Baby Bunting Group reported a strong first half result with store sales growth up 6.8% compared to Morgans’ expected 2.3% and up 21.8% on a two-year basis, and momentum appears to have continued into the second half.
While a gross margin increase to 39.3% exceeded expectations, expect margin contraction in the second half on seasonality as well as the reset of hedging and freight contracts.
Looking ahead, potential for further growth in broader baby products was indicated, offering potential to further drive comparable store sales growth. The broker believes opportunity exists to win a greater share of the $5.1bn baby goods market.
The Add rating is retained and the target price decreases to $6.00 from $6.20.
Sector: Retailing.
Target price is $6.00.Current Price is $5.18. Difference: $0.82 – (brackets indicate current price is over target). If BBN meets the Morgans target it will return approximately 14% (excluding dividends, fees and charges – negative figures indicate an expected loss).
