Margin Gains and Cost Pressures Shape Baby Bunting’s Growth Outlook
Baby Bunting has reported a robust first half of FY25 with a 37% rise in pro forma NPAT and solid sales growth, underpinned by strategic execution and margin expansion.
- Pro forma NPAT up 37% to $4.8 million in 1H FY25
- Total sales increased 2.4% to $254.4 million
- Gross margin improved by 260 basis points to 39.8%
- Store refurbishment program underway with new format stores launching
- Net debt reduced to $9.1 million, supporting capital expenditure
Strong Financial Performance Amid Challenging Conditions
Baby Bunting Group Limited has reported a solid first half for FY25, demonstrating resilience and strategic progress in a competitive retail environment. The company’s pro forma net profit after tax (NPAT) rose 37% to $4.8 million, driven by a combination of sales growth and margin improvement. Statutory NPAT also increased significantly by 45.3% to $3.9 million, underscoring the strength of the underlying business.
Total sales for the period reached $254.4 million, up 2.4% compared to the prior corresponding period. Comparable store sales growth of 2.2% was a key contributor, reflecting steady consumer demand and effective execution of Baby Bunting’s growth strategy. The first seven weeks of the second half have continued this momentum, with comparable sales growth of 2.8%, despite cycling changes in promotional offers.
Margin Expansion and Operational Efficiency
One of the standout achievements in the half was the gross margin expansion to 39.8%, a 260 basis point increase from the previous year. This improvement was driven by a simplified pricing architecture, renegotiated supplier trading terms, and supply chain initiatives. The company remains on track to meet its full-year gross margin target of 40%, bolstered by anticipated benefits from retail media income and freight optimisations in the second half.
Despite increased costs associated with new store rollouts, investments in data and analytics, and marketing, Baby Bunting managed to reduce net debt from $13.0 million to $9.1 million. This deleveraging supports the company’s capital expenditure program, which is expected to be fully funded through operating cash flow.
Strategic Growth Initiatives and Store Refurbishment
Baby Bunting’s CEO, Mark Teperson, highlighted the importance of range innovation and new customer acquisition, which grew by 12% in the period. Exclusive branded products continue to drive traffic, with a strong pipeline of launches planned for the second half. The company has also made significant progress in its store refurbishment program, with three new format stores scheduled to open in 2H FY25. The first refurbishment, in Maribyrnong, Melbourne, is set to reopen in April 2025, marking the first major format update in 17 years.
These initiatives are expected to enhance customer experience and store economics, positioning Baby Bunting well for sustainable growth. The company’s outlook for FY25 remains confident, with pro forma NPAT guidance reaffirmed between $9.5 million and $12.5 million, assuming stable economic conditions and controlled cost inflation.
Looking Ahead
While the retail environment remains challenging, Baby Bunting’s disciplined approach to pricing, supply chain management, and customer engagement provides a solid foundation for continued growth. The company’s focus on innovation and operational efficiency will be critical as it navigates the remainder of FY25 and beyond.
Bottom Line?
Baby Bunting’s strong half-year results and strategic investments set the stage for a promising second half and sustained growth trajectory.
Questions in the middle?
- How will Baby Bunting’s store refurbishment impact long-term sales and profitability?
- What risks could arise from potential changes in economic or retail trading conditions?
- How effectively will the company leverage its data and analytics investments to drive future growth?
