What happened

Shares of Build-A-Bear Workshop (BBW) -18.29% ), the build-it-yourself plush toy retailer, fell 23.5% in early trading on March 10. About 90 minutes into the market day, the stock was still down about 18%. The reason for the drop was most likely the company’s earnings release in the fourth quarter of 2021.

So what

From a global point of view, the quarter was good. Sales of $130 million were up 38.8% from the same quarter in 2020. And, perhaps more interestingly, they were up 24.3% from the same period of 2019, before the pandemic . That said, sales in the quarter were negatively impacted by approximately $1 million due to pandemic-related disruptions, but overall sales were clearly in recovery mode. The same story held true for the full fiscal year, with sales up 61.2% from 2020 and 21.6% from 2019.

Image source: Getty Images.

The good news also continued on net income, with adjusted earnings per share in the fourth quarter of the fiscal year of $0.97 easily beating the adjusted $0.58 it earned in 2020 and $0.39 in 2019. For the full year, Build-A-Bear reported adjusted earnings of $2.37 per share, compared to a loss of $0.92 in 2020 and earnings of a penny per share in 2019. company also beat Wall Street expectations for the quarter’s results. Normally you’d expect a title to rise based on performances like this, but there’s more to this story than meets the eye.

Now what

The problem is twofold. First, the stock has risen dramatically since the pandemic-induced bear market in 2020. Even including today’s drop, the stock is up around 990% since April 2020. So investors have brought a lot good news here. Meanwhile, the company noted that, looking ahead to 2022, it must consider “inflationary pressure and the potential impact of the stimulus on consumer spending over the prior year.” In other words, costs might be higher and sales might be lower in the future.

At this point, management does not offer a full year forecast and only suggests that the first fiscal quarter of 2022 will “overtake” the same quarter in 2021. That’s not much to go on, and after a run too huge for the stock, it’s no surprise that investors are getting a little nervous. This austere mood was likely amplified by the widespread declines seen early in trading.

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