Build-A-Bear Workshop Inc. (NYSE:BBW) shares rose $3.39, or 15.06%, to $25.90 today after the company announced that it hired Lehman Brothers to explore strategic alternatives after a relatively bad quarter for the retailer. Chairman and CEO Maxine Clark, however, said that the company remains highly profitable in a unique retail-entertainment niche that will continue to grow.

Build-A-Bear warned last week that its earnings and revenues for the quarter would fall short of projections while its same-store sales were projected to drop from 9% to 7%. The company blamed higher advertising costs, high performanced-based executive compensation and language translation costs from new store openings abroad.

A company spokesperson said that it has an obligation to shareholders to explore a range of strategic alternatives that could help unlock value in their investments. Meanwhile, shareholders are betting that the company will either decide to sell off some of its extraneous investments such as that in Retail Entertainment Concepts. Others are hoping that the company will decide to put itself up for sale in an environment that is extremely conductive to high-priced buyouts. Either way, BBW is definitely a stock to watch over the next few months!

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HealthSpring Inc. (NYSE:HS) shares moved up marginally today after the Clinton Group disclosed a 5.05% stake in the company, expressed their concerns over the company's valuation and recommended ways in which the company could better structure their balance sheet to unlock value for shareholders.

The activist hedge fund sent a letter to the company's Chairman and CEO on June 15th expressing its support of the management team and view of the company as an attractive long-term investment. The letter also noted that HS' stock price has retreated to levels below that of its February 2006 IPO and is currently undervalued.

Consequently, the Clinton Group suggested that the company institute a leveraged recapitalization and a Dutch tender offer in the $22 to $23 per share range for 30% of the company's outstanding shares in order to better optimize their balance sheet and take advantage of the appealing debt financing markets in an accretive transaction. The hedge fund estimates that this accretion would amount to 13.8% and translate to a post-leveraging share price of $23.42.

The Clinton Group also offered to help the company explore strategic alternatives, which could include a potential privatization in which he would participate. The investment group has a private equity wing that it indicated would be interested in such a transaction. One would assume that any such transaction would take place not only at value ($23), but also at a premium to this value that could reach as high as $28 per share or higher.

So, what is the stock worth? Well, based on peer multiples (TEV-EBITDA and PE), the company is trading at a substantial discount. The company is currently trading at 14.9x 2007 earnings while its peers are trading at 16x and its IPO was priced at 19.5x. A similar disconnect is seen when looking at projected 2008 earnings. Clearly there is an issue here with the company's valuation, which should stand between $22 and $23 at the very least.

Combined, these factors make HealthSpring a stock worth watching!

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1-800-FLOWERS.COM Inc. (NDAQ:FLWS) has been a strong performer recently with shares nearly doubling since the middle of last year. The gift retailer announced strong earnings in April and shareholders are starting to take notice. RLR Capital disclosed a 5.1% stake and praised the company's acquisition of Fanny May's candy business last May.

The activist hedge fund believes that the company's acquisition of Fanny May's candy business was truly a transformative deal and they are excited by the strength of the brand, management team and the manufacturing footprint that come with it. Further, they see Fanny May as a strong compliment to the company's existing Gourmet Food and Gift Basket brands as the company looks to build an online strategy for these segments that will mimic their success in the flowers segment. RLR Capital also expressed their satisfaction with the company's broad cost-cutting measures and prospects for growth in margins as a result. And finally, the activist hedge fund supported the company's plans to re-examine the Home and Children's Group segment given its lower growth and margins.

Overall, it appears as if this company is on the right track with its business and plans for the future. All of their business segments are performing very well with the exception of its Home and Children's Group segments - and the company is looking into ways of solving this problem. It's hard to ignore a company posting 18% quarterly earnings growth and such strong performance across the board! This makes FLWS a stock worth following!

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