Baby Bunting enjoys double-digit growth spurt, opens first New Zealand store

After establishing a 5,000sqm warehouse in New Zealand in 2020, the Melbourne-headquartered business started shipping products across the Tasman Sea to Kiwi customers. However, the 1,700sqm store in the Albany Lifestyle Centre in Auckland represents its first foray outside of Australia, where it has 65 stores across the country.

Baby Bunting says it has plans to double the number of stores across Australia and New Zealand as it looks to catch up with competitors Kmart, Big W and Target, believing it can expand its addressable market opportunity from $2.5 billion to $3.5 billion through new initiatives.

“Baby Bunting has had a very successful year; our total sales exceeded half a billion dollars for the first time. We continued to grow our market share at the same time as we delivered very strong gross profit growth,” Baby Bunting CEO Matt Spencer said.

“But we also worked hard to continue to drive further efficiencies in our supply chain and in our buying to ensure we provide great prices to our customers, at a time when value remains so important.

“It is a tremendous result given the COVID-related lockdowns in place around Australia in the first half and the disruptions that occurred during the year. I am proud of the way our team has worked hard to keep us moving forward during the challenges this year, delivering some great operational performances as well as delivering on our transformation agenda.”

Making up 22.2 per cent of total sales, online sales grew 24.4 per cent to $112.7 million during FY22, which has led to the company commencing work on establishing a ‘Baby Bunting marketplace’ to facilitate first-party drop ship sales and the sale of third-party products.

The business transitioned its digital technology in January and switched to a new platform, enabling it to build out new features and provide a better customer experience while building out its online range.

It has expanded its clothes range from 0-18 months old to 0-4 years, its toy range from 0-3 to 0-5 years, expanded its hardware ranges of prams, car seats and nursery furniture, as well as consumables and nappies.

Introducing 25,000 new members to its loyalty program per month, Baby Bunting has increased its loyalty members to 1.4 million, with 705,000 active members in the last year.

With sales of $507.3 million, representing a growth of 8.3 per cent from the previous year, Baby Bunting reported statutory net profit after tax (NPAT) of $19.5 million.

Comparable store sales were up 15.3 per cent on the previous period as of 10 August, with total sales growth of 19.3 per cent over the same timeframe. However, the business expects this growth to moderate as it cycles through periods affected by lockdowns.

It anticipates opening six new stores in Australia during FY23, including a store in Hornsby in New South Wales that began trading on 5 August, with Christchurch pencilled in for the next destination in New Zealand.

With continuing economic uncertainty, inflationary pressures and other global challenges, Baby Bunting is offering no guidance about FY23 earnings.

“We have started the new financial year in good shape, and we are the clear leader in our category,” Spencer said.

“Our transformation agenda is delivering efficiencies and benefits. We are executing on our strategy to grow market share.

“Through the strategic initiatives announced today, we have plans to broaden our total addressable market to increase the opportunity before us. It is an incredibly exciting time.”

Shares in Baby Bunting (ASX: BBN) have dropped 3.4 per cent to $4.70 per share as of 10.39 AEST on the back of the results announcement.