The Baby Bunting Group Ltd (ASX: BBN) share price has fallen around 8% after delivering a disappointing HY23 result.
Baby Bunting is a leading retailer of baby and toddler products.
HY23 result
Here are some of the highlights from the result:
- Total sales increased by 6.6% to $254.9 million, with comparable store sales growth of 0.4%
- Gross profit margin of 37.2%, down from 39.3%
- Cost of doing business ratio was 32.4%, up from 30.2%
- Pro forma/underlying net profit after tax (NPAT) fell 59% to $5.1 million
- Statutory / reported NPAT sank 67% to $2.7 million
- Interim dividend of 2.7 cents per share, down 59%
The retail business said that it has held onto its market share that it gained over COVID-19.
However, the gross profit margin worsened because of a number of factors including supply chain cost increases, rapidly increasing domestic transport costs, better-than-expected engagement with its loyalty program and the impacts of the contraction of the play gear category.
Other costs also increased, including wages, investments in new markets (where revenue will hopefully flow in the future, like new stores, the launch of the New Zealand business and investment in the new marketplace). The new Baby Bunting Marketplace is on track to launch in the fourth quarter of FY23.
It opened five new stores in the half, plus Loganholme in mid-February. The next store is expected to open in Orange in April.
Trading update
Baby Bunting said that as of 16 February 2023, year to date sales showed total sales growth of 3.3% and a comparable store sales decline of 2.1%.
The company said that sales is improving through February, with plans to drive further sales performance. Its gross profit margin in January was in line with the forecast and up year over year.
It’s expecting that pro forma net profit after tax to be in the range of $21.5 million to $24 million, while the full year gross profit could be between 38% to 39%.
That outlook reflects an expectation that comparable store sales growth will be between negative low single digits to positive low single digits for the full year. Management are uncertain how consumer demand and behaviour is going to change.
Final thoughts on the Baby Bunting share price
Baby Bunting is a sector leader, but it’s gone through a lot of pain. I think it could deliver good outperformance over the next three years from this low starting level.
I don’t think the pain will last forever, and the return of immigration could help add to the number of babies being born in Australia.
