Shareholders of Baby Bunting (ASX:BBN) are set to receive a reduced final dividend for the 2022-23 financial year, as the company unveiled a nearly 50% decline in net profit due to vanishing sales growth and pressure on profit margins.
The company informed the ASX on Friday that shareholders would be granted a final dividend of 4.8 cents per share, down from the 9 cents paid in the previous year. Consequently, this decrease results in a 52% cut in the full-year payout to 7.5 cents per share.
This announcement follows the disclosure of a mere 1.7% rise in sales for the year, which equates to less than 6% inflation, resulting in a sales figure of nearly $516 million. However, there was a stark contrast in the financials, with a 51% fall in pro forma net profit to $14.5 million and an approximate 50% drop in statutory earnings to $9.9 million.
The company cited a 37.4% gross profit margin, down 118 points, as comparable store sales experienced a 3.6% decline over the year, a stark contrast to the prior year's 5% increase.
Despite the challenges, Baby Bunting noted a second-half improvement in margin attributed to factors such as reduced international shipping rates, enhanced domestic freight efficiency, new ranges of private-label products, and changes to the loyalty program.
In an optimistic tone, Acting CEO Darin Hoekman acknowledged the challenges faced, saying, "We have continued to grow market share and experienced positive sales growth despite the increasing macroeconomic factors impacting the retail sector." He emphasized a focus on cost reduction and efficient management of working capital.
Hoekman further explained, "We will continue to invest for growth, and our store network expansion will continue in FY24. Baby Bunting has the leading market position and enviable top-of-mind brand awareness. We will continue our focus on supporting new and expectant parents through the current environment."
The company revealed net debt of $6.2 million at the end of June, with $58 million headroom in its $70 million banking facility. Baby Bunting also outlined its growth strategy, with plans to open five new stores in FY24, three in New Zealand and two in Australia.
The outlook for the beginning of 2023-24 appeared challenging due to high comparatives from the previous year, especially as pandemic lockdowns were easing. The company shared that recent trade data showed negative growth in total sales and comparable store sales, but it remains committed to its growth plan, focusing on mature store returns and an orderly store rollout strategy.
