Baby Bunting earnings beat, assesses broader $5.1bn baby goods market

Baby Bunting (ASX: BBN) has delivered a noble half-year FY22 result in light of the difficult reporting season so far for retail stocks. 

Financials at a glance 

• Sales of $239.1m, up 10% 

• Comparable store sales growth of 6.8% 

• Net profit of $12.5m, up 16.4% 

• Interim dividend of 6.6 cents per share, up 13.8% 

In the lead up to the result, Morgans said “in contrast to many retailers, we forecast Baby Bunting will deliver positive growth in sales and earnings.” 

The result came in slightly ahead of Morgans expectations of 6.5% revenue growth to $231.5m, based on 2.3% comparable sales growth. 

The profit figure beat Bell Potter and Citi estimates of $10.4m. 

Ticking all the boxes 

Baby Bunting managed to grow both the top and bottom line amid a difficult reporting season weighed by covid restrictions, labour shortages and cost inflation. 

Baby Bunting experienced a slight increase in cost of doing business, up 125 basis points to 30.2%. This reflected a major investment into a new national distribution centre and one-off costs for a New Zealand market launch. 

Encouragingly, store expenses as a percentage of sales remained flat at 19.8% of sales. 

Looking ahead

As at 9 February, Baby Bunting said that comparable sales growth was up 6.1% year-to-date. 

For the same time period, online sales grew strongly, up 30%. Online sales represented 24% of total sales in the first half.

Baby Bunting expects to open another 2 to 3 stores in the second-half, which would bring total store numbers to 66-67. 

CEO and Managing Director Matt Spencer pointed out the company’s growth options, including:

“Ultimately, as the strength of our offer grows and our customer engagement increases, we will assess the broader $5.1 billion baby goods market for future long-term growth opportunities, relative to our current $2.5 billion addressable market.”