Baby Bunting prepares for post-lockdowns baby boom

It’s already expanding after a rise in profit, but the baby goods retailer says Medicare scan figures now point to a new surge in births.

Baby Bunting CEO Matt Spencer is enjoying boom times for the retailer. Stuart McEvoy.

Lockdowns and home isolation might be delaying expecting parents’ purchases of nappies, prams and cots, but ultimately the purchases need to be made when the baby arrives.

That’s the lesson being emphasised at Baby Bunting as the nation’s leading baby goods chain enjoys a sales and profit boom, and as it anticipates a potential rise in birth rates.

With 300,000 births a year in Australia, and on average 6000 births a week, Baby Bunting said its experience through the Covid-19 pandemic has been that any short-term sales impact from pandemic disruptions and restrictions is recovered quickly once lockdowns ease.

And it comes as Baby Bunting said Medicare data showed a strong uptick in 12-week baby scans, which could point to a looming baby boom and a rise in demand for baby products.

It said Medicare scan volumes were up 4 per cent in the fourth quarter, from a 6.4 per cent gain in the third quarter. Scans were up 9 per cent in the second quarter and up by 13.9 per cent in the first quarter.

To prepare for a potential wave of new parents, Baby Bunting is aiming to grow its network to 100 stores from its current chain of 60 outlets, and has recently signed five new leases. Expansion into New Zealand is also planned.

Meanwhile Baby Bunting is also encouraging its staff to get vaccinated against Covid-19, with a competition for team members and winners sharing a prize pool of $10,000.

“We all need to play our part to help Australia move to a Covid-normal setting,” said chief executive Matt Spencer.

The retailer on Friday said its full-year net profit rose 76 per cent to $17.53m on total sales of $468.4m, up 15.6 per cent. Like-for-like sales were up 11.3 per cent and it posted online growth of 54.2 per cent. Online sales now contribute 19.4 per cent of total sales.

Baby Bunting said pro forma net profit (which excludes employee equity incentive expenses and the significant costs associated with business transformation projects) rose 34.8 per cent to $26m.

Continuing this reporting season’s trend of higher dividend payments, Baby Bunting declared a final dividend of 8.3 cents per share, with a full year dividend of 14.1 cents, up 34.1 per cent.

Baby Bunting did not receive any JobKeeper payments or rent relief in fiscal 2021.

Mr Spencer described 2021 as a “tremendous year” that delivered great growth, both in earnings per share and returns for shareholders.

“As we expand our network of stores and our range and services, we expect our growth to continue,” Mr Spencer said.

Baby goods purchases can’t be delayed indefinitely, says Baby Bunting. Picture: Josh Woning

The company said it was a characteristic of the maternity and baby goods category that the timing of purchasing decisions was relatively flexible and would move when lockdowns occurred. But those purchases eventually needed to be made.

“They cannot be delayed indefinitely. That is, when the baby is imminent or has just been born. There are around 6000 births on average per week in Australia. Lockdowns – which have been of varying durations – result in changes in sales patterns in the lockdown areas.

“Sales typically recover quickly after lockdowns ease.”

The lockdown disruption to sales was evident in recent trading, with same-store sales down more than 6 per cent since July amid lockdowns in Queensland, NSW, South Australia and Victoria.

The retailer said its private label and exclusive products sales grew 31.1 per cent to be 41.4 per cent of total sales.

“There has been considerable growth in the proportion of private label and exclusive sales and Baby Bunting 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.

The retailer said its loyalty club was proving a crucial platform for growth, and has now grown to 1.1 million members with around 600,000 members active in the last 12 months and around 25,000 new members a month signing on.

Mr Spencer said loyalty members spend 36 per cent more per transaction than non-loyalty members, through higher average item value and increased average items per transaction.

Turning to the current financial year, Baby Bunting said comparable store sales as at August 12 were down 6.4 per cent year-to-date.

“While the new financial year has started with some disruptions from ongoing lockdowns, our experience has been that any short-term sales impact is recovered quickly once lockdowns have eased,” Mr Spencer said.

“While fiscal 2022 may have more surprises, our operating strength in our category and our transformation plans should see us well placed in the period ahead.”