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FY22 trading update: Baby Bunting (ASX:BBN) share price on watch

The Baby Bunting Group Ltd (ASX:BBN) share price is on watch after providing a trading update for FY22, with growth returning.. 

The Baby Bunting Group Ltd (ASX: BBN) share price is on watch after providing a trading update for FY22.

Baby Bunting’s FY22 trading

The baby product retailer announced that in the financial year to date (to 3 October 2021), it has seen total sales growth of 1.5%.

However, there are different sales numbers within that overall growth.

Comparable store sales “continue to strengthen” and were down by 1.3%. However, excluding NSW and ACT stores, comparable store sales growth was 4.7%.

But e-commerce sales, including click and collect, continue to deliver a lot of growth. Online sales rose 37.7% in the year to date, which was on top of the 126% growth in the prior corresponding period in FY21.

Baby Bunting’s profitability continues to increase. The retailer reported that its gross profit margin increased 120 basis points (1.20%) to 38.7%. This was largely driven by private label and exclusive products, product mix and supply chain efficiencies.

Private label and exclusive products made up 44.3% of year to date sales, it was 38% in the prior corresponding period. Baby Bunting has a long-term goal of 50% for private label and exclusive product sales.

Business progress

The company is expecting to open between six to eight new stores in Australia in FY22, with two in New Zealand towards the end of the second half of FY22.

Baby Bunting said that its transformation program is progressing well with an anticipated launch of its new Australian website and phase 2 of its loyalty program in early November.

Management comments

Matt Spencer, the Baby Bunting CEO and Managing Director said:

When we last updated the market on 13 August, comparable store sales were negative 6.4% for the first seven weeks of the year. Since then, we have seen a positive trend in comparable store sales growth, despite the ongoing lockdowns experienced across Victoria, NSW and the ACT.”

Summary thoughts on the Baby Bunting share price

Before taking into account today’s reaction, Baby Bunting shares had fallen 7% since the release of the Baby Bunting result.

I think Baby Bunting is one of the best retailers on the ASX along with ones like Wesfarmers Ltd (ASX: WES) and City Chic Collective Ltd (ASX: CCX). It’s an essential retailer, it has a growing store network across Australia (and New Zealand), online sales are booming, profit margins are rising and so on. It ticks a lot of boxes.

The Baby Bunting share price reflects that growth expectation, but short-term weakness could be an opportunistic time to think about this business.

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