Baby Bunting posts first-half profit surge

Sales of infant products have proven resilient, with Baby Bunting posting a 54.7pc leap in half-year profit, as online sales surged.

Baby Bunting CEO Matt Spencer, left, with customers in one of his stores. Picture: Stuart McEvoy

Anxious parents filled their shopping baskets with nappies, cots and bedding through the worst months of the COVID-19 pandemic, reflecting a “nesting” behaviour, but as soon as restrictions were lifted switched their minds to the outdoors and bought up prams, striders and car capsules.

Baby Bunting chief executive Matt Spencer, who runs the nation’s biggest infant and baby goods retailer in Australia, told The Weekend Australian there were clear trends during the pandemic in 2020 with good growth across all his categories.

“We do see when we came out of lockdown we did see the ‘travel’ category being the prams and the car seats as people moved out, that did pick up,” Mr Spencer said.

“When we went into lockdown people couldn’t travel so they weren’t buying these items, prams or car seats, but as we came out of lockdown those categories picked up straight away.”

Baby Bunting, which on Friday posted a 54.7 per cent leap in half-year profit to $7.48m, revealed the buying behaviour of consumers as the pandemic ebbed and flowed through 2020.

At the commencement of lockdowns, there was significant sales growth in baby essentials such as nappies and baby wipes. During lockdowns, sales mix shifted from travel (car safety, prams and strollers) to nesting (cots and furniture, manchester and bedding). As restrictions eased, all categories experienced growth and sales mix returned to historical ratios.

Play products, toys and manchester proved especially popular in months of lockdowns.

Baby Bunting on Friday announced that sales for the December half — dominated by the pandemic — rallied 16.6 per cent to $217.3m. Same store sales growth was better by 15 per cent, or as much as 21.8 per cent higher when excluding its Victorian stores as that state suffered extended lockdowns in the period.

The company’s financial results were achieved without the support of any JobKeeper allowances or subsidies.

However, the profit did undershoot some analyst expectations and shares in Baby Bunting fell on the release of the results, dropping almost 7 per cent. Baby Bunting later closed down 6.6 per cent at $5.25.

Again it was online that was a key driver for sales, with online sales growth of 95.9 per cent and click & collect popular as shoppers maintained social distancing restrictions and that delivery platform recorded sales growth of 218 per cent.

Baby Bunting, riding a wave of demand for its large range of baby products, clothing and equipment despite any economic headwinds or COVID-19 impact, announced an interim dividend of 5.8c per share, up strongly from the 4.1c per share paid in 2020. The half-year dividend will be paid on March 12.

Mr Spencer said maternity and baby goods were essential products for parents and parents-to-be and are less discretionary in nature.

“Our strong comparable store and total sales growth performance demonstrates that we continue to deliver on our strategy of growing market share.

“The Baby Bunting team has done tremendously well servicing new and expectant parents in what can only be described as an unusual and difficult time.”

Mr Spencer said sales in all channels were up.

“Our online sales growth in the half was very pleasing. Significantly, we still have over 90 per cent of sales occurring or being completed in our stores highlighting the importance of our store network across Australia.

“And we continue to progress our store network expansion in Australia with three stores opened in the half and more planned for the period ahead.”

Mr Spencer said following a successful launch of online sales into New Zealand, the retailer has plans to establish a multichannel retail proposition in New Zealand with its first store anticipated to be opened in fiscal 2022.

Baby Bunting’s half-year results showed gross profit margin improved by 41 basis points to be 37.4 per cent, driven by a range improvements with supplier partners delivering great products at sustainable margins, the continued growth of private label and exclusive products range and investments in its Baby on Board services business which contributes to margin expansion.

Private label and exclusive products grew 28.2 per cent to be 39 per cent of total sales compared to 35.5 per cent in the prior corresponding period. Baby Bunting is targeting above 40 per cent for the full year and is tracking well to achieve its long-term target of 50 per cent of sales coming from private label and exclusive products, the company said.

In terms of outlook, comparable store sales growth for the first six weeks of the second half was strong at 18.5 per cent. This has seen comparable store sales growth rise to 15.7 per cent year-to-date.

Turning to population growth and a potential baby boom coming out of COVID-19, he said the company was tracking the number of ultrasounds performed in Australia and that ultrasound services had increased in recent months.