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Reports of consumers trading down and a stalled recovery have spooked investors in retailer Baby Bunting (ASX: BBN) with shares plunging 22.6 per cent today to $1.47, shaving off almost $58 million from the Melbourne-based company's market capitalisation.
Baby Bunting reports that a trend of improving comparable store sales in January and February has softened over the last two trading months, reflecting the ongoing cost-of-living pressures being experienced by new parents with young families.
Comparable store sales to the end of April were down 7.7 per cent, compared to a 2.8 per cent decline during the same period in 2023.
"Baby Bunting remains focused on providing great value to customers. We’re acutely aware that our customers are more sensitive than many other groups to the widespread cost-of-living pressures and are managing their spending carefully," says Baby Bunting CEO Mark Teperson.
"While we have seen an improving trend in transactions in 2H compared to 1H, this was heavily impacted by a declining average transaction value driven by consumers trading down and ongoing competition in nursery essentials impacting market price."
The retailer is forecasting net profit after tax (NPAT) of $2-4 million - a result that includes a loss of approximately $1.2 million associated with the extended closure and remediation of the Cairns store due to structural issues with the property.
With four new stores having opened in the first half of FY24, inventory is running at around $10 million below the prior year, and net debt is comparable to the end of April 2023.
The company notes that all stores are now enabled for online fulfilment, thus delivering lower freight costs due to fewer split orders, better utilisation of inventory and lower pick costs through April.
"Our focus on customer experience and simplification of the business continues," adds Teperson.
"We continue to look for opportunities to align the cost profile with the group’s sales trajectory and future growth plans."
The news comes amid other results from companies in the sector that disappointed shareholders, including online furniture seller Temple & Webster (ASX: TPW) whose shares plummeted almost 18 per cent, and electronics retailer JB Hi-Fi (ASX: JBH) with shares down 4.5 per cent.
In the case of Temple & Webster, the company reiterated its EBITDA guidance of 1-3 per cent targeting the mid-point of that range, with sales up 30 per cent year-on-year from the start of the year through to 5 May.
For JB Hi-Fi, comparable sales for the quarter were down slightly in JB Hi-FI Australia and for The Good Guys with declines of 0.3 per cent and 0.8 per cent respectively, while same-store growth in New Zealand was up 2.9 per cent amidst overall sales growth of 16.8 per cent across the Tasman.
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