Baby Bunting pushes on with store expansion plan

Baby Bunting chief executive Matt Spencer is confident the retailer can counter any predicted decline in fertility rates by expanding its market share.

Baby Bunting CEO Matt Spencer’s ambitious store rollout strategy will almost double its network to more than 100 stores. Picture: Stuart McEvoy

Baby Bunting chief executive Matt Spencer is confident the infant-products retailer can counter any predicted decline in fertility rates caused by the COVID-19 pandemic and the shutdown of immigration by expanding its market share.

Despite its recent growth, Baby Bunting still only sits at about 15 per cent of the market.

Mr Spencer said Baby Bunting was still pursuing an ambitious store rollout strategy to almost double its network to more than 100 stores, with several regions in the nation still not captured by its bricks-and-mortar footprint.

And the rollout was proving its worth, with Baby Bunting stores the key in a click & collect business that saw these types of sales outside of Victoria jump 233 per cent in the first quarter of the 2021 fiscal year.

Providing a trading update to shareholders via a virtual AGM on Tuesday, Mr Spencer revealed year-to-date (to October 2) comparable store sales growth of 17 per cent. Excluding Melbourne metropolitan stores, operating amid the city’s stage-four restrictions (although Baby Bunting stores remained open), comparable growth was 28.5 per cent.

The company said online sales (including click & collect) were up 126 per cent during the first quarter. Excluding Victoria, online sales growth was 92 per cent during the quarter.

Shares in the retailer gained ground on the trading performance for the start to the 2021 fiscal year, and closed up 28c at $4.87.

After the AGM, Mr Spencer told The Australian the retailer could continue to grow earnings even if dire predictions of the ­nation’s population shrinking because of the impact of COVID-19 on new births became true.

“I can’t predict the future in terms of fertility. From my point of view, we have about 15 per cent market share of our addressable market so we still have some significant head room to grow,’’ Mr Spencer said.

Some analysts have forecast there could be more than 50,000 fewer babies born each year ­between now and 2024 with the fertility rate already falling before the pandemic hit, while immigration is tipped to be at its lowest levels since the end of World War II.

“But there has been some conflicting reports around what happens in lockdown, whether or not we might have a mini baby boom in the coming months — who knows?” Mr Spencer said.

Shareholders were told Baby Bunting’s gross margin was up 90 basis points to 37.5 per cent at the end of the first quarter.

COVID-19 affected operating costs, with expenses up $500,000, but Baby Bunting still had plans to open four to six new stores in 2021.

“We have seen the positive momentum in sales continue for the first quarter, which is reflective of the less discretionary nature of the maternity and baby goods category,” Mr Spencer said.

“There was an increase in sales in products for the home with a reduction in travel-related cat­egories, such as car seats and prams, etc. Outside of (lockdown) restrictions, these trends have reversed and we have seen sales in our travel-related categories rebound strongly.

“As a result of the pandemic, our customers’ shopping behaviours have changed; not only what they shop, but how they shop, with many switching channels or choosing different ways to shop.”