Cruise Line. So people tend to be in a different mindset when they're in a tourist location and build the bear fits very nicely into that mindset.We also created products that are specifically procured for that area like say it's in Nashville or in the foothills of the Smoky Mountains, um, so we'll have product that's appropriate for that or in beach cities. Myrtle Beach is another one of our really big locations or even Mall of America, um, and we become the best souvenir ever.

Hang with us, Sharon. We're gonna go off for a quick break. We'll be right back on opening bid.All right, welcome back to Opening bid. Talking all things, uh, is it, is it correct to call it a stuffed animal? Is that what

people still call it? I want you to be happy. OK,

fair enough. All right,OK, we

call them furry friends.

All right, we're we're talking furry friends here with, uh, Bill de Bear's longtime CEO Sharon Price John. Now in your seat about two months ago we talked to, and you've been in the toy industry for for a while, uh, Hasbro's CEO, and I asked him how challenging is it to make a toy whenSo much uncertainty exists with supply chains. Where are you making, where are you making this this furry friend? Oh hello. Where is this being made and how, what happens to the price of this if we have tariffs go into effect?

Well, that's of course a really good question, and it's a question of the moment right now, um, and, um, I will note that even in our guidance we did contemplate what we believed would be the tariffs at the time, so it's a few weeks ago.Um, into that guidance, um, but we have since, um, probably I mean over 5 years ago now, uh, 6 years ago we started the diversification process for our supply chains so, uh, because there were discussions of tariffs, um, in the previous administration of with, um, President Trump, um, and so we had.The vast majority of our products were sourced from China at that time and now it's less than 50%. So we do have some diversification in our supply chain.Um, now there is I believe has been discussed, um, there's some amount of tariffs that I think that we could all, uh, probably manage, but I think that some of the, the higher ends are going to be very, very difficult for companies to absorb, um, and as close as you are to your factories, that's also very, very difficult. Um, now we're a vertical retailer, so we have a little more immediate pricing, um, capabilities for some flexibility.But it, it's not easy. No, it doesn't sound and, and it's not going to be easy.

Even the fact that you even try to take an estimate at it. I mean, even that's hard to do.

It is because, um, a lot of these products are made one in 11 in one country, one in a different country.So it depends on the demand of certain items that you've sourced, um, because certain factories in different areas have different expertise. Um, and this is a small, you know, these are not high priced products in the whole scheme of things. When you think about everything, so the, then you're going to end up with tighter margins. That's just the way that is. And there's also in the toy industry, and I also sit, uh, I'm the chair of the toy association.Um, I mean, we have a tremendous belief, and it's founded in a magnitude of research that toys and, and play are absolutely critical for kids' development whether it's social, emotional, um, even educational.

I might not beable to get a toy. Well,

this is the blunt.That's the it's, it makes it more difficult, um, and that's one of the reasons why we try to have approachable price points. We really do want to the best that our ability for a wide variety of consumers to be able to have a build of there.Um, and, uh, it's, it's important because stuffed animals and the emotional development that goes along with stuffed animals and caring for a stuffed animal and having something to cuddle at night when you're afraid is absolutely proven to be important. We see ourselves back to that earlier discussion as an essential product. So, um,

you can't eat these tariffs to be clear. I mean, we're, we're we're basically looking at a more expensive holiday season this year potentially.

I, it depends on what happens on April 2nd. It depends because, um, you know, we like everyone who may have had, uh, their call, uh, recently or post some of the announcements, um, we, I'm sure just as we did, um, had to go back and rethink guidance, um, because usually in these circumstances, uh, there's a little more of a horizon, a planning horizon.And there's also more certainty so there's no planning horizon and uh not a lot of certainty so it's very, very difficult and you have to be um explicit with the street that you're making assumptions on what you know now because um we're not really sure what's going to happen but we in the toy industry and I'm speaking as the the head of the the the chair of the association.board right now, um, again, we believe that toys are essential and we've worked with associations from all over the globe to, uh, toward a no tariff approach, uh, to, um, across the board and they've gotten quite a few countries and associations to agree with that concept.

Iwant to switch gears a little bit.Because you don't get to lead a company as a CEO for 12 years if you're not doing something right, so what is the secret to your leadership success if you could boil down the past 12 years of your life into a couple inspirational nuggets, firethem at me.

Well, well, you have to have a great team, um, and we have a fabulous team, best in class team.All of us are from multi-billion dollar companies. Um, they're attracted to this organization for a lot of reasons, some of which is because we have a mission that's bigger than stuffed animals. Um, we're really in the business of.Adding a little more heart to life and they love what they do. They love making kids smile. They love making you smile.

Yeah, look, I'm,I'm really smiley. I'm putting this right on my desk. I'm gonna got that hair. I got that furry friend.I mean,

it's not the worst thing to do every morning to start the day. It is a nice way to start the day, and you know, there sometimes.There's difficulties, there's business, of course, that you're dealing with, uh, that, that everybody deals with, uh, and, um, and, but it's a good place to work. So that's um, you know, I'm, I'm really pleased with that. Um, and we had a legacy of amazing culture. So I'm, I'm happy that we were able to evolve that culture to some degree, but also keep it.Uh, secondly, you've got to be flexible. Um, this is an ever-changing environment right now. Uh, so I, I've kind of call this mastering the skill of mastering new skills. Like, you know, nobody had a playbook on, uh, oh look, here's my.notebook that I learned in business because

we've never done thatbefore

before. So and that what's so interesting about that is when you're in this constant change and evolution and you're not quite sure what's going to be around the corner, so you're scenario planning and working with this fabulous team, um, and you then have to have trust.And trust really does come from the top and it's developed over time and created over time. So that trust is back to COVID, not that I want this to be a COVID interview. Um, if we hadn't had that trust, we couldn't have moved as quickly. Trust creates speed. People don't go back, are you sure? Did we want, oh, did she really agree to that? Well, I don't know, because they know that if we.Get agreement in a room and sometimes we don't all agree in the room, but we agree to agree in the room. Once we land, you go out and you execute with excellence. Now if there's a new piece of information, bring it back we'll fight it over again. But if there's no new piece of information, you, we, we're doing what we're doing because we've got another challenge in front of us or another opportunity in front of us depending on the way you look at it.But it's a fun business because we work not only for great with great consumers with people that love this brand and love this business but fabulous licenses, best in class licenses. I mean, again, it's a great place to

work. Let me, let me end on this because the last two minutes we always love to get, uh, hot takes from our guests. So what originally inspired me, I've been following you for some time, we've talked before, but what inspired me for this interview, so I'm scrolling Instagram around I guess Valentine's Day, and I see in your account something called the Cougar.February 3rd post, quote, She's on the prowl. This cuddly cougar is in her prime and looking for a good time. My first thought was, what the hell is this? I sent it to my friend. I'm like, can you just double checkBuilder Bear's account, make sure it wasn't hacked. Like I've never seen this before. Like, where did this even comefrom?

So we get back to

this. This was a bear. It was wearing like a robe like a leopard robe, and I, and I wrote it down like uh sparkly shirt and a, and a I guess a pair of like nice looking shoes. I'm likewhat? Well,

you could get that almost any time you can get and get, you know, a really cute coat and sparkly shoes inside of a bill of air, um, but, um.This is a part of a strategy that again, it's all about the expansion of the Brantly. So when I came to build a bear, one of our tenants was we can be so much more than we are. We literally started as a mall-based retailer for kids, right? That happened to be an experience to make a stuffed animal. That's it. That's all we were and in many ways, when I got there, that's still all we were.Um, the truth of the matter is malls have changed, consumers have changed. The, the digital economy was coming and we had to deal with that, right? It was almost an existential crisis. If malls are, or malls are contracting.And e-commerce, which is not an experience, is going to be as big or bigger than traditional retail, which is some of the discussions at the time it's settled a little bit now. Um, we have to figure out how to operate in the digital economy and we have to figure out how to be more. We were also becoming multi-generational at that very point.So again, being flexible, looking at the opportunity, so I'm gonna get to this in a second. You're are you tracking with me? This is great. This is great. Um, so the idea that I brought to the team, well, first we had to fix a lot of the financials, we were just unprofitable. So do that. There's a lot of leverage you can.If you're a change agent, which I've been on brands and business units for years. So we did that. But it's about the future, right? It's not just about the now when you come in as a change agent. You have to set yourself up for what's next. The what's next was this idea of more. So we build a bear has.The 250 million heart ceremonies over the last 25+ years where the heart is sown into the bear. Well, just, yes, the heart, you make a wish on it. It's a very emotional experience that has packed so much. I, I mean love, memories, friendship.people can tell you everything about the first time they got to build a bear. They can tell you everything about the last time they went to get to build a bear. It's really remarkable. So that kind of equity is incredibly montizable if you have an infrastructure to access it.Um, so that was what we were doing. More consumers, more types of products, also our mini beans, another type of product outside of the, the make your own stuff like that little guy right there, this little fellow is a mini bean matching mini bean.Um, also about $10. All right, that's my sales. And, and so, and then we could also be in different categories. So we needed to pivot from this retailer, right, that happened to accidentally create a brand to a branded intellectual property company that happened to have vertical retail profitable vertical retail as one of its rev streams.Profitable vertical retail throws off a lot of cash, so we built out an entirely new infrastructure on on the on the web, but we didn't want to candalize our business, so we went after the multi-generational consumer and that's where that 40% over indexes of teens and adults and we created something called the Bear cave, a micro site that is age gated so we can put kind of.Fun. Our interpretations completely benign interpretations of licenses in movies like Matrix Bear, Deadpool Bear, but you wouldn't want to see that in a build a bear because it, the movie's not rated appropriately, but the bear's fine. And that's the same thing here and people think it's hilarious.

So, uh, real quick, friends, uh, you know who, who you are out there because you asked me to ask Sharon this. She craved the cougar bear. All right, that's how,

no, I did not. I personally.No, I did not,

but like they have a

fabulous

group of designers. This is how it came to be, uh, and it is in fact a real thing. Um, Sharon Price, John, it was good to catch up with you. It's been, thank you. It's been too long. Uh, Bill De Beer, CO, uh, keep on rocking over there.

Thanks so much, Brian.

All right, and that's it for the latest episode of Opening Big. Continue to hit us with those 5 stars and all the podcast platforms and thumbs up on YouTube. I love all of your suggestions, and I definitely want to hear what you think about the Cougar bear. Uh, just keep those comments coming. We'll talk to you soon.