Baby Bunting share price plunges as profits tumble 67%

The market has spat the dummy on Baby Bunting's half year earnings.

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Key points

  • The Baby Bunting share price is currently down 2.44%, trading at $2.40
  • Its fall comes on the release of the company's earnings for the first half
  • It posted a 67% fall in statutory profits and slashed its interim dividend by 59% 

The Baby Bunting Group Ltd (ASX: BBN) share price is tumbling on the release of the company's earnings for the first half of financial year 2023.

Shares in the baby goods retailer plummeted 9.8% on open before recovering. Right now, the stock is trading 2.44% lower at $2.40 a share.

Baby Bunting share price slumps as dividend slashed

Here are the key takeaways from the S&P/ASX 300 Index (ASX: XKO) company's first half:

  • $254.9 million of sales – a 6.6% improvement on the prior comparable period (pcp)
  • $2.7 million of statutory net profit after tax (NPAT) – down 67%
  • Pro forma NPAT was $5.1 million – a 59% fall
  • Comparable store sales growth of 0.4% – down from 6.8%
  • Gross margin came in at 37.2% – down from 39.3%
  • Declared 2.7 cents per share fully franked interim dividend – a 59% tumble

The company's gross profit margin was dinted by supply chain and shipping costs, better-than-expected engagement with its loyalty program, and the play gear category's contraction – driven by price deflation and reduced demand.  

What else happened last half?

Consumer behaviour at the business shifted last half as shopping patterns normalised post-pandemic.

Instore sales grew 12.2% to make up 80% of all sales while touchless click-and-collect sales fell 30.2%. Meanwhile, online delivery sales grew 6.5%, with online sales making up 19.7% of all sales.

Five new Baby Bunting stores opened during the period while progress was made on the company's ongoing transformation program.

What did management say?

Baby Bunting CEO and managing director Matt Spencer commented on the news driving the company's share price today, saying:

Over the last 3 years, our sales have grown 36.7% noting that all Baby Bunting stores remained open during the COVID period. As life has normalised, the market share gains made through COVID have predominantly been held onto.

Post-COVID, our product segment performance is normalising. Nursery essentials – being a core category – continue to grow strongly and were up 12.7% in the half (over three years, this category is up 39.4%). Consumer staples, which are more widely available across general retail, saw a decline of 4.7%. Play time items (including Play gear) declined 3.6% in the half.

What's next?

Baby Bunting provided a trading update for the first seven weeks of 2023 today.

It recorded 3.3% of total sales growth in the period. Though, its comparable store sales came in 2.1% lower.

Looking forward, the company previously announced it expects its full-year pro forma NPAT to come in between $21.5 million and $24 million and its gross profit margin to be between 38% and 39%.

Meanwhile, Baby Bunting Marketplace – presenting a "significant revenue opportunity" – is set to launch in the final quarter of this financial year.

Finally, the company announced Spencer's resignation this morning. He will continue in the role until his successor is appointed.

Baby Bunting share price snapshot

The Baby Bunting share price has had a rough trot as of late.

The stock has tumbled 12% since the start of 2023 and is now trading 53% lower than it was this time last year.

For comparison, the ASX 300 has gained 6% year to date and 0.6% over the last 12 months.

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 positions in and has recommended Baby Bunting Group. The Motley Fool Australia has recommended Baby Bunting Group. 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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