Shares in Baby Bunting Group Ltd (ASX: BBN) roared to 52-week highs on Friday after the group unveiled its results for FY25.
It was a spectacular day for investors the with the company's share price rising by 40% from Thursday's close to end the week at $2.60 per share.
On Monday, Baby Bunting shares took a breather with a pull-back sending the share price to $2.42 at the close of business.
Nevertheless, shares in the baby and maternity goods retailer are up by 31% since reporting its results.
But where to from here?
Renowned investment firm Macquarie Group Ltd (ASX: MQG) has crunched the numbers and delivered its verdict.
Before diving into the broker's viewpoint, let's first recap what the company reported.
Record sales and surging profit
Total sales hit a new record of $521.9 million after rising by 4.7% year-on-year.
Management noted that this outcome was supported by comparable store sales growth of 4.2%.
Total active customers grew by 4.5% from the previous year to reach 828,000, with new customer acquisitions also jumping by 6.2%.
Baby Bunting's gross margin of 40.2% increased by 340 basis points to surpass a previously reported target of 40%.
In turn, net profit after tax (NPAT) on a pro-forma basis rocketed by 228% to come in at $12.1 million.
Net debt of $4.6 million at the end of June also improved substantially – down from $13 million at the same time last year.
Growth strategy gains momentum
Meanwhile, the company's Store of the Future refurbishment program generated a 28% jump in sales across three stores opened in FY25.
This recently launched growth initiative features modernised store layouts to enhance customer experience and drive sales.
Baby Bunting is targeting up to 12 Store of the Future refurbishments in FY26.
It also plans to open five new large format stores and three small format pilot stores in the first half of the fiscal year.
Macquarie weighs in
Analysts at Macquarie group have now chimed in with their views following the surge in Baby Bunting shares.
And the broker appears to be taking a cautious tone.
It noted that Baby Bunting's growth strategy is showing early signs of traction with 28% sales growth across the first three refurbished stores.
That said, Macquarie pointed to higher promotional activity and the short timeframe of less than four months since these stores first opened.
As such, the broker is keen more information from the refurbishment program in FY26 before becoming materially positive on Baby Bunting shares.
Macquarie is projecting year-on-year comparable store growth of 4.3%, which comes in at the lower end of management's guidance.
It believes that the significant number of refurbishments in FY26 could impact comparable store growth targets.
Similarly, its estimate for FY26 NPAT is 3.5% lower than the bottom end of the company's guidance, which ranges between $17 million and $20 million.
In turn, Macquarie has placed a neutral rating on Baby Bunting shares with a 12-month target price of $2.50 per share.
This implies a modest 3.3% upside from Monday's closing price.
However, the broker noted that improved consumer demand stemming from interest rate cuts could help the company meet its targets.
It also sees continuing sales growth in FY26 as a potential catalyst for Baby Bunting shares.
