Australia’s largest baby goods retailer Baby Bunting ASX: BBN) has reported a boost in profitability in the first half of the 2025 financial year (H1 FY25) driven by an uptick in sales, a rise in new customer acquisitions, and gross margin expansion.
Strong financial metrics
Net profit after tax (NPAT) of $4.8 million on a pro-forma basis lifted by 37 per cent from the same time last year, with statutory NPAT increasing by 45.3 per cent to reach $3.9 million.
The company generated total sales of $254.4 million during the half-year which represents a 2.4 per cent increase from the prior corresponding period. Comparable store sales also grew by 2.2 per cent.
Its gross margin in H1 FY25 expanded by 260 basis points to 39.8 per cent, putting Baby Bunting on track to achieve its 40 per cent full-year margin target.
Management attributed this improvement to pricing simplification for its products, renegotiations with suppliers, and supply chain efficiencies. It noted that this solid outcome demonstrates the strong execution of its growth strategy despite operating under a challenging retail environment.
Growth initiatives
Baby Bunting also continued to broaden its footprint by adding two new stores in Australia and relocating another one, taking its total store count to 75. All up, the company plans to roll-out more than 40 stores across targeted locations.
An ongoing shop refurbishment program is also progressing with the first major format update in 17 years set to debut in April. Management believes this initiative will enhance customer experience and drive stronger store economics.
A key focus for the company has been customer acquisition which increased by 12 per cent year-on-year, largely on the back of a strong pipeline of exclusive branded product launches. In conjunction, optimised trading terms, retail media income, and freight efficiencies are expected to support growth in the second half of FY25.
Baby Bunting chief executive officer, Mark Teperson, commented:
“Our focus on driving sales through range innovation and new customer acquisition is delivering results. Newness in our ranges continues to resonate, with new customer acquisition up 12% on the prior period. Our exclusive branded products remain a key traffic driver and, with a strong pipeline of exclusive launches in the second half, we expect this momentum to continue.”
Improved bottom line
Baby Bunting strengthened its net debt position from $13 million at the end of June to $9.1 million at the end of the half-year. It has also identified about $1 million in annualised cost savings from its New Zealand supply chain which is expected to contribute positively from the fourth quarter of FY25.
However, operating costs increased in H1 FY25 due to new store openings, investment in a data and analytics function, higher marketing spend, and a rise in labour costs.
Positive outlook
Baby Bunting also reported a solid start to the second half of the fiscal year with the first seven weeks of the period seeing comparable store sales growth of 2.8 per cent. Meanwhile, its January gross margin of 39.4 per cent represents a 570 basis points increase from the same time last year.
The company reaffirmed its guidance for pro forma NPAT to range between $9.5 million and $12.5 million for the full 2025 fiscal year.