Australian retailer Baby Bunting is on track to meet its targets for FY25, solidifying its new approach to growing market share by expanding more into the soft goods market - including clothing and footwear.
This approach was revealed by Baby Bunting chair Melanie Wilson at the retailer’s AGM late last year, when she confirmed that the retailer operates in a large market with a total addressable sales opportunity of $6.3 billion across Australia and New Zealand.
Preliminary first-half results show that Baby Bunting is 0.2 percentage points away from hitting a 40 per cent gross profit margin, one of its goals for FY25.
Meanwhile, comparable store sales growth is at 2.2 per cent - within guidance range - and which hit 4.5 per cent in the second quarter.
Group unaudited net profit after tax (NPAT) was $4.8 million, up 37 per cent compared to the first half of FY24, nearing the target range of full-year of $9.5 million to $12.5 million.
Baby Bunting also currently holds a net debt of $9.1 million.
"We are pleased to share this update today which demonstrates our successful progress in executing our strategy of growing market share, EBITDA and return on capital,” CEO Mark Teperson said.
“The November and December trading periods were particularly strong, with well-executed campaigns resonating with our consumers, driving comparable store sales growth of 4.5 per cent in the second quarter.
“At the same time, our focus on renegotiating supplier terms, simplifying our price architecture and our exclusive brands and private label works delivered significant gross margin expansion, finishing at 39.8 per cent for the first half.”
Teperson added that the momentum of growth has continued into the first weeks of the second half, reporting strong customer engagement and positive feedback “driven by our strategic range innovation across out key categories.”
Speaking at the AGM last year, chair Wilson said Baby Bunting holds around 10 per cent of the $5.2 billion opportunity in Australia and is a clear market leader in the hard goods space. But the new opportunity is to grow more share in the soft goods market, “which typically offers higher margins and allows for more frequent transactions with consumers.”
As well as clothing and footwear, which makes up the largest portion of the baby soft goods category at $1.34 billion, the market also includes nappies health and beauty at $1.29 billion and food, formula and feeding at $740 million.
Overall, the soft goods market accounts for $3.4 billion, which Baby Bunting claims around three per cent of. Meanwhile, the retailer reportedly holds a circa 23 per cent share in the hard goods market, which makes up a total $1.8 billion in Australia.
“Gaining an additional 1 per cent market share translates to approximately $34 million in incremental revenue, offering a valuable opportunity to complement our established success in hard goods and nursery essentials,” Wilson said.
“Underpinned by our new strategy we are well positioned to capture more of our large addressable market.”
Wilson shared these words before announcing her planned departure from the chair position in February 2025, once Baby Bunting announces audited first-half results.