Baby Bunting Group Ltd (ASX: BBN) shareholders will be smiling widely today.
That's because the Baby Bunting share price jumped almost 17% to $1.78 in morning trade.
This has been driven by the release of the baby products retailer's results for FY 2024 and guidance for the year ahead.
Baby Bunting share price jumps on results release
- Pro forma sales down 3.4% to $498.4 million
- Gross margin narrowed 56 basis points to 36.8%
- Net profit after tax down 74.7% to $3.7 million
- No final dividend for FY 2024
What happened during the year?
As you can see from the summary above, it was not an easy 12 months for Baby Bunting.
Its total sales were down 3.4% year on year to $498.4 million and its comparable store sales were down 6.3%. Management advised that this reflects the challenging trading conditions and cost of living pressures faced by consumers.
The good news is that the company has seen an improvement in its sales performance trajectory since May as it implements strategic initiatives that are designed to improve both top line sales and profitability.
Baby Bunting's gross profit margin was under pressure in FY 2024. It was down 56 basis points to 36.8%.
Management advised that this reflects increased margin pressure in key hard good categories, which is being addressed through a number of initiatives. This includes the simplification of pricing architecture, renegotiation of trading terms with suppliers, and elevating exclusive brand partnerships in its range offer.
This ultimately led to the company's pro forma net profit after tax falling almost 75% to $3.7 million. In light of this, the Baby Bunting board decided that no final dividend will be paid.
Management commentary
Baby Bunting's CEO, Mark Teperson, revealed that he has been pleased with the early results of its strategic growth initiatives. He said:
While it is still early days, it is pleasing to see the implementation of the strategic growth initiatives that we announced as part of our Investor Day in June 2024 starting to deliver positive momentum in our trading and financial performance.
Of note has been the improvement in trajectory of our comparable store sales since May, reflecting the change in our go-to-market strategy and the 180-basis points improvement in our Gross Profit Margin achieved in July 2024 following simplification of elements of our pricing structure. We remain focused on continuing to implement our strategy and maintaining the positive momentum achieved over the past three months.
Outlook
Potentially lifting the Baby Bunting share price today is the company's outlook statement.
Management is expecting a big rebound in its profits in FY 2025. It is guiding to pro forma net profit after tax in the range of $9.5 million to $12.5 million.
This is based on the expectation of comparable store sales growth of 0% to 3% and a full year gross profit margin of 40%.
