The Baby Bunting Group Ltd (ASX: BBN) share price fell around 5% after reporting its FY22 result, which included solid profit growth.
Baby Bunting is like the Bunnings of baby products, selling a wide range of baby items like prams, cots and toys.
Baby Bunting’s strong FY22 report
Here are some of the highlights from the specialty retailer’s result:
- Total sales grew by 8.3% to $507.3 million, driven by comparable store sales growth of 5%
- Online sales jumped 24.2% to $112.7 million, representing 22.2% of sales
- Gross profit margin improved 1.51% (151 basis points) to 38.6%
- EBITDA (EBITDA explained) grew 16.1% to $50.5 million
- Australian underlying net profit after tax (NPAT) grew 20% to $31.1 million
- Statutory net profit went up 14.6% to $19.5 million
- Final dividend of 9 cents per share
- Full year dividend grew 10.6% to 15.6 cents per share
The company told investors that it had grown its market share, while achieving a strong (and higher) gross profit margin, improving efficiencies in its supply chain and ensuring good value for customers.
Baby Bunting opened four new stores during the year, plus two store relocations and two store refurbishments. It also opened its first New Zealand store today, in Auckland.
The company has its own private label range of products with three brands: 4baby, Bilbi and JENGO. Private label and exclusive products sales grew by 18.3% to be 45.3% of total sales, up from 41.4% in FY21. These products can come with a better gross profit margin.
Focused on future growth
One of the main ways that Baby Bunting is opening up more potential growth is by expanding its addressable market from $2.5 billion to around $3.5 billion primarily through the growth of online and expanding certain category ranges beyond 0 to 3 years.
Other ways it can deliver growth is by growing and further leveraging the store network as well as introducing a ‘marketplace’ which can further extend its range with more products, more brands and more suppliers by selling third party products. The marketplace is expected to launch in the second half of FY23.
It now has a plan to grow its network in Australia to over 110 stores, up from 100, along with its plan to open at least 10 stores in New Zealand.
Trading update
Comparable store sales growth as at 10 August 2022 was 15.3% in the financial year to date, with total sales growth of 19.3%. This is when it was cycling against lockdowns 12 months ago.
It expects to open at least six new stores in Australia in FY23. It expects to open a store in New Zealand in Christchurch in the second half of FY23.
Final thoughts on the Baby Bunting share price
The boss of Baby Bunting said it is an “incredibly exciting time” for the business. I agree, I think it’s one of the most promising ASX retail shares with growing online sales, an expanding store network, solid comparable store sales and increasing profit margins. It also offers a solid dividend yield. What’s not to like?
It’s trading on a multiple of its statutory earnings of around 30 times, which is a lot for a retailer. But, with the growth plans, the solid start to the year, the dividend yield and exciting e-commerce plans, I think Baby Bunting is definitely one to watch over the next few years.
I’d be happy to buy some shares of Baby Bunting at this level.
