Momentum Grows, Sales Improve
Baby Bunting, an Australian and New Zealand retailer specializing in baby and children’s products, has reported a strong start to the 2025 financial year. The company’s new growth strategy, combined with a positive outlook for the next financial year, has driven shares up by 9 percent on Aug. 19.
In the first seven weeks of trade, Baby Bunting experienced a 3.5 percent total sales growth and a 2 percent comparable sales growth in the 2025 financial year. This growth puts the company on track to achieve a 40 percent gross profit margin for the year. Baby Bunting’s CEO, Mark Teperson, expressed his satisfaction with the positive momentum and improved store sales since May. He attributed these improvements to the implementation of strategic growth initiatives announced in June 2024. Teperson highlighted the company’s go-to-market strategy change and the simplification of pricing structure as factors contributing to the 180-basis points improvement in gross profit margin achieved in July 2024.
Baby Bunting’s financial results for the 2024 financial year were mixed. The company reported a pro forma net profit after tax of $3.7 million, which was at the upper end of the guidance range. However, the statutory net profit after tax in FY24 was $1.7 million, down 82.8 percent from FY23. The company’s group earnings before interest, taxes, depreciation, and amortization (EBITDA) stood at $15.9 million, with an EBITDA margin of 3.2 percent. Despite these challenges, Baby Bunting reported a gross profit percent of 37.3 percent in the fourth quarter, up 19 basis points from the previous corresponding period.
Chair Melanie Wilson acknowledged the difficulties faced by the company in a “difficult economic climate” and emphasized the new strategy’s focus on growing market share, boosting EBITDA, and improving return on invested capital. With $498.4 million in sales for FY24, Baby Bunting saw 21.8 percent of its sales coming from its online platform. The company also boasted a loyal customer base, with more than 90 percent of sales attributed to loyalty customers and 800,000 active loyalty customers on the books.
Reporting Season Continues
In the infant product market, Bubs Australia and A2 Milk are two other companies listed on the Australian Stock Exchange. Bubs Australia reported a net revenue of $81.1 million in FY24, representing a 35 percent increase from the previous year. CEO Reg Weine expressed satisfaction with the company’s performance, stating that they had exceeded their revenue guidance of $80 million.
A2 Milk, on the other hand, experienced a significant decline in share prices, falling by nearly 19 percent on the market following the release of their financial results on Aug. 19. However, the shares managed to recover slightly, edging up by 0.7 percent the next day. A2 Milk attributed their decline to the Chinese infant milk formula market, which saw an 8.6 percent decrease in volume and a 10.7 percent decrease in value in FY24.
In conclusion, Baby Bunting’s strong start to the 2025 financial year and their new growth strategy indicate positive prospects for the company. While they faced challenges in the previous financial year, their focus on implementing their strategy and maintaining positive momentum will likely contribute to sustainable shareholder value. The performance of other companies in the infant product market, such as Bubs Australia and A2 Milk, also provides insight into the industry’s dynamics and challenges.
