Baby Bunting has reported a robust first half FY26 performance, driven by strong sales growth and a record gross margin, while maintaining its full-year profit guidance amid ongoing store refurbishments.
- Total sales up 6.7% to $271.4 million
- Comparable store sales exceed guidance at 4.7%
- Gross margin hits record 41.0%, up 124 basis points
- Underlying NPAT rises 44% excluding significant items
- Full-year pro forma NPAT guidance maintained at $17.5-$19.5 million
Strong Sales Momentum and Margin Expansion
Baby Bunting Group Limited has delivered a solid first half for FY26, with total sales climbing 6.7% to $271.4 million, surpassing expectations. Comparable store sales growth of 4.7% notably exceeded the company’s initial guidance of 2%-3%, signalling robust consumer demand in the baby products retail sector.
The company’s gross margin reached a record 41.0%, up 124 basis points from the previous corresponding period, reflecting the success of its product strategy focused on exclusive and private label brands, which now represent nearly half of total sales. This margin expansion aligns with Baby Bunting’s FY26 target and underscores its ability to command better pricing and supplier terms.
Impact of Store Refurbishments and Operational Investments
Central to Baby Bunting’s growth story is its Store of the Future refurbishment program, which has delivered a 25% sales uplift across nine refurbished stores, at the upper end of the targeted 15%-25% range. The company prioritised rapid refurbishment to capitalise on key sales periods, supporting a sub-three-year payback on investment. This strategic focus on store experience and layout is clearly resonating with customers.
However, these refurbishments and network optimisation efforts have come with increased costs. Significant items related to these activities totalled $3.2 million, impacting statutory net profit after tax (NPAT), which fell to $1.8 million from $3.9 million a year earlier. Excluding these items, underlying NPAT rose a healthy 44% to $7.2 million, highlighting the underlying operational strength.
Outlook and Strategic Priorities
Looking ahead, Baby Bunting has maintained its pro forma NPAT guidance for the second half of FY26 at $12.5 million to $14.5 million, with full-year guidance adjusted slightly to $17.5 million to $19.5 million. The company expects continued sales momentum, with comparable store sales growth forecast at 5%-7% for the full year and gross margin to remain above 41%.
Capital expenditure is set to remain elevated at $41 million to $43 million, funding further refurbishments and new store openings in key locations such as Tuggerah (NSW) and Mentone (VIC). This investment underscores Baby Bunting’s commitment to long-term growth, although it has led to a rise in net debt to $21.1 million and the decision to suspend dividends for the time being.
Additionally, the recent addition of Stokke as an exclusive brand partner in Australia signals Baby Bunting’s ongoing efforts to strengthen its product offering and differentiate itself in a competitive market.
Bottom Line?
Baby Bunting’s strong half-year results and strategic investments set the stage for sustained growth, but rising costs and debt warrant close investor attention.
Questions in the middle?
- How will ongoing refurbishment costs impact profitability in the second half and beyond?
- What is the expected timeline for new store openings and their contribution to sales?
- How might the partnership with Stokke influence Baby Bunting’s competitive positioning and margins?