Retailer of babies and infant merchandise Baby Bunting Group [ASX:BBN] said that while its total sales saw an increase of 6.6% for the first half of fiscal 2023, its statutory net profit plunged 67%.
The results had investors downvoting the baby good’s share price more than 6% by Friday afternoon, shares were worth $2.30.
Over the weekend it gained 2 cents, and shares were flat on Monday. Over the past full year BBN’s share price has plummeted nearly 54%.
Baby Bunting sales grow, yet profits fall
For the first half of fiscal 2023, Baby Bunting reported its total sales were up 6.6% on the prior corresponding period, with the total of $254.9 million.
Comparable store sales growth inched up just under a half percent compared with the first half of financial year 2022.
While instore sales were the most lucrative at 80% growth compared with 12.2% a year before, online sales delivered 4.1% less.
Baby Bunting said that pro forma cost-of-doing business expenses had risen from 30.2% in the first half FY22, to 32.4% in the latest half year, leading to the group’s gross margin coming down from 39.3% in FY22 to 37.2% in the past six months.
BBN blamed significant wage inflation, investments in new markets, and the launch of its New Zealand business investment, as well as platform and growth expansions as catalysts for heightened business expenses.
Sales may have gone up in the past half year, however, BBN revealed the group’s pro forma net profit after tax brought in the total of $5.1 million, much less than the $12.5 million pulled in the year before.
Statutory NPAT was therefore $2.7 million, 67% less than the $8.1 million gained a year ago.
It was no surprise when BBN’s board decided to distribute a much lower dividend from last year’s 6.6 cents to 2.7 cents a share this past half year (fully franked).
The company stated:
‘Gross profit margin finished the half at 37.2% which was down 212 basis points on the prior corresponding period. This was a consequence of several factors including, supply chain cost increases, rapidly increasing domestic transport costs, better than expected engagement with the recently launched loyalty program and the impacts of the contraction of the play gear category.
‘As the supply chain impacts seen in the first half normalise, and other management actions undertaken in Q2 take effect, gross margin recovery is expected to continue through the second half.’
The group expects its full-year gross margin to be between 38.0% and 39.0%, largely in line with FY22’s 38.6%. So far, gross profit percentages for January are in line with the group’s recovery plans, and up from the year prior.
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For The Daily Reckoning