Shares of Build-A-Bear (BBW) jumped Tuesday after the customized stuffed animal retailer announced it is exploring strategic alternatives, after which research firm Craig-Hallum commented that a potential takeout could "easily" be financed by a major toy manufacturer.

QUARTERLY RESULTS: News of the potential sale of the company came alongside its first quarter report, which showed earnings per share of 22c against expectations for 37c, revenue of $94.98M versus estimates of $96.70M, and same-store sales growth of 2.2%. The company opened four of its new "Discovery" format stores during the quarter, with sales at the now 15 Discovery stores growing 14%, though the roll-out also brought higher costs.

STRATEGIC ALTERNATIVES: Build-A-Bear disclosed that its board has authorized an exploration of a "full range of strategic alternatives." The company retained Guggenheim Securities as its financial advisor for the process. Commenting on the strategic review, CEO Sharon John said the move will "enable us to evaluate the various opportunities to potentially accelerate our key growth initiatives while enhancing total shareholder value."

EASY ACQUISITION FOR TOY COMPANIES: Given Build-A-Bear's "low valuation" and positive free cash flow, Craig-Hallum analyst Alex Fuhrman views the company as an "attractive acquisition target" in light of this morning's announcement. Major toy companies could "easily" finance a takeout, and subsequently expand BAB's intellectual property into areas outside stuffed animals, the analyst said. Fuhrman noted that Build-A-Bear CEO Sharon John's former employers -- Hasbro (HAS) and Mattel (MAT) -- both paid dividends last year that exceeded the stuffed animal company's total market cap. Finally, weighing in on the quarterly results, the analyst believes the Discovery format "continues to resonate well with customers," though he conceded the increased opening costs.

PRICE ACTION: Shares of Build-A-Bear have jumped 8.3% to $13.71.

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