A maker of stuffed animals you get to build yourself: shoppers pick a bear, stuff it, and give it a "Heart Ceremony" before taking it home. Founded in 1997 by Maxine Clark, the idea came from a girl who said making your own toy would be "easy" after a store lacked what she wanted. It now runs stores in the U.S., Canada, the U.K., and Ireland, plus partner and franchise locations worldwide.
Retail gross margin hit 64.4% on a $7.0M tariff refund, but revenue fell 2.4% as core retail sales weakened.
A one-time tariff refund reshaped the quarter. fell 2.4% to $125.3 million as a 5.1% drop in net retail sales was partly offset by a 44% increase in commercial revenue, while retail expanded to 64.4%—driven almost entirely by a $7.0 million that added 560 . The core business contracted, and the headline margin figure masks that underlying retail profitability was lifted by selective price increases rather than volume growth.
Key takeaways
Retail reached 64.4%, up from 56.8% a year ago, but $7.0 million of the improvement came from a one-time on prior-year costs; without it, the was 190 from selective price increases.
Net retail sales fell 5.1% to $113.5 million, the first decline since Q1 FY2024, while commercial rose 44% to $10.9 million as partner-operated locations grew by 33 net new units to 181.
rose 21.6% to $23.9 million and widened 3.8 points to 19.1%, entirely because the tariff refund dropped through to the .
Section summaries
Management's Discussion and Analysis
Q1 FY2027 revenue fell 2.4% to $125.3M, but retail gross margin surged 750 bps to 64.4% driven by a $7.0M IEEPA tariff refund.
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Total revenues decreased 2.4% to $125.3M, as a 5.1% drop in net retail sales to $113.5M was partially offset by a 44% jump in commercial to $10.9M.
rose to 44.8% of from 41.7% a year ago, driven by higher compensation, inflation, and long-range investments, continuing a multi-quarter trend of expense growth outpacing revenue.
fell 23.7% to $21.2 million as share repurchases accelerated to $11.4 million; the company ended the quarter with $26.2 million in cash and no borrowings on its $40 million .
What changed
The FY2025 10-K flagged whether retail would stabilize above 54% as tariff costs flowed through; the reported 64.4% rate was inflated by a $7.0 million IEEPA refund, and the underlying rate—closer to 58%—suggests the tariff is being managed through price increases rather than cost absorption.
The FY2025 10-K asked whether the $82.2 million in could be sold without markdowns; the 5.1% drop in net retail sales this quarter raises the risk that slower sell-through could pressure margins in coming periods.
The FY2025 10-K questioned whether would as new stores matured; the rate rose to 44.8% from 41.7%, the highest Q1 level in the series, indicating expense growth continues to outrun .
The FY2025 10-K flagged the pace of share repurchases and their effect on the cash balance; repurchases accelerated to $11.4 million in Q1, and cash fell to $26.2 million, approaching the mid-FY2022 low of $12.0 million.
What to watch
Whether net retail sales return to growth in Q2 or the 5.1% decline marks the start of a sustained pullback in core consumer demand.
Whether retail , stripped of the one-time IEEPA refund, holds above 56% as the company laps the prior year's 56.8% rate and faces ongoing tariff costs.
Whether the $26.2 million cash balance constrains the pace of share repurchases or the quarterly , given the company has no borrowings but is approaching the mid-FY2022 low.
Whether as a percentage of begins to in Q2 or remains above 44%, as higher compensation and long-range investments continue to outpace revenue growth.
Retail expanded 750 to 64.4%, including a 560 benefit from a $7.0M IEEPA tariff refund related to prior-year costs and 190 bps from selective price increases.
Commercial grew $3.3M due to higher wholesale volume from partner-operated locations, which increased by 33 net new units to 181.
expenses rose to 44.8% of from 41.7%, driven by higher compensation costs, inflation, and long-range investments.
fell to $21.2M from $27.8M, while share repurchases accelerated to $11.4M; the company has no outstanding borrowings on its $40M .
The company expects to spend $22–$25M on in fiscal 2026 and believes operating cash flows are sufficient to meet obligations for at least the next 12 months.