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Baby Bunting share price in focus after strong FY 2020 profit growth despite the pandemic

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The Baby Bunting Group Ltd (ASX: BBN) share price will be one to watch this morning following the release of its full year results.

How did Baby Bunting perform in FY 2020?

Baby Bunting was a very positive performer in FY 2020 despite the pandemic. The baby products retailer posted an 11.8% increase in total sales to $405.2 million.

This was driven by strong online sales growth, five new store openings, and very positive comparable stores sales growth. In respect to the latter, it recorded comparable store sales growth of 4.9% for the year. Second half comparable store sales were the strongest, up 10.5% on the prior corresponding period.

Online sales (including click and collect) grew 39.1% in FY 2020, making up 14.5% of total sales.

Thanks to higher margin private label and exclusive product sales, Baby Bunting achieved a 120-basis point increase in its gross margin to 36.2%. This led to its earnings before interest, tax, depreciation, and amortisation (EBITDA) growing at an even quicker rate than its sales. The company reported a 24.1% increase in pro forma EBITDA to $33.7 million.

It was a similar story for its pro forma net profit after tax, which grew 34.1% to $19.3 million in FY 2020. On a statutory basis, net profit after tax was down 14% to $10 million. This includes the non-cash impact of employee equity incentive expenses, significant transformation project expenses, and the impairment of digital assets and the write-off of old branding assets.

It is also worth noting that unlike Premier Investments Limited (ASX: PMV), Baby Bunting’s profit growth has come without the support of JobKeeper. As its stores remained open and its sales were strong, it did not qualify or receive any support.

In light of its positive form, Baby Bunting declared a final fully franked dividend of 6.4 cents per share. This brings its full year dividend to 10.5 cents per share.

Outlook.

The good news for shareholders is that Baby Bunting’s positive form has carried over into FY 2021. Comparable store sales growth for the first 6 weeks of FY 2021 is currently an impressive 20%.

At the end of the period the company had 56 stores operating and is aiming to grow this to 100 stores in the future. It will start by opening 4 to 6 new stores in FY 2021, with 3 of these new stores due to open in first half.

No guidance was given for the full year due to the significant uncertainty caused by the pandemic.

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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 and has recommended Premier Investments Limited. 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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