Baby Bunting shareholders spit the dummy despite profit surge

Baby Bunting shareholders spit the dummy despite profit surge

A weak start to the current financial year and uncertainty over the ongoing effects of lockdowns have hit the shares of maternity and baby goods retailer Baby Bunting (ASX: BBN), despite the company reporting a 76 per cent increase in net profit to $17.5 million.

Baby Bunting's stock opened more than 10 per cent lower in early trade on the ASX before recovering some ground by late morning.

The hit came as the company revealed same-store sales were 6.4 per cent lower for the first six weeks of FY22, while the ongoing uncertainty means it is unable to offer guidance.

This is even though the company announced all stores remained open during the recent lockdowns in Victoria, South Australia, parts of Queensland and in Greater Sydney.

"While the new financial year has started with some disruptions from ongoing lockdowns, our experience has been that any short-term sales impact is recovered quickly once lockdowns have eased," says Baby Bunting CEO Matt Spencer.

The sales update for the current year overshadowed a strong earnings performance for Baby Bunting in FY21.

Total sales of $468.4 million were up 15.6 per cent, led by online growth of 54.2 per cent. Online sales now account for 19.4 per cent of the group's sales.

However, comparable stores sales growth of 11.3 per cent, which was up from 4.9 per cent in FY20, highlights the softer performance for the first six weeks of the current year.

"The COVID-19 pandemic continues to create significant disruption, with the risk that trading conditions will fluctuate greatly throughout the year," says the company.

Baby Bunting remains confident of a rebound, highlighting its market position as a "less discretionary" retailer and the birth rate of about 6000 newborns a week shoring up consumer demand.

"It is a characteristic of the maternity and baby goods category that the timing of purchasing decisions is relatively flexible and will move when lockdowns occur," says the company. "However, they cannot be delayed indefinitely."

Spencer says the company market position as Australia's most recognised brand in the maternity and baby goods category positions it well to capitalise on the 300,000 births a year nationally.

"While FY22 may have more surprises, our operating strength in our category and our transformation plans should see us well placed in the period ahead," says Spencer.

"Our brand has gone from strength to strength and is now the most recognisable brand in this category and this is converting into stronger brand preference and engagement. As we expand our network of stores and our range and services, we expect our growth to continue."

Among the positives in the FY21 earnings result are an increase in gross margin of 83 basis points to 37.1 per cent, building on a 120 basis-point improvement in the prior year.

Online sales lifted 54.2 per cent to $90.8 million, while click and collect grew 110 per cent to contribute about 57 per cent of all online sales.

Baby Bunting commissioned a new 22,000sqm national distribution centre at Dandenong South in the second half of FY21, doubling its distribution capability. This also reduces the company's reliance on third-party logistics.

The group increased its network of retail outlets to 60 with new stores in Westfield Knox (Victoria), Coffs Harbour (NSW), Westfield Belconnen (ACT) and Castle Towers (NSW). Baby Bunting is currently targeting to have 100 stores in Australia over time.

Baby Bunting plans to open three new stores in the first half of FY22, with a strong pipeline of leases committed for the second half of the year including two in New Zealand.

Baby Bunting is paying a fully franked final dividend of 8.3c per share, bringing the full-year payout to 14.1c up 34.1 per cent from the previous year.

Never miss a news update, subscribe here. Follow us on LinkedIn, Instagram and Twitter.

Business News Australia

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

New report reveals 68 per cent of businesses are vulnerable to a cybersecurity attack

Partner Content
36 per cent of employees fear their organisation is at risk of financial losse...
SAI Global
Advertisement

Related Stories

Smartgroup shares plunge as suitor lowers takeover offer

Smartgroup shares plunge as suitor lowers takeover offer

Shares in Smartgroup (ASX: SIQ) have fallen back to where they were...

APA gets look in at AusNet for $9.96 billion takeover offer

APA gets look in at AusNet for $9.96 billion takeover offer

AusNet Services (ASX: AST) has today granted due diligence access t...

Victorian retail to reopen a week earlier, milestone set for scrapping masks and capacity limits

Victorian retail to reopen a week earlier, milestone set for scrapping masks and capacity limits

With Victoria poised to hit its 80 per cent double dose vaccination...

Victoria opening to vaccinated international arrivals from 1 November

Victoria opening to vaccinated international arrivals from 1 November

With lockdown lifting today in Victoria the state’s governmen...