The new CEO of Baby Bunting is pushing through a turnaround

Infant products retailer Baby Bunting faces cost of living pressures for new parents and a declining birth rate, but its new CEO believes it can grow its profits, expand margins and open new stores to recapture its former glory.

Baby Bunting faces the twin headwinds of cost of living pressures and a declining birth rate. Picture: Alison Paterson

Recently appointed Baby Bunting boss Mark Teperson, brought on board to turnaround the struggling chain, believes he can lift profitability, expand margins and double its store network despite the twin headwinds of sliding consumer spending and a declining birth rate.

Mr Teperson says he is in the “early days” still of the transformation and turnaround of market leader Baby Bunting but argues he can return it to its “former glory state” with the retailer’s leading position in the infant goods market a perfect platform for future growth.

Baby Bunting, which was once valued at more than $800m and dominated the baby products space to such an extent that many of its smaller rivals went out of business, has struggled since the end of Covid-19 as its earnings shrank, sales growth reversed and its share price sank.

A troubled loyalty scheme, supply disruptions, new online competitors and sometimes confusing pricing all played a part, but now Mr Teperson, a former executive at footwear retailer Accent Group, is pushing through a turnaround amid dour economic and demographic settings.

This is led by cost of living pressures for new parents as they look to buy prams, cots, bedding and toys as well as a declining birth rate.

On Tuesday those twin forces, as well as misfired strategies of previous management, showed through in the full-year results which showed a 83 per cent dive in full-year profit to $1.7m as revenue fell 5 per cent to $498.4m.

However, giving Mr Teperson some confidence in his new strategy was a switch in same store sales growth back into the positive for the first seven weeks of 2025, up 2 per cent, against a 5.6 per cent fall in the second half and a 7 per cent sales slide in the first half.

He said July 2024 gross profit margin was up 180 basis points driven by a simplified pricing model across its catalogue, online and in-store, and the removal of its failed Loyalty Spend & Earn scheme in the fourth quarter.

“While it is still early days, it is pleasing to see the implementation of the strategic growth initiatives that we announced as part of our investor day in June starting to deliver positive momentum in our trading and financial performance.”

The market welcomed the sales turnaround and hopes of more gains in the near future, sending Baby Bunting shares 16 per cent higher.

Mr Teperson said while consumer spending was soft and the birth rate was declining, the baby goods retailer could still grow its earnings.

“The macroeconomic conditions have been tough for our customers for at least the last 12 to 18 months after the series of interest rate rises. 12 to 18 months, after a series of interest rate rises. We can’t do anything to control the economic landscape, so looking within our business, a strong pivot towards driving new product innovation in addition to delivering fantastic value to our customers, has really been part of the turning point of sales.”

He said the retailer was well placed to lift its total footprint in Australia from 70 large format stores currently to 110. Later this financial year Baby Bunting will open and trial three new smaller format stores with that store model having the potential to grow to 20 to 40 if the pilot is deemed successful.

In a trading update the company said it expects fiscal 2025 profit to be in the range of $9.5m to $12.5m, based on the expectation of comparable store sales growth of flat to 3 per cent and full year gross profit margin of 40 per cent.