KOSEC REPORT: Baby Bunting Group Records Solid Growth Amid Pandemic

Baby Bunting Group Limited (ASX:BBN) has provided its full-year results for the 2020 financial year, highlighting strong growth in its sales, underpinning an overall robust period for the group. Online retail channels for the group have further supported this surge.

The company showcases a total growth in sales relative to the previous corresponding period of 11.8 per cent, bringing this figure to A$405.2 million. Furthermore, the group reports a surge in comparable store sales of 4.9 per cent for this period. Facilitating this vast growth in sales is a rise in receivables through online channels of 39.1 per cent, representing 14.5 per cent of total sales for the company.

Baby Bunting Group also reports a gross margin increase in 36.2 per cent, along with a net profit after tax of A$19.3 million, representing a rise of 34.1 per cent. In conjunction with this is a A$33.7 million surge in earnings before interest, tax, depreciation and amortisation, up by 24.1 per cent.

Additionally, the group outlines a rise in gross profit of 15.9 per cent, to A$146.9 million. As a result of the company’s operations remaining mostly unaffected by the Covid-19 pandemic, the group did not qualify for or receive any JobKeeper support.

Cementing this strong position is the issuing of a fully franked final dividend of 6.4 cents per share, which brings the yearly total to 10.5 cents. Moreover, on the back of this optimistic performance, the group is planning to expand its physical stores to number over 100. In addition to this, the group has performed very well in the first six weeks of the first half of FY21, with comparable-store sales growth of 20 per cent.

Commenting on the bullish results, Baby Bunting Managing Director and CEO, Matt Spencer, highlights the pleasing performance in light of the current environment. Mr Spencer further emphasises the incredible performance and execution of its growth strategy during the Covid-19 pandemic. The Managing Director also comments on the success of the group’s website in driving consumer interaction with the product offering of Baby Bunting.

Looking forward, the group aims to develop and implement a new loyalty program; expansion of existing services to include car seat hire; moving to a new distribution centre to streamline supply chains; as well as commencing shipping to New Zealand. This is in addition to increasing the number of physical stores to 100, from the current 56 that are operating in Australia.

The robust performance of Baby Bunting during the Covid-19 pandemic and the capitalising on opportunities has facilitated such incredible results. Critically, the operation of its physical stores in Melbourne despite stage four restrictions galvanises a secure outlook for the group as it moves into the new financial year.

This financial news analysis was produced in partnership with Michael Kodari, the founder and CEO of KOSEC (Kodari Securities). Michael is one of Australia’s most consistent, top-performing investors with intensive knowledge of business in the Asia-Pacific region.