Cost-of-living crunch hits spending on baby goods
Australia’s largest specialist baby retailer will miss earnings forecasts following weak sales of its baby strollers and car safety products over the past few months.
Baby Bunting expects to make a net profit of $11 million to $12 million in the second half of its fiscal year, up 50 percent to 64 percent from the previous year, but below the previous forecast of $12.5 million to $14.5 million.
The group also forecasts same-store sales to grow by just three percent in the second half; down from six to eight percent in the previous estimate.
Baby Bunting CEO Mark Teperson said on Wednesday that the group’s expected pro forma profit growth of 32 per cent to 40 per cent for the full year ending June 30 would still be a strong result, given a challenging trading environment.
“The increase in three (central bank) cash rates in the second half, together with higher fuel prices, depressed consumer spending and increased our distribution costs,” he said.
Sales at the group’s unrefurbished stores over the last seven weeks have not gone quite to plan.
This was due to softness, which lowered average transaction values in the strollers and car safety categories.
However, the renovated Baby Bunting stores are performing in line with the forecasts and sales increased by 18 percent for the whole year.
The group has 74 stores in Australia and five in New Zealand.
Around 15 stores across Australia have undergone extensive renovations as part of the “store of the future” programme, to add features such as a whimsical canopy of feeding bottles and calming spaces that will evoke a friend’s kitchen.
“The fundamentals of our business and the strategy we execute remain strong,” Mr. Teperson said.
RBC Capital Markets analyst Jackie Moody said it was a negative update but at least group costs, capital expenditure and future program storage remained in line with expectations.
In afternoon trading, Baby Bunting shares fell 11.4 percent to $1.46, a two-week low.
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