Aussies may be tightening the household budget amid rising cost-of-living expenses but when it comes to retail spending, there’s one area that families are happiest to spend on – babies. It’s also why retailer Baby Bunting (ASX: BBN) has bucked the retail trend with another bumper result.
For the 52 weeks ended 26 June 2022 (FY22 in retailer terms), Baby Bunting reported $507.3 million in sales which represented an 8.3% increase on the previous year. As a retail category that is traditionally sold with high margins given the minimal price sensitivity of customers buying for their most prized possessions, Baby Bunting delivered this revenue at 38.6% gross profit, a 1.51% increase on last year.
All of this contributed to $19.5 million in statutory net profit after tax, a 14.6% increase from last year.
“Our total sales exceeded half a billion dollars for the first time. We continued to grow our market share at the same time as we delivered very strong gross profit growth,” said Baby Bunting Managing Director, Matt Spencer.
“But we also worked hard to continue to drive further efficiencies in our supply chain and in our buying to ensure we provide great prices to our customers, at a time when value remains so important.
“It is a tremendous result given the COVID-related lockdowns in place around Australia in the first half and the disruptions that occurred during the year. I am proud of the way our team has worked hard to keep us moving forward during the challenges this year, delivering some great operational performances as well as delivering on our transformation agenda.”
At a time when other retailers are downsizing their operations due to declines in foot traffic, Baby Bunting has been increasing its network. The year saw four new stores opening, as well as two stores relocated and two refurbished. This occurred in parallel with increased online activity for Baby Bunting, who’s online sales of $112.7m was a 24.2% increase on FY21, and represented 22.2% of total sales for the Company.
Profits for the year could have been even higher had Baby Bunting not spent a substantial amount of the year investing in their expansion into New Zealand where they opened their first store just hours before reporting their FY22 results. On top of the opened store itself, Baby Bunting has established a distribution centre in Auckland and established a standalone team to work with local suppliers with plans to expand their New Zealand footprint in the coming years.
The addressable market in New Zealand for baby products is estimated at NZD $450 million per annum. With their Auckland store now open, a location in Christchurch is expected to open in the coming weeks while the Company’s plans have a total of 10 stores planned for their NZ network.
In Australia, Baby Bunting currently operates 65 locations but has plans to expand to 110 having emerged as the leader in the space where its largest competitors are general retailers like Kmart and Big W, or online marketplaces like Amazon and eBay.
As part of their investment into their digital channels, Baby Bunting also has plans to launch its own marketplace, while its digital strategy has future-proofed the business through its loyalty program which has 1.4 million members. Considering the niche nature of maternity and baby products, the program is a core driver of Baby Bunting’s marketing initiatives where members account for 81% of total sales.
Many of these members will soon have access to discounts on the Baby Bunting marketplace which will be open to 3rd party sellers, increasing the range of products accessible to mothers, while Baby Bunting can take a clip on all products sold. The marketplace is expected to launch in H2 of FY23.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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