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Baby goods retailer Baby Bunting's (ASX: BBN) business model has proven to be COVID-19-proof thus far, with sales up across the board during the heaviest of COVID-19 restrictions.
As an essential retailer Baby Bunting's stores remained open to service the new parents of Australia, but many turned online during the months of March through to April.
Online sales increased from 12.4 per cent to 22.4 per cent over a two month period to 17 May 2020. This represents an increase in online sales for that period of 121 per cent year-on-year.
Implementing a click and collect service was also well received by Baby Bunting's customers, with around 42 per cent of all online orders finishing as click and collect transactions.
Overall, total sales growth during the second half (30 December 2019 to 17 May 2020) was 13.2 per cent, with online sales representing 17.3 per cent of total sales.
On a year-to-date basis total sales grew by 10 per cent with online sales representing 14.3 per cent of total sales.
"Supporting new and expectant parents and providing them with the essential products and services they need is the core of what we do," says Baby Bunting CEO and managing director Matt Spencer.
"There are around 6,000 babies born in Australia each week and we are critically aware of how important it is to provide support to new and expectant parents at a time when they face additional challenges brought about by social distancing requirements."
Spencer says when public health restrictions were first introduced the company saw strong demand for lower margin consumable products like nappies and baby wipes.
As the restriction period continued nursery products like cots, furniture, toys, and bedding became more in demand.
"We did see lower transactions in travel-related products such as prams and car seats," says Spencer.
"It is difficult to anticipate how these buying trends will play out over the coming period and how gross margin will be impacted. In addition to this, we have seen costs increase to manage the changed operating environment."
Because of its success online during the COVID-19 restriction period Baby Bunting is implementing a 'Digital Roadmap' which will see the company invest significantly into its digital shopfront.
The company intends on moving from its current e-commerce site in the next 12 months to a 'headless' e-commerce architecture.
"This will enable Baby Bunting to leverage best of breed applications to deliver a world class customer experience through the digital channel," says Baby Bunting.
"For a number of years, Baby Bunting's IT approach has utilised integration layer software to manage the interaction of data between its different applications which provides greater flexibility and ease of development.
"A headless approach to digital is a continuation of this technology approach."
As a result of this move Baby Bunting expects to recognise a non-cash impairment to the carrying value of this investment in digital in the range of approximately $2 million to $3 million in FY20.
Shares in Baby Bunting are up 9.74 per cent to $2.93 per share at 10:28am AEST.
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