- Trusted baby goods retailer Baby Bunting (BBN) has reported strong profitability growth in the financial year 2020 half one period
- $186.4 million in total sales was achieved — an 8.1 per cent growth since the last corresponding period
- Baby Bunting’s net profit after tax (NPAT) came in at $7.5 million, representing a 30.6 per cent increase
- This period saw the retailer focus on expanding its stores, growing online sales and refresh its brand’s identity as it becomes more gender-neutral
- Looking forward, its FY20 earnings guidance still sits between $20 and $22 million
- Despite the results, shares are down 7.89 per cent and trading for $3.50 each
Trusted baby goods retailer Baby Bunting (BBN) has reported strong profitability growth in the financial year 2020 first half-year period.
The company reported a pro forma net profit after tax (NPAT) of $7.5 million, up 30.6 per cent, with its statutory NPAT up 1 per cent to $4.8 million.
“Our results for the first half reflect continuing profitability growth and significant progress on a number of our operational objectives for the year,” CEO and Managing Director Matt Spencer said.
It also experienced an 8.1 per cent growth in total sales, achieving $186.4 million in sales during the period.
Baby Bunting attributed a cut of these sales to the opening of four new stores in premium areas of Sydney and one in Melbourne.
There are now 56 Baby Bunting stores in Australia and the retailer hopes to increase this number to over 80.
Store expenses increased by 50 basis points due to the costs associated with the new stores, also factoring in wages.
Overhead costs increased by 90 basis points, which reflects the incorporation of its Baby on Board businesses and the investment in warehouse, customer care, and IT services.
“We grew our store network, delivered sales and market share growth, and achieved improved profitability,” Matt added.
The retailer has entered the first six weeks of the FY20 H2 period strongly, with a comparable store sales growth of 5.7 per cent.
Pro forma gross profit was $68.9 million, which is a 15 per cent growth on the previous corresponding period.
Additionally, gross profit margin has improved by 223 basis points to 36.9 per cent. The company expects a further improvement to roll into the second half.
This gross profit margin improvement, according to the company, is an outcome of working with suppliers on various opportunities geared towards supply and trading improvements.
In terms of its Private Label and Exclusive Products range, it grew 52 per cent to be 35.5 per cent of total sales compared to 25.3 per cent in the prior period.
Baby Bunting had a full-year target of 35 per cent and is well on track to achieve its long-term sales target of 50 per cent of sales coming from private label and exclusive products.
Online sales, including click and collect, grew by 10.5 per cent, making up 11.7 per cent of total sales.
The growth came after November when the company decided to roll-back to a previous website after trying a new, unsuccessful platform in July 2019.
In terms of transformational projects, the FY20 and FY21 periods are set to see the development of a new loyalty program, an expansion of the Baby on Board services business and new merchandise planning.
Importantly, the 41-year-old baby goods retailer will implement new, gender-neutral branding across the business. The announcement came in October last year which stated the brand was overdue for a fresh look.
“Research and customer engagement showed there was a clear need for us to update both how we presented our brand and the way in which we communicate to ensure that we reflect the modern generation of parents,” Matt said in a former statement.
Also, as part of its supply chain strategy, Baby Bunting will be moving to a new distribution centre in Dandenong South. This is expected to go live in the second half of the 2021 financial year.
Looking forward, the company’s FY20 earnings guidance remains unchanged. It still expects its FY20 NPAT to be between $20 and $22 million, while its pro forma earnings before interest, taxes, depreciation and amortisation (EBITDA) is expected to be between $34 and $37 million.
It seems investors aren’t responding well to these results as shares are down 7.89 per cent and trading for $3.50 each at 1:15 pm AEDT.