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With a boardroom coup well behind it, infant formula group Bubs Australia (ASX: BUB) has delivered some positive news for shareholders with a strong performance over the first quarter of FY24.
Bubs, which has been struggling to regain lost ground in the previously lucrative China market, has made significant strides in the US where a surge in gross revenue has lifted that market to nearly half of group revenue.
US sales were up 24.1 per cent to $11.6 million in the three months to the end of September, compared to the same time last year.
The solid gains in the US helped drive Bubs’ group sales 3.4 per cent higher year on year to $24.3 million for the quarter, with the result up 21.7 per cent on the previous quarter. The result was achieved despite China sales being 51 per cent down from a year earlier.
The latest earnings update is seen as a vindication of CEO Reg Weine who led a strategic review into resolving Bubs’ woes prior to his appointment ad CEO. Weine was appointed to lead the company after the sacking of former CEO and company founder Kristy Carr in May, with the ousting leading to a tumultuous boardroom battle for the company earlier this year.
“Q1 was a successful period for Bubs as the company narrowed its focus on executing the strategic priorities of our five-point plan announced to the market in July 2023,” Weine says.
“Overall, Bubs is on track to deliver its strategic plan and remains focused on responsibly managing capital to grow and maximise shareholder value.”
Adding to the company’s gains in the US, Bubs says it lifted market share in Australia with value growth of 11.6 per cent versus the total category value growth of 3.8 per cent.
Australia posted domestic gross revenue of $6.4 million which was up 36 per cent on the previous corresponding period.
Bubs saw positive signs in the Caprilac adult formula product range with growth of eight times that of the previous corresponding period, although it concedes this has been off a low base. Bubs says its goat formula brand is number one in Australia and the US based on market share.
In the US, the company’s Amazon sales also continue to grow strongly at 3 per cent compounding weekly in the first quarter.
Bubs products were also stocked by 5,900 brick-and-mortar stores in the US at the end of September, which is up 15.5 per cent on the previous month.
“The US remains our growth engine, with sales revenue in the US growing rapidly,” says Bubs US general manager Chris Lotsaris.
“E-commerce now represents more than 60 per cent of our US revenue and is complemented by the increased ranging and sales velocity we are seeing in brick-and-mortar stores since the new planograms have been rolled out.
“With our momentum building each week, we expect our US sales to grow by more than 100 per cent in FY24 over FY23.”
While sales have taken a big hit in China over the past year, Bubs says the first-quarter result is encouraging as the company resets its approach to this market.
Bubs shares were trading 9 per cent higher at 18c each at 12.48pm (AEDT).
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