The Baby Bunting Group Ltd (ASX: BBN) share price is trading flat today following the release of an operational update.
At the time of writing, shares in the baby goods retailer are slightly higher at $4.43, up 0.23%. In comparison, the All Ordinaries Index (ASX: XAO) climbed up 1.1% to 6,336 points.
What happened?
Baby Bunting said it was working closely with the Federal Department of Agriculture, Water and the Environment (DAWE) after a problem with a recent overseas shipment affected the goods being received.
The company advised insects had been found in a shipping container holding 320 units of Peg Perego Prima Follow Me highchairs. The Khapra beetle was found inside the shipment, a common insect attracted to cardboard packaging.
In response, Baby Bunting's Dandenong South Distribution Centre in Victoria has been closed temporarily for inspection and treatment. This has affected the distribution of stock being flowed onto retailers. Normal operations are expected to progressively resume early next week.
Baby Bunting said that while the product with the affected packaging had been delivered to retail stores, it remained in storerooms. Acting quickly on the discovery, the items have now been quarantined and inspection by DAWE officers is under way. Treatment of the impacted storerooms is also being undertaken. All retails store will continue to remain open, but there may be some minor disruption over the coming weeks.
Costs are expected to be incurred to Baby Bunting for the containment and treatment plans associated with the insect dilemma. Furthermore, the company is assessing its options to recover some of these expenses.
Baby Bunting will provide replacement products to customers who had purchased the Peg Perego Prima Follow Me highchairs. More than 260 units in total were sold in the 7-week period.
The company has not indicated the impact to its performance for the quarter.
Baby Bunting share price on the rise
Despite this recent incident, the Baby Bunting share price has risen in strength over the past 8 months. From reaching a multi-year low of $1.51, shares in the company have jumped almost 200%. Demand for the retailer's products led its shares to an all-time high of $5.18 just last month.
Baby Bunting has a market capitalisation of $615.9 million and a price-to-earnings ratio (P/E) of 61.4.
