Baby Bunting warns of short-term hit after collapses
BABY Bunting has warned its full-year profit may fall short of its expectations following the collapse of two rival chains.
In an update to the Australian Securities Exchange yesterday, the baby goods retailer noted administrators had been appointed to rival chains Baby Bounce and Baby Savings.
The effect on Baby Bunting was unknown “at this stage”, the group said, adding that its sales and profit margin might be hit.
“If that occurs, there will be a risk that (our) earnings for the full financial year may be less than previous guidance of around $23 million,” the group said.
Baby Bunting noted that its sales and profit margin had been hit previously when rival retailers collapsed and went through a period of “distressed retailing”.
Although retailers generally benefit in the long term when rivals collapse, they can take a short-term hit due to the clearance sales carried out by administrators.
Baby Bounce has 10 stores across New South Wales and Queensland, while Baby Savings has four stores in Sydney.
“The current level of industry consolidation experienced during the course of this financial year is unprecedented,” Baby Bunting told shareholders.
In February, the retailer reaffirmed its full-year earnings forecast despite suffering a 33 per cent plunge in first-half net profit, compared with the same period a year earlier, to $3.5 million.
As he announced the company’s first half results, chief executive Matt Spencer said the company was “seeing some signs that market conditions are stabilising”.
The latest store closures in the sector come after US-based Toys ‘R’ Us announced earlier this year that it would look to sell or close of some of its subsidiaries, which could include its Australian operations.