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There's been trouble brewing in the baby goods industry over the past financial year, with brands and retailers consolidating, falling into administration, and struggling to maintain relevance in an increasingly online market.
Baby Bunting's (ASX: BBN) full year results tell an optimistic story of survival against the odds, with the company in fact reporting an increase in sales over the financial year.
However, this wasn't enough to stop the bleeding out of the baby goods retailer. Earnings were down 18.9 per cent to $18.6 million, and the statutory net profit dropped by nearly 30 per cent to $8.7 million.
A silver lining of Baby Bunting's FY18 report is the optimistic outlook for FY19. According to the listed company, trading for the first six weeks of FY19 has been strong, with comparable store sales growth of 9.8 per cent.
At this early stage, the company expects its gross profit margin for FY19 to recover by 34 per cent, and earnings to be in the range of $24-$27 million.
Shares in Baby Bunting have skyrocketed following the full year results announcement, up 28.16 per cent to $2.23 per share at 10.04am AEST.
CEO and managing director of Baby Bunting, Matt Spencer, says the year has been tough for the business.
"The past financial year has seen Baby Bunting strengthen and consolidate its market leading position as the largest specialty baby goods retailer in Australia," says Spencer.
"In unprecedented times, Baby Bunting's top 4 specialty baby goods competitors all entered external administration resulting in significant price deflation as a result of distressed retailing. Despite this, Baby Bunting was still able to grow sales and transaction volumes within the difficult trading environment."
Finding its niche really paid off for Baby Bunting, with the company reporting a growth of 100 per cent from its range of private label and exclusive brands which now make up 21 per cent of total sales.
Noting the increasing amount of shoppers preferring to buy online, the group has made a significant push into this arena too with 63 per cent year-on-year growth for a segment that now represents almost 10 per cent of sales.
In line with this development, the retailer intends to invest further in digital, building upon its recent developments like its gift registry mobile app.
The company intends to open three new stores in FY19, but is keeping its options open considering the recent closure of Toys R Us and Babies R Us which could make potential store opportunities too good to pass up.
Baby Bunting's board has announced a final fully franked dividend of 2.5 cents per share, bringing the total dividends for the year to 5.3 cents per share.
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