Newborn and infant products retailer Baby Bunting (ASX: BBN) has potentially avoided a national catastrophe after a cluster of Khapra beetles were intercepted by the Federal Department of Agriculture, Water and the Environment (DAWE) in a shipping container holding Baby Bunting products.
Within the shipping container were 320 Peg Perego Prima Pappa Follow Me highchairs which were distributed from Baby Bunting’s Dandenong South distribution centre to retail stores where 260 units of the highchairs had been sold already.
Working closely with DAWE, Baby Bunting has taken precautionary measures to temporarily shut down their Dandenong South distribution centre while the facility is treated and inspected to ensure no presence of the Khapra beetle while retail storerooms are also undergoing treatments.
While these treatments are undertaken, Baby Bunting stores remain open, however, the Company has flagged commercial losses will be incurred as a result of disruption to the distribution centre and cost of cleaning, which it will explore options to recoup.
Common in many parts of the world, the Khapra beetle is attracted to cardboard packaging and is Australia’s highest priority pest for grains. As a highly invasive pest, the Khapra beetle is a major threat to Australia’s grains industry where it feeds directly on goods such as stored grain and dry food stuffs, which can result in significant damage.
Since interception and notification from DAWE, Baby Bunting has commenced the process of contacting the 260 customers that purchased a Peg Perego Prima Pappa Follow Me highchair between 9 September and 28 October and is offering replacement products.
The disruption is the first setback endured by Baby Bunting through the pandemic where their retail sales have thrived for the Company to report FY20 sales of $405.2 million, an 11.8% increase on the previous year.
Baby Bunting is yet to quantify the material impact of the beetle contamination with BBN shares mildly reacting to open this morning at $4.20, a 4.9% fall on their previous $4.42 close.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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