Baby Bunting has warned investors that it is expecting in-store sales and profits to be lower due to the “difficult consumer environment” in which it is currently operating. But its New Zealand sales are growing quickly.
The speciality baby retailer with five stores in New Zealand, now expects full-year after-tax profits to fall between $16 million and $17 million. It also expects the figure for the second half of its fiscal year to see after-tax profits of $11 million to $12 million, down from the previously expected range of $12.5 million to $14.5 million.
This downgrade, however, would still present a growth between 50 and 64 per cent year-on-year. Explaining this downgrade, the retailer cited the three-in-a-row interest rate hikes by the Reserve Bank of Australia among the challenges it has faced.
“The three RBA cash rate rises in the second half, together with higher fuel prices, weighed on consumer spending and added to our distribution costs,” said Baby Bunting’s CEO, Mark Teperson. “Sales across our non-refurbished store network did not meet plan over the last seven weeks, driven by softness in prams and car safety categories relative to expectations, which lowered average transaction values.”
Baby Bunting now expects its same-store sales growth to fall from a 6 to 8 per cent range down to 3 per cent. Despite this, the retailer said its Store of the Future program continued to perform in line with expectations.
In December, Baby Bunting opened its first Store of the Future in New Zealand. It also continues to operate the country’s largest baby-goods store in Christchurch.
“We are proud of the progress we have made against our strategic plan,” Teperson added. “We have held gross margins above 41 per cent, driven double-digit growth in our online channel, and built strong momentum in New Zealand with sales growth in the second half above 15 per cent, all while maintaining disciplined cost and capital management and a strong balance sheet.”
Teperson said that Baby Bunting’s fundamentals and strategy remain strong, with new product developments and “clear gross margin levers” cited.
