Baby Bunting Accelerates Growth with 37% NPAT Surge in 1H FY25
Baby Bunting has reported a robust first half for FY25, with net profit after tax rising 37% to $4.8 million and sales edging up 2.4%. The company’s strategic initiatives around margin improvement and store expansion underpin a stable outlook for the full year.
- 1H FY25 pro forma NPAT up 37% to $4.8 million
- Sales increased 2.4% to $254.4 million with 2.2% comparable store growth
- Gross margin improved by 260 basis points to 39.8%
- Net debt reduced to $9.1 million, reflecting disciplined capital management
- FY25 NPAT guidance maintained at $9.5 million to $12.5 million
Solid Financial Performance Amid Strategic Execution
Baby Bunting Group Limited has delivered a strong first half for FY25, showcasing a 37% increase in pro forma net profit after tax (NPAT) to $4.8 million, supported by a 2.4% rise in sales to $254.4 million. This performance reflects the company’s focused efforts on driving earnings growth through strategic initiatives, including margin enhancement and store network expansion.
The company’s comparable store sales growth of 2.2%, accelerating to 4.5% in the second quarter, signals a positive trajectory in customer engagement and market penetration. Gross margin improvements were notable, rising 260 basis points to 39.8%, driven by a simplified price architecture and renegotiated supplier trading terms.
Strategic Investments and Operational Discipline
Baby Bunting’s cost of doing business (CODB) increased to $87.2 million, reflecting strategic investments in store expenses, wage inflation, and marketing aimed at new customer acquisition. Despite this, the company maintained a disciplined capital management approach, reducing net debt from $13.0 million at the end of FY24 to $9.1 million by December 2024.
Notably, the company will not pay an interim dividend this year, prioritising reinvestment to support its near-term growth strategy. The cash conversion ratio from operations stood at 63%, underscoring efficient cash flow management amid ongoing expansion.
Growth Initiatives and Market Expansion
Baby Bunting has expanded its store network to 75 locations, including new openings in Maroochydore (QLD) and Belmont (WA), with plans for further refurbishments and new store formats. The company is also advancing its private label and exclusive brand offerings, which accounted for 46% of sales in the first half, enhancing product differentiation and margin potential.
In New Zealand, sales doubled to $7.8 million, although the region remains loss-making with a pre-tax loss of $2.1 million. Management has completed a review of the New Zealand supply chain and distribution network, identifying annualised savings expected to commence in the second half of FY25.
Outlook and Future Prospects
Looking ahead, Baby Bunting maintains its FY25 pro forma NPAT guidance in the range of $9.5 million to $12.5 million. The outlook assumes comparable store sales growth between 0% and 3%, a gross margin target of 40%, and cost pressures from wage inflation and strategic investments. Capital expenditure is forecast between $10 million and $13 million, fully funded through operating cash flow.
The company’s focus on exclusive product launches, supply chain optimisation, and enhanced customer experiences through digital and retail innovations positions it well to capitalise on the $6.3 billion Australia-New Zealand baby products market. The ongoing rollout of new store formats and refurbishment projects signals a commitment to evolving the retail footprint to meet changing consumer needs.
Bottom Line?
Baby Bunting’s disciplined execution and margin expansion set the stage for sustained growth, but investors will watch closely how the company navigates cost pressures and New Zealand profitability challenges.
Questions in the middle?
- How will Baby Bunting balance cost inflation with margin expansion in the second half?
- What impact will the new store formats and refurbishments have on customer engagement and sales?
- Can the New Zealand operations turn profitable as supply chain efficiencies are realised?
