Baby Bunting upbeat on sales outlook despite inflation
After handing down a double-digit rise in annual profit, the kids products retailer plans to expand its exclusive label offering.
Baby Bunting Group says its “future is looking bright” amid plans to double its store network and grow its addressable market by more than one third, after the company reported double-digit growth in annual profit.
But it opted not to detail guidance for the 2023 financial year, due to “continuing economic uncertainty, inflationary pressures and other global challenges”.
The kids products business lifted its net profit by 14.6 per cent in the 2022 financial year to $19.5m.
Gross margin improved by 38 per cent, driven by growth in private label and exclusive products, which totalled 45.3 per cent of sales.
Meanwhile, sales revenue jumped 8 per cent in the 2022 financial year to $507.3m, with online sales lifting 24.1 per cent, or $21.9m to $112.7.
Rising product demand had flowed through to the current fiscal year, with comparable store sales as August 10 up 15.3 per cent year-to-date (cycling negative 6.4 per cent in the prior corresponding period) and total sales 19.3 per cent higher.
But Baby Bunting expected comparable store sales growth to moderate as it cycled periods affected by lockdowns in 2021.
“We continued to grow our market share at the same time as we delivered very strong gross profit growth. But we also worked hard to continue to drive further efficiencies in our supply chain and in our buying,” Baby Bunting CEO Matt Spencer said.
Despite a lack of forward guidance, Baby Bunting has increased it planned network of stores from 100 to 110 in Australia and had eyes on 10 stores in New Zealand after its first shop opened in Auckland on Friday.
It expected to open six new stores in Australia in the year ahead. It also hoped to open its second New Zealand store in Christchurch next year.
This comes despite discretionary expenses coming under rising strain from the cost-of-living crisis and growing interest rates.
Mr Spencer said the company could expand its addressable market by more than one third, or $1bn, to $3.5bn, through the growth of online, expanding the range of private and exclusive ranges and products beyond the current 0-3 years age range.
Despite a record result and positive outlook, Baby Bunting’s share price was down by more than 5 per cent in early afternoon trade to $4.64.
Cit analysts said total sales in the 2022 financial year were 4 per cent below expectations, likely due to delays in its number one selling pram and a slower than anticipated store rollout due to handover delays.
Analysts added that the cost of doing business inflation is growing faster than sales even when adjusted for the establishment of operations in New Zealand.
On a pro forma basis, NPAT was 13.6 per cent from a year ago to $29.6m and pro forma earnings before interest taxes depreciation and amortisation was $50.5m, up 16.1 per cent.
A final dividend of 9c per share will be paid on September 9, taking the full-year payout to 15.6c per share, up 10.6 per cent on FY21.
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