The Bubs Australia Ltd (ASX: BUB) share price is soaring today in reaction to its December quarterly update.
Bubs is an infant formula business which specialises in goat milk products.
Bubs December 2020 quarter
Bubs said that its quarterly gross revenue was $12.8 million. This was up 36% compared to the first quarter of FY21, though it was down 12% compared to the prior corresponding period.
There were various elements of the sales update that the company wanted to tell the market about.
Bubs infant nutrition saw sales rise by 27% compared to the FY21 first quarter and represented 57% of second quarter sales.
China cross border e-commerce sales went up 27% quarter on quarter and up 34% compared to the prior corresponding period. Adult goat dairy gross revenue went up 45% quarter on quarter and 25% compared to the prior corresponding period.
The company boasted about being the fastest growing infant formula manufacturer across Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Chemist Warehouse with combined retail scan sales at the checkout rising 41% quarter on quarter and 67% compared to the prior corresponding period. Bubs goat formula has the fastest growing brand share across the total category, up 46% quarter on quarter.
Bubs said that there was strong consumer offtake sales volume for Bubs during ‘Double 11’ on Tmall Global, up 174%. CapriLac was ranked number one on Tmall Global during ‘Double 11’ and for the duration of the second quarter.
Corporate daigou trading was weaker than pre-COVID levels, but was up 122% on the first quarter of FY21.
For me, perhaps the most important growth stat was that export sales to markets outside of China continue to strengthen, up 194% quarter on quarter and up 138% on the prior corresponding period.
The company ended the quarter with $40.2 million of cash.
Management comments
Bubs CEO and founder Kristy Carr said: “Whilst the impact of COVID-19 continues to cause channel disruption and market conditions remain challenging, we are pleased to report sales growth is returning across all product groups, channels and regions…Total export sales revenue was also up 45% on the previous quarter and up 55% on the prior year, validating our global expansion strategy is taking hold.”
Summary thoughts
This seems like a very promising turnaround for Bubs. Whilst total sales were down on the prior corresponding period, there was good growth across many categories. Does one quarter point to a sustained recovery? Maybe, maybe not.
The international growth, outside of China, was a key reason why I was attracted to Bubs several months ago. In this quarter, export sales to international markets outside of China nearly tripled quarter on quarter, contributing 17% of group revenue. The first shipments of Bubs infant formula and baby food products were exported to Malaysia during the second quarter. New prominent e-commerce platforms were signed in the region with Bubs products now sold on Redmart in Singapore and Lazada in Malaysia.
Bubs is a relatively small, higher-risk investment idea. But if this growth can continue, then it could be worth considering, but investors may want to see another quarter of recovery first.
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