Baby Bunting lifts full-year guidance following sales growth

Baby Bunting shares soared over 17 per cent on Monday, after the specialty baby goods retailer lifted its full-year guidance off the back of strong sales in the first 20 weeks of fiscal 2019.

At the company’s annual general meeting on Monday, Baby Bunting CEO and managing director, Matt Spencer, said the business is now forecasting pro-forma EBITDA of $25-27 million, excluding employee equity expenses, for FY19, up from the $24-27 million forecast as recently as October 11.

If achieved, this would represent growth of between 34-45 per cent, following a challenging FY18, when Baby Bunting’s earnings were heavily impacted by price deflation in the sector due to the closure of Toys ‘R’ Us, Babies ‘R’ Us, Baby Bounce, Bubs and Baby Savings.

Baby Bunting’s total sales in the first 20 weeks of FY19 were 17 per cent higher than the same period last year, and comparable store sales are up 9.6 per cent. Gross margins are on track to exceed 34 per cent for the year, in line with guidance.

The company plans to open two new stores ahead of Christmas, bringing the store network to 52. This includes Baby Bunting’s first shopping centre format store at Chadstone and a former Toys ‘R’ Us/Babies ‘R’ Us location at Bankstown.

Spencer revealed that Baby Bunting is in negotiation with landloards to take over two other former Toys ‘R’ Us/Babies ‘R’ Us sites. Besides Bankstown, the retailer is also relocating its Cannington store to a former Toys ‘R’ Us/Babies ‘R’ Us site in that suburb.

Following 63 per cent growth in online sales in FY18, Spencer said that Baby Bunting is making steady progress on the implementation of a new website platform, which is expected to launch at the end of the year.

The new platform is expected to deliver increased traffic, reduced bounce rates and higher conversion rates.  Since launching a click-and-collect service, roughly half of online orders are now picked up in-store, which Spencer said demonstrated the complementary nature of e-commerce and bricks-and-mortar.

Longer term, the retailer is looking to further blur the line between physical and digital sales, with the development of a store-to-door model that will enable faster, cheaper delivery of online orders.

Spencer said it was an “exciting time” for Baby Bunting, as the business consolidates its position as Australia’s largest specialty baby goods retailer.

Baby Bunting’s share price shot up over 17 per cent after the AGM, reaching a high of $2.32, up from $1.98 at close of trade on Friday, November 16, before settling at $2.21 a share at close of trade on Monday.

The retailer completed its fourth gift offer under its general employee share plan last month, which involved providing around 550 eligible team members with $750 worth of Baby Bunting shares for no monetary cost.

More than 50 per cent of employees now hold shares as a result of the offers. Baby Bunting’s board said it encourages team members to become shareholders and believes that this providers greater alignment between the interests of shareholders and the team at Baby Bunting.

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