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Bubs Australia Ltd posts 422% increase in quarterly sales

The Bubs Australia Ltd (ASX: BUB) share price will be one to watch on Thursday after the fledgling goats milk infant formula and baby food company released its latest quarterly update.

According to the release, third-quarter net sales increased 422% on the prior corresponding period to $5.178 million. This was also an impressive 180% increase on the net sales generated in the second-quarter of FY 2018.

Management advised that this strong quarterly growth was driven by a 63% increase in infant formula sales compared to the prior corresponding period and the first full quarter of trading from its NuLac Foods business.

This has lifted its year-to-date sales to $8,259 million, meaning almost two-thirds of its sales were generated in the most recent quarter.

These sales could be set for a further lift in the current quarter, with all three stages of Bubs’ infant formula set to be ranged in Woolworths Group Ltd (ASX: WOW) supermarkets from this month.

After which, from May onwards there will be an incremental ranging of two varieties of its organic baby cereals products in the supermarket.

In addition to this, Chemist Warehouse will be ranging five varieties of its baby food pouches in store from this month, adding to its previous supply agreement for baby cereals, baby biscuits, and infant formula thorough its e-commerce platforms. This complements its recent supply agreement with Chinese e-commerce giant JD.com.

Should you invest?

Of all the up and coming infant formula companies, which include Wattle Health Australia Ltd (ASX: WHA) and Jatenergy Ltd (ASX: JAT), I think Bubs has the best chance of becoming a challenger to Bellamy’s Australia Ltd (ASX: BAL) and A2 Milk Company Ltd (ASX: A2M).

But it is still very early days and its infant formula sales are trivial compared to these giants. Because of this, I plan to keep my powder dry until its sales catch up with its lofty market capitalisation.

Especially with Bubs having just over $5.5 million in the bank now. I suspect another capital raising will be necessary before the end of 2018 unless there is a serious uptick in sales.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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