Baby Bunting (ASX: BBN) has announced that it achieved a large amount of underlying growth in FY20. The Baby Bunting share price is up 2% in early trading.
What is Baby Bunting?
Baby Bunting Group Ltd is a retailer that specialises in baby goods with over 6,000 lines such as prams, cots, car safety equipment, toys, feeding and other accessories. Starting in Melbourne in 1979, the company now has over 50 stores in Australia with plans to grow the store count beyond 80 over the next few years. It currently employs over 700 people.
Baby Bunting’s FY20 update
The retailer has decided to release some of the numbers from its upcoming FY20 result, though the figures remain subject to finalisation and external audit.
The company expects to report total sales of approximately $405 million, representing growth of around 12%. Comparable store sales growth in the second half of FY20 of 10.5%, with full year comparable store sales growth of 4.9%. Comparable growth from bricks and mortar stores was 2.5% for the year and 7.6% in the second half.
Online sales (including click and collect) grew 39%, which represented 14.5% of total sales. In FY19 online sales were 11.8% of FY19 sales.
Pleasingly, Baby Bunting is expecting to report a gross profit margin of 36.2%, an increase of 120 basis points (1.2%) against the prior corresponding period.
‘Pro forma’ is the company’s attempt to calculate a reasonable comparison compared to last year. Pro forma EBITDA (click here to learn what EBITDA means) is expected to show growth of 22% to 25% to be between $33 million and $34 million.
Pro forma net profit after tax is expected to grow by 29% to 35% to be between $18.5 million to $19.5 million.
However, statutory/reported net profit after tax is expected to be between $9.5 million to $10.5 million, down from $11.6 million in FY19.
The pro forma figures excludes employee share incentives, significant transformation project expenses and the impairment of the carrying value of the company’s investment in its digital commerce technology. Pro forma EBITDA excludes the AASB 16 lease accounting.
Management comments
Baby Bunting Managing Director Matt Spencer said: “These are very positive results, in particular given the impact of the COVID-19 pandemic on communities in Australia. During the year, all of our stores remained open and our team worked incredibly hard to adapt how we operated to ensure that we continue to support new and expectant parents in these challenging times. We have seen the business continue to grow in FY20 and I am confident that growth will continue in FY21.”
Summary
The underlying growth of the business has been impressive, though the expenses of employee share incentives, impairment and transformation costs can’t be completely ignored – they are/were costs.
The Baby Bunting share price has recovered strongly since March 2020, so I’m not sure if it’s a good value buy today or not. There has been strong retail sales in the last few months. Will that continue? We’ll have to see. I’m not looking to buy Baby Bunting shares today. I’d rather buy other growth shares.
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