Baby Bunting a little underweight

By Trevor Hoey. Published at Feb 17, 2017, in Features

Distributor of newborn/infant products (prams, car seats etc), Baby Bunting Group (ASX: BBN) delivered a first half pro-forma net profit of $5.7 million, slightly shy of Morgans CIMB’s forecast of $5.9 million.

Sales of circa $135 million, representing year-on-year growth of 18.1% were in line with Morgans’ expectations. The broker is attracted to the stock given it is a dominant player in a defensive sector with the potential to more than double the existing store footprint.

Furthermore, more than 40% of established stores are less than three years old, leaving scope for further organic growth in those businesses.

Adding further interest to the group’s growth prospects is the fact that a key competitor in My Baby Warehouse has fallen by the wayside, effectively providing BBN with a greater market share and arguably better pricing power.

From an operational perspective the result appeared sound with same-store sales growth tracking at 8.2%, above historical levels of circa 5%.

Chief Executive Matt Spencer noted he was happy with the performance of the new store rollout program in saying, “We have continued to expand the network by four stores in the half, including two stores in Sydney which is our largest market opportunity in Australia”.

Spencer also said that the group’s online sales growth had expanded at a ‘rapid rate’.

The group reaffirmed previous full year EBITDA guidance of between $21.5 million and $24.5 million, representing growth of between 15% and 31%. Three new store openings have been flagged in the six months to June 30, 2017.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

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