ASX Watch: Baby Bunting Charges to All-Time High


Did you see this? Baby Bunting Group Limited [ASX:BBN] just released a good earnings announcement in the midst of the recent share market chaos. Investors pushed the share price 11% higher.

It’s not every day a company delivers such strong results. Management expects growth to continue from here.

While you shouldn’t take their word for gospel, the company’s 58.2% net profit after tax growth for the last fiscal year suggests the business is indeed growing.

Not sure who Baby Bunting is?

Let me fill you in…

Who is Baby Bunting?

Baby Bunting sells baby goods. The target market is parents with new children aged zero to three.

The company sells products like prams, cots, car seats, nappies and wipes.  It has more than 6,000 products available to parents in around 40 retail stores across Australia. It also has an online store.

Today, the company has a market cap of around $340 million, putting it in the small-cap sector.

Let’s take a closer look at the company’s latest announcement, and what the future may hold…

What’s next for BBN?

Baby Bunting’s total sales were $362.3 million. That’s an increase of 19% from the prior 12 months.

Some of this growth can be attributed to BBN’s strategy of securing prime retail locations, such as Chadstone Shopping Centre in Victoria. BBN also has a new store opening soon at Westfield Doncaster Shopping Centre.

Both locations have an extremely high level of foot traffic.

Though, BBN also saw relative growth in locations where competitors were pushed out of the market. BBN estimates roughly 30% of the market share will now move to its stores.

BBN also noted that its online sales have increased by 46%. Online sales now equate to 11.8% of total sales.

On the market, BBN gapped up last week after trading sideways for several months.

Take a look below…

Source: Optuma

This is an illustrative way of showing that Baby Bunting beat previous expectations and has now repriced higher.

The interesting thing about Baby Bunting is that it has achieved this result amidst the perceived gloom around Australian retail.

This suggests two things: Either the Aussie retail environment is not as bad as most presuppose, or this is a business with multiple competitive advantages that can overcome a weak sector in general.

It’s definitely a stock worth following, either way.

As always, this is not a recommendation to buy or sell BBN. It is an update only.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch