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SHARES in retailer Baby Bunting (ASX: BBN) have dropped by more than 10 per cent after it downgraded its full year earnings guidance.
The retailer says its FY18 earnings will be similar to the $23 million it delivered in FY17, which is less than its original forecast of between $25.3 million and $27 million.
The company attributes the drop in earnings to high margins suffered amid challenging market conditions.
Baby Bunting shares fell 10.4 per cent on Monday to $1.41, and at around 11am (AEST), they were down a further 3 per cent to $1.36.
Matt Spencer, Baby Bunting CEO, says market pricing has not stabilised as industry consolidation and aggressive discounting continues.
"Given the challenging conditions in the first four months, we think it appropriate to adjust our guidance," says Spencer.
"Nevertheless, the business is performing well and we believe our strategy is working."
Baby Bunting's struggle in the retail sector is symptomatic of the Australian retail sector as a whole.
Sales for the baby goods chain for the first four months to November 13 were up 11.4 per cent but comparable store sales were flat.
Spencer specified that most of the store's struggles came from intense discounting in the sector from competitors and a shortage of car seats and capsules, and that he was surprised at the length of discounting.
"We are expecting things to normalise over a period of times but it is taking a little bit longer than we thought," says Spencer.
Spencer says the company would not comment on whether it would sign up to the Amazon Marketplace when the online behemoth launches within weeks.
At around 11.30am (AEDT) Baby Bunting shares were down by 3.19 per cent to $1.36 per share.
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