Brand transformation pays off for Baby Bunting

Brand transformation pays off for Baby Bunting

A brand refresh has worked in favour of baby goods retailer Baby Bunting (ASX: BBN) with sales and profit both growing during the first half.

The company reported a net profit after tax (NPAT) of $7.5 million, up 30.6 per cent.

Sales were rose 8.1 per cent to $186.4 million on the back of store network growth and a brand transformation.

Despite the positive result BBN has dived this morning, with shares down 11.32 per cent to $3.37 per share at 11.17am.

Baby Bunting CEO and MD Matt Spencer says the results reflect the group's investment in its business transformation.

"Our results for the first half reflect continuing profitability growth and significant progress on a number of our operational objectives for the year," says Spencer.

"We grew our store network, delivered sales and market share growth, and achieved improved profitability. At the same time, we continue to invest in business transformation to build capability for future growth."

During the half the group launched a new brand across the business, and moved into a new purpose-built distribution centre in Dandenong South, Victoria to replace its existing facility.

The company expects this new centre to go live in the second half of FY21, following a new loyalty program which is expected to launch in early FY21.

The second half of FY20 has started strongly according to BBN, with comparable sales growth of 5.7 per cent in the first six weeks of the half.

Baby Bunting's online retail business performed strongly too, with the company witnessing 10.5 per cent growth in the business, now making up 11.7 per cent of total group sales.

Its Click & Collect service represents around 45 per cent of all online sales too in areas where Baby Bunting has a physical presence.

Following the opening of three new stores in the first half the company is now in the final stages of its latest network plan.

"This network plan will incorporate recent developments, including the addition of our new shopping centre store format, the improved store trading performances, Baby Bunting's improved market share since changes in the competitor landscape and any changes in Baby Bunting's addressable market and the broader retail market," the company says. 

As a retailer that imports goods from China the question of whether the novel coronavirus Covid-19 outbreak has impacted the company is a hot topic.

Baby Bunting says while it does source products from China, it is still too early to determine whether the virus will have a material impact on the company.

Nevertheless the group says it ended the first half with high levels of stock which will be enough to support the business for the time being.

"We continue to monitor developments and are working closely with our suppliers to ensure supply is maintained," says Baby Bunting.

BBN's FY20 earnings guidance remains unchanged; the company expects a FY20 pro forma NPAT to be in the range of $20 million to $22 million and EBITDA in the range of $34 million to $37 million, representing growth of 25 per cent to 36 per cent.

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