Build-A-Bear Workshop shares plunge on downgrade

In midday trading, the stock declined 89 cents, or 8.7 percent, to $9.39 in midday trading. Shares have traded between $7.89 to $31.19 over the past year.

Paul Lejuez of Credit Suisse downgraded the St. Louis company to "Neutral" from "Outperform" in a client note and said the shift in the Easter holiday this year, into the first quarter from the second quarter, will crimp the latter's results.

He also said higher fuel costs, which have hit record levels in the past few weeks, also hurt the chain which operates nearly 400 stories, primarily in malls.

The company reported last month its first-quarter profit fell 21 percent to $6.4 million, or 32 cents per share, while same-store sales, a key retailer metric that measures sales in stores open at least a year, fell 10.5 percent.

For the second quarter, Lejuez expects Build-A-Bear Workshop to post a loss of 16 cents per share on a decline in same-store sales between 17 percent and 19 percent. On average, analysts surveyed by Thomson Financial forecast a loss of 2 cents per share.

The analyst said the stores have relatively stable free cash flow and said the company's Web site may help drive customers traffic to stores.

However, "we are concerned that macroeconomic weakness will continue to pressure (same-store stales) and margins for the foreseeable future. As a result, we do not see a near-term catalyst to move the stock higher."

Lejeuz reduced his target on the stock by $4 to $11, implying he expects the stock to move 7 percent above Friday's close in the next year.