The Baby Bunting Group Ltd
(ASX: BBN) share price is in focus after reporting a good recovery during the HY22 result.
Baby Bunting is a large national retailer of baby products, with a store network and online operations.
Baby Bunting’s HY22 report
These are some of the highlights from the ASX retailers result:
- Total sales increased 10% to $239.1 million
- Online sales (including click and collect) increased 32.6% to $56.8 million, representing 23.8% of total sales
- The gross profit margin rose 192 basis points (1.92%) to 39.3%
- Underlying EBITDA grew 18.6% to $21.8 million
- Underlying net profit grew 16.4% to $12.5 million
- Statutory net profit rose 12.2% to $8.1 million
- Interim dividend grown by 13.8% to 6.6 cents per share
Online sales were a big driver of the result. But comparable store sales also grew by 6.8%.
Within the sales growth, a key driver was the rise of private label and exclusive product sales which grew 25.3% to be 44.5% of total sales. Baby Bunting has a long-term target of 50% of sales coming from private label and exclusive products. This comes with a higher gross profit margin and also gives the ASX retail share a unique selling point.
Baby Bunting’s cost of doing business went up 125 basis points to 30.2% This include a large investment in the new national distribution centre and one-off establishment costs for New Zealand. There were also $0.5 million of COVID-related costs.
New stores
During the first half of FY22, Baby Bunting opened two stores in NSW as well as one in Victoria and one in Queensland. That brought the total store number to 64 stores. It has plans for more than 100 stores around Australia in various formats.
The company has a long-term objective of fulfilling 90% of online orders on the same day in metro areas.
The new national distribution centre is double the size of the old site, enabling better margins, a bigger range and other benefits.
Trading update
Baby Bunting told investors how it had performed in the first six weeks of the second half of FY22. Comparable store sales had grown by another 3.6%, after a strong 18.4% rise a year ago. Online sales grew by another 30%.
Over the rest of the year, Baby Bunting plans to leverage its new e-commerce architecture and drive loyalty and membership through thee newly launched Baby Bunting family loyalty program.
It’s expecting to open another two or three stores in the second half.
Final thoughts on the Baby Bunting share price and result
At the AGM, Baby Bunting said that total sales had only grown by 1.5% to 3 October 2021. So this result showed a solid improvement over the second quarter.
The ASX retail share continues to grow its store network and invest in its operational capabilities.
Baby Bunting said that it’s assessing “the broader $5.1 billion baby goods market for future long-term growth opportunities, relative to its current $2.5 billion addressable market.”
I think that Baby Bunting is one of the most attractive retailers on the ASX. Expanding into New Zealand is a good strategy. It’s one of the ASX growth shares on my watchlist.
