Baby Bunting is rebuilding its financials after a tough few years
Once a market darling, Baby Bunting’s new CEO believes the building blocks are in place for a revival of its fortunes.
Baby Bunting is putting in the building blocks of a recovery, led by better margins, product innovation, private label sales and a burgeoning media business.
Recently appointed chief executive Mark Teperson believes Baby Bunting, which operates 75 infant and baby products stores across Australia and New Zealand, has the right strategy in place to sustainably grow the business with that momentum showing through the first half of 2025.
“We certainly feel very confident in the strategy that we put together, and it’s great to see some consistent momentum building through the period that we released our new strategy, right through the first half and early into the second half now,” Mr Teperson told The Australian after Baby Bunting posted a 2.4 per cent lift in interim sales to $254.4m as profit rose 45 per cent to around $3.9m. The results were inline with guidance. No dividend was declared as the company opted to reinvest in its growth plans.
“So we’ve got a clear pipeline of initiatives that continue to build on the momentum, but we’re feeling very confident about the future as we progress our strategy.”
Comparable sales rose by 2.2 per cent with the first seven weeks of the second half showing same store sales growth of 2.8 per cent, although the sales were down on the second quarter.
Importantly, despite the still flat sales growth gross profit margin was up 260 basis points over the half to 39.8 per cent, driven by Mr Teperson’s strategies which include simplification of Baby Bunting’s pricing architecture, renegotiating supplier trading terms, and supply chain initiatives.
Baby Bunting’s earnings and share price have been in decline since 2022, pummelled by the cost-of-living crisis as new parents traded down to cheaper baby products, competition from newer players such as Amazon and a shrinking birthrate that was robbing the leading player in the sector of new babies.
Mr Teperson said it was still highly competitive in the sector and cost-of-living pressures were playing out, but Baby Bunting was repositioning itself to grow sales and profit through a number of growth options.
“For young families, nothing has materially changed for them. Over the course of the last 15 months interest rates have remained high, they are the cohort in the market that are the most under pressure, and so they are very discerning with how they’re spending their dollars, seeking out value.
“And then for those that do, perhaps have a little bit more capacity, again, just being discerning about wanting innovation and new products. And so we’re trying to ensure that we are providing both in a very comprehensive way to meet the needs of consumers in this challenging market, and the strategy seems to be resonating well with consumers.
“Our focus on driving sales through range innovation and new customer acquisition is delivering results. Newness in our ranges continues to resonate, with new customer acquisition up 12 per cent on the prior period.
“Our exclusive branded products remain a key traffic driver and, with a strong pipeline of exclusive launches in the second half, we expect this momentum to continue.”
One new strategy Baby Bunting is pursuing its establishing a new media division – mirroring similar highly profitable media arms developed by retailers such as Coles, Woolworths and Chemist Warehouse – with the retailer tipping its media arm to deliver around $2m to $3m gross margin improvement in 2026.
“We actually launched the media business late in the first half, but we don’t expect it to be accretive to earnings in this financial year, as we set the foundations and bring the team on board.
“It’s really bringing to life for our supply partners all of the assets that Baby Bunting has built and created for customers.”
Baby Bunting has forecast full-year profit to be in the range of $9.5m to $12.5m.
Its shares were down 3.3 per cent to $1.78 on the ASX late Tuesday morning.
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