Baby Bunting shares fall 24pc, company cuts profit guidance

Baby Bunting Group (ASX: BBN) has seen shares tumble by 24pc this morning after announcing it was slashing its full-year profit guidance due to a key promotional period delivering ‘unprecedentedly low’ sales.

In an ASX announcement, the retailer announced it expects to generate a net profit in the range of $13.5 million – $15 million, having previously flagged it would land between $21.5 million – $24 million.

A key promotional event, known as the Storktake sale, saw trading both in-store and online deliver well below expectations, with comparable store-stales falling by 21 per cent since the sales period kicked off on 23 May. 

If the trend continues, Baby Bunting expects FY23 sales to land in the range of $509 million to $513 million, which is within the $507.3 million result the group posted in FY22. Comparable store sales are also anticipated to land between -4 per cent and -5 per cent.

At the time of writing, shares are down 20 per cent at $1.41 each, and fell as low as 24 per cent to $1.36 each earlier today.

Baby Bunting’s latest trading update comes as companies like Treasury Wine Estates (ASX: TWE), Maggie Beer (ASX: MBH) and Universal Store (ASX: UNI) all flagged profit warnings as consumers tighten their belts.

“As June delivers a larger proportion of the company’s second half profit, a continuation of the current trend will have a significant impact on the company’s full year profit result,” Baby Bunting said in an update to shareholders.

“As at 4 June 2023, total sales growth is around 1 per cent and comparable store sales growth is -3 per cent.”

The group’s gross margin performance up until the end of May was on track to land within the lower end in BBN’s expected full-year gross margin range of 38 per cent to 39 per cent. It now anticipates that margin performance will be ‘moderately below’ the bottom end of that range.

Baby Bunting’s inventory levels are expected to finish around $100 million for the year, a similar result to the $96.7 million result on the year prior.

The Melbourne-based company also noted its marketplace initiative has successfully launches, with Baby Bunting activating initial third-party sellers stock keeping units (SKUs) on its website.

The group anticipates it will have more than 2,000 third-party SKUs available online by the end of the financial year.

Two weeks ago, Baby Bunting announced former Afterpay executive Mark Teperson would take over as top boss from 2 October. The company plans to release its full-year results on 11 August.