Baby Bunting flags another profit downgrade as its competitors go under
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Shares in baby-product retailer Baby Bunting are under pressure after the company issued a profit downgrade today.
The shares (ASX:BBN) fell 6 per cent to $1.28 but recovered to $1.32 by the close.
Baby Bunting highlighted competitive pressures stemming from the struggles of two big competitors forced into administration.
Both companies have since been forcibly liquidating stock at reduced prices.
As a result, Baby Bunting’s same-store sales growth fell into negative territory for the first six weeks of the June quarter.
“After comparable store sales growth of 4.7 per cent in Q3, we have seen comparable store sales of negative 2.5 per cent in the first six weeks of Q4, driven by a higher level of market discounting and reduced transactional volumes as competitors liquidate stock,” the company said.
The two rivals — Baby Bounce and Baby Savings — were previously the third and fourth biggest baby retailers.
Their collapse highlights challenging conditions facing the market, as retail spending remains subdued.
Online competition also remains strong. In August, shares in Baby Bunting fell more than 10 per cent after it predicted Amazon and eBay would take $50 million worth of market share in Australia.
Baby Bunting now expects EBITDA earnings for the 2018 financial year will be between $18-20 million — down from $23 million in November.
“What we have seen in the industry during this financial year in terms of the extent of consolidation is unprecedented,” CEO Matt Spencer said.
While challenging in the short term, these changes in market conditions present some great opportunities for the growth of Baby Bunting’s business and profitability in FY2019 and beyond.”
A short time ago, shares in Baby Bunting were down by 3.3% in afternoon trade, holding just above the company’s 2018-lows reached in early April: