Baby Bunting Charts Bold Growth with ‘Store of the Future’ and New Formats

• FY25 NPAT guidance set at $10-12.5 million with 40% gross margin
• Plan to refurbish 8-12 stores and open 5-8 new stores including small format pilots
• Small format stores aim for $2 million revenue and 50% ROIC
• Leveraging retail media and omni-channel integration to boost customer lifetime value
• Capital expenditure of $11-12 million fully funded through operating cash flow

Strategic Reset for Growth

Baby Bunting Group Limited has laid out a comprehensive blueprint to rejuvenate its retail footprint and financial performance through its newly announced ‘Store of the Future’ strategy. Presented on 1 May 2025, the plan aims to stabilize and grow the business by targeting a gross margin of 40% and delivering FY25 pro forma NPAT between $10 million and $12.5 million. This guidance assumes modest comparable store sales growth of 2-3% and incorporates anticipated cost pressures including wage inflation and investments in brand awareness, particularly in New Zealand.

The company’s vision is clear: to support confident parenting from newborn to toddler, leveraging its leadership in hard goods while aggressively expanding into the soft goods segment, which represents a significant growth opportunity within a $6.3 billion ANZ total addressable market.

Revitalizing the Store Network

Central to Baby Bunting’s strategy is a targeted store refurbishment program, aiming to refurbish 8 to 12 stores in FY25. Early results from the new store format have been encouraging, with refurbished locations like Maribyrnong already trading above targeted growth rates. Each refurbishment is expected to drive over 10% comparable store sales growth, with capital investment per store ranging from $0.8 million to $1 million and a payback period capped at three years.

Complementing this is an ambitious network expansion plan, including 5 to 8 new stores and pilot launches of small format stores in metro markets such as Robina (QLD), Plenty Valley (VIC), and Marion (SA) starting in FY26. These smaller stores are designed to unlock high-value catchments not currently served by large format stores, targeting revenues exceeding $2 million and a robust 50% return on invested capital. The curated product mix will focus on consumables and higher frequency categories, optimizing for higher margins and lower operating costs.

Harnessing Omni-Channel and Retail Media

Baby Bunting is also doubling down on its omni-channel capabilities, with over 75 stores acting as distribution hubs and a digital ecosystem that includes click & collect, on-demand delivery, and ship-from-store options. The company reports that omni-channel customers deliver 2.6 times the value of single-channel shoppers, underscoring the importance of integrated retail experiences.

In a novel move, Baby Bunting is developing a retail media business to monetize its extensive in-store and digital assets. With 800,000 active loyalty customers and 32 million annual website visits, the company aims to generate $2-3 million in incremental gross margin from media contributions in FY26. This initiative leverages targeted advertising embedded within physical stores and online platforms, promising superior return on ad spend through closed-loop attribution.

Financial Discipline and Future Outlook

Capital expenditure for FY25 is forecasted at $11 million to $12 million, fully funded through operating cash flow, reflecting disciplined balance sheet management. The outlook assumes no significant macroeconomic disruptions, but the company acknowledges risks related to cost inflation and execution of new store formats.

Baby Bunting’s strategy to re-establish itself as a +10% EBITDA margin business hinges on a combination of gross margin expansion, cost control, network growth, and new revenue streams. The company’s focus on customer experience, data analytics, and retail innovation positions it well to capture evolving consumer preferences, particularly as its core customer base shifts from Millennials to Gen Z parents over the next five years.

Bottom Line?

Baby Bunting’s ‘Store of the Future’ strategy sets a clear path to margin expansion and market share growth, but execution on new formats and media monetization will be critical to watch.

Questions in the middle?

• How will the small format store pilots perform in diverse metro markets and impact overall profitability?
• What is the potential scale and profitability of the retail media business beyond FY26 targets?
• How resilient is Baby Bunting’s growth outlook amid rising cost pressures and uncertain macroeconomic conditions?