'Our future is looking bright': Baby Bunting share price slips despite earnings milestone

The company's total sales surpassed $500 million last financial year.

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Key points

  • The Baby Bunting share price is sliding on Friday, falling by more than 3% to trade at $4.695
  • It comes after the company announced its sales and profits rose 8% and 15% respectively in financial year 2022
  • It also provided a trading update for financial year 2023 so far, during which its comparable store sales have risen 15% while its total sales have grown 19%

The Baby Bunting Group Ltd (ASX: BBN) share price is in the red on Friday after the company released its earnings for financial year 2022.

After opening at $4.87, 0.2% higher than its previous close, the nursery retailer's stock has slipped to trade at $4.695. That represents a 3.4% fall.

Baby Bunting share price falls as sales surpass $500m

Here are the highlights of the company's full-year earnings:

  • Sales reached $507.3 million – 8.3% higher than that of the prior corresponding period (pcp)
  • Earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 16.1% to $50.5 million
  • Statutory net profit after tax of $19.5 million – a 14.6% increase
  • Online sales represented 22.2% of all sales, coming in at $112.7 million
  • Final dividend of 15.6 cents per share – a 10.6% increase on that of the pcp

Baby Bunting surpassed a major milestone in financial year 2022, boasting more than half a billion dollars of total sales for the period.

Its comparable store sales also grew, increasing 5% over the last 12 months and 25.2% over the last two years. Sales of its private label and exclusive products also increased to represent 45.3% of all sales.

Meanwhile, its core Australian business (excluding New Zealand start-up costs) brought in $31.1 million of pro forma after-tax profits – a 20% improvement.

What else happened in FY22?

The last financial year was a relatively quiet one for the baby-focused retailer.

The Baby Bunting share price slumped 3% when the company released its half-year results in February.

It also worked to enter the New Zealand market, opening its first store across the ditch today. Its establishment in the nation brought $1.5 million in one-off costs.

It also transitioned its digital technology to a headless architecture, switching over the Australian website in January, and launched its loyalty program 'Baby Bunting Family' across all channels in February. The company noted that 81% of sales are transacted by a loyalty member.

What did management say?

Baby Bunting CEO and managing director Matt Spencer commented on the company's earnings, saying:

Baby Bunting has had a very successful year. Our total sales exceeded half a billion dollars for the first time. We continued to grow our market share at the same time as we delivered very strong gross profit growth.

Our future is looking bright.

We have started the new financial year in good shape. We are the clear leader in our category.

What's next?

The company's immediate future does, indeed, appear busy. Though, it hasn't provided any earnings guidance, blaming economic uncertainty, inflation, and other global challenges.

It's working to expand its market to a $3.5 billion market, targeting that beyond birth-to-three-years-old in certain categories and growing online.

It's also looking to grow its Australian network by six stores in financial year 2023 and open another store in New Zealand in the second half.

Work has also begun on a Baby Bunting marketplace ­– expected to launch in the second half.

Finally, Baby Bunting provided a trading update for the period from 1 July to 10 August.

Its comparable store sales rose 15.3% in that time compared to the pcp. That's expected to moderate as the company cycles periods impacted by lockdowns. Meanwhile, its total sales increased by 19.3%.

Baby Bunting share price snapshot

The Baby Bunting share price has underperformed the broader market so far in 2022. Though, it's doing well compared to its sector.

The stock has fallen 15% year to date. Meanwhile, the All Ordinaries Index (ASX: XAO) has dumped 8%.

But, while the company isn't included on the S&P/ASX 200 Index (ASX: XJO), it's worth noting the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) has fallen 19% since the start of 2022.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Baby Bunting. 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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