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Baby Bunting's (ASX: BBN) earnings forecast has dropped after two of its main competitors entered administration and have begun liquidating stock.
Baby Bunting says it has been "adversely affected by the distressed trading" of its competitors Baby Bounce and Baby Savings, after the announcement was made in April that both companies entered external administration.
In February, Baby Bunting expected its earnings before interest, tax, depreciation and amortisation (EBITA) to reach $23 million at the full year.
Now the company is expecting EBITA to be in the range of $18-20 million, excluding employee equity incentives.
While the company recorded comparable stores sales growth of 4.7 per cent in 3Q18, during the first 6 weeks of 4Q18 it has recorded a 2.5 per cent drop.
CEO and managing director Matt Spencer says the short-term outlook for Baby Bunting is rocky, however he expects the company will bounce back in the long run.
"What we have seen in the industry during this financial year in terms of the extend of consolidation is unprecedented," says Spencer.
"While challenging in the short term, these changes in market conditions present some great opportunities for the growth of Baby Bunting's business and profitability in FY2019 and beyond."
Baby Bunting expects to release its full year financial results on 10 August.
BBN shares opened trade this morning at $1.36.
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