Retailer of baby gear suffers dip in profits

BABY Bunting’s stocks dropped nearly 10 per cent in early trade yesterday despite the news its first-half net profit edged slightly higher.

The specialist baby goods retailer increased statutory profit by 0.6 per cent to $4.8 million in the six months to December 29, while revenue increased by 5.0 per cent to $186.39 million.

The board announced an interim fully franked dividend of 4.1 cents per share, up from 3.3 cents last year.

Pro-forma profit, which strips out the non-cash impact of employee equity incentive expenses and transformation project expenses, increased by 31 per cent to $7.51 million.

FY20 pro forma profit guidance of $20 million to $22 million remains unchanged. The company told the ASX yesterday that sales from its private label and exclusive products grew 51.6 per cent for the period and now represent 35.5 per cent of total sales, driven primarily by the support of key suppliers expanding the range of products exclusively sold to Baby Bunting.

Meanwhile, a successful integration of the “Baby on Board” car seat installation businesses, purchased in the last quarter of FY19, resulted in car fitting sales jumping by 40 per cent.

Baby Bunting said although products were sourced, either directly or through distributors, from China, it ended the first half with relatively high levels of stock, having built these up with the earlier-thanusual Chinese New Year factory closures in mind.

CEO Matt Spencer said while the majority of the company’s stock was manufactured in China, it had sufficient stock and also the ability to lay-by stock, which made up roughly 20 per cent of sales. “The coronavirus is obviously top of mind for everybody,” he told an investor call yesterday.

The company’s stocks dropped 35 cents to $3.45.