Build-A-Bear Workshop, Inc. (NYSE: BBW) shareholders may have to build their value somewhere else. The interactive entertainment retailer announced today that tightened credit markets and a weak retail environment prevented it from pursuing the strategic alternative that so many investors were expecting - a sale. Instead, the company opted to double its share repurchase program and adopt a broad range of operational initiatives according to their 8-K filing with the SEC. So, is this 15% decline justified?

Investors may be disappointed with the lack of a sale, but perhaps it is understandable given the current economic climate. Instead, the company chose to focus on improving its operation performance until things improve. Specifically, the company decided to adopt the following initiatives:

1. Focusing on existing store sales by slowing new store growth to approximately 25 stores - down from 50 stores in 2007 - and realigning store operations management by creating a new position, Managing Director - Workshop Experience, focused on continuing to energize and update the store experience.
2. Enhancing brand appeal with children and growing store sales through raising awareness of our new online “world” website, buildabearville.com.
3. Continuing the position traction experienced in the European operations during the fiscal 2007 fourth quarter through raising brand awareness, increasing average transaction value, and continuing growth of the in-store parties business.
4. Growing store sales by leveraging and expanding our loyalty club program through improved and more frequent communication to members, adding new Guests to the club, and introducing the program in United Kingdom stores.
5. Attracting new Guests through multimedia marketing initiatives, including a new TV advertising campaign that will launch in the second quarter and will leverage buildabearville.com as a new platform for communicating with Guests.
6. Expanding international franchise fee revenues with the addition of 15 to 20 new franchise stores, including a new store in the United Arab Emirates.

These initiatives are all good news as they will force the company to limit its spending while increasing its revenues. This, in turn, should expand its multiple and make any future acquisitions much more attractive to shareholders. So, while today’s news may be bad for the short-term, it is likely the best solution for the long-term. Combined, these factors make BBW a stock worth watching closely over the next year!

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