BBN - Baby Bunting Group

Baby Bunting is Australia's largest specialty retailer of baby goods, primarily catering to parents with children from newborn to three years of age.

It is anticipated that BBN will list on the ASX during October 2015.

http://www.babybunting.com.au

Re: BBN - Baby Bunting Group IPO

System said:

Baby Bunting is Australia's largest specialty retailer of baby goods, primarily catering to parents with children from newborn to three years of age.

It is anticipated that BBN will list on the ASX during October 2015.

http://www.babybunting.com.au

Click to expand...

I can't quite believe how high this float is trading at.

Baby products are some of the MOST competitive categories in the retail market. It's available everywhere from specialty stores to KMart to ebay. I am struggling to think of how one company can have sustainable competitive advantage... except may be scale and lowest costs (which is quite dangerous for a fragmented category). Has BBN got that scale?

Here's one that didn't quite make it...
http://www.smh.com.au/small-busines...was-going-down-down-down-20151215-glnqhz.html

I just wish I could've gotten in with a discount card (do they still do those?) a couple-and-a-half years ago. Don't care about the business; would've saved me a fortune $$$

Uptrend forming over the last few weeks.

Might have to look at this if BAL and A2M stop making me richer by the day.

Has anyone had a close look at this one...if they are truly to become the Bunnings of the Baby World, they will find a place in the long-term portfolio....at what price is the question.

Why are they being sold down today?

Huge gap up for Baby Bunting Group this morning following the release of their FY18 financial results.

Here are the details:


Total online sales grew 63% and made up 9.5% of total sales. Click and collect grew 66% during the year and was 27% of online sales.

Sales from the companies expanding range of private label and exclusive products grew 100%, representing 20.9% of total sales.

The company noted in its announcement this morning that its four largest specialty baby goods competitors entered external administration during the year and have either ceased trading or are expected to do so shortly. It is inevitable that this will assist BBL with growth in FY19 as a lack of competition should help with both sales and margins.

Chartwise, BBL experienced a decline in its share price from $3.20 in August 2016 to $1.25 earlier this year. Volume and share price began to increase noticeably at the end of July leading to today's huge move north following the FY18 results.

BBL is currently trading at $2.19, up 25.96% from yesterday's close.

Market did not like news with share price down at 10:23 today



Motley Fool reports
https://au.finance.yahoo.com/news/baby-bunting-delivers-28-increase-222559991.html

Baby Bunting delivers 28% increase in half year profits

Baby Bunting Group Ltd (ASX: BBN) share price could be on the move on Friday after the baby products retailer released a strong half year result."

What happened in the first half?
For the six months ended December 31, Baby Bunting achieved sales of $177.7 million, up an impressive 17.2% on the prior corresponding period. This was driven by the easing of tough trading conditions, online sales growth, the addition of five stores to its network, and strong comparable store sales growth of 9.5%.

Online sales grew 61% during the period and now account for 11.5% of total sales. Click and collect was a key driver of this growth with sales growing an incredible 97%. Management revealed that in areas where Baby Bunting has a store, click and collect sales now represent 47% of online sales in that area.

Thanks to a 160 basis points increase in its gross margin to 34.6%, gross profit increased 22.9% to $61.5 million. Pro forma EBITDA came in 25% higher at $11.6 million and statutory net profit after tax rose 27.8% to $5.2 million or 4.1 cents on a per share basis.

This return to form allowed the Baby Bunting board to declare a fully franked interim dividend of 3.3 cents per share, up 18% on the same period last year.

Baby Bunting’s CEO and Managing Director, Matt Spencer, was rightfully pleased with the company’s performance in the first half.

He said: “I am proud of our first half performance. We started the year in unsettled trading times with major competitor disruption and Toys R Us / Babies R Us in administration. As a Team, we developed a plan to capture market share, stabilise gross margin and invest in our business to support the future growth opportunity. With great focus, we have achieved what we needed to do, and at the end of the half we have seen strong market share growth and a recovery in gross margins back to levels that support our ongoing growth strategy.”

Management has held firm with its upgraded FY 2019 EBITDA guidance range of $25 million to $27 million, excluding employee equity incentive expenses. This represents growth of between 34% to 45%.

My share tip for February 2020

Morgans Reporting Season February 2020
https://www.morgans.com.au/research-and-markets/reporting-calendar

14/02/2020 Baby Bunting Group
BBN ADD

We expect a strong result from BBN with EBITDA +38% (GM expansion a key contributor). While 1H20 LFL sales growth may fall short of FY guidance expectations (if website search function issues hasn’t been resolved), GM expansion can offset this. We expect a strong result/growth which could lead to FY20 guidance looking conservative

bigdog said:

My share tip for February 2020

Morgans Reporting Season February 2020
https://www.morgans.com.au/research-and-markets/reporting-calendar

14/02/2020 Baby Bunting Group
BBN ADD

We expect a strong result from BBN with EBITDA +38% (GM expansion a key contributor). While 1H20 LFL sales growth may fall short of FY guidance expectations (if website search function issues hasn’t been resolved), GM expansion can offset this. We expect a strong result/growth which could lead to FY20 guidance looking conservative

Click to expand...

friendly trend, @bigdog?

..and the beat goes on
..hard not to like

Hello BBN holders/followers/watchers.
No posting for about 16 months and no comments on the price crash either.
Market must have combed through these announcement's and found few holes through to punish the stock. one of them the lesser profit

I'm doing some investing and thought it'd be fun to share my investment thesis for Baby Bunting. This is a specialist baby goods store operating in Australia and New Zealand. The current market cap as of writing is circa 250m AUD.

I view Baby Bunting as a value long transaction over 3+ years at a purchase price of 1.55 AUD (10 PE ratio*) and estimated yield of 110% over 3 years (i.e. double your money). This is a bet that a historically strong business, with 15% p.a. average earnings growth over 8 years until FY2022, would continue to prosper in the long term, but is currently suffering one-off shocks which offers a buy in opportunity. Namely, the bet is on the business restoring growth due to a future catch up in Australian baby births to maintain the long term average of 300k p.a. registered births** following a slump over 2023-2024, and retail spending improving from FY2025 due to expected interest rate cuts given that inflation is now within 2-3% of the RBA target.

The 110% estimated yield comprises of
*50% from Earnings Per Share growth. This assumes restoring earnings to 20m AUD per FY22 prior to the baby slump and cost of living pressures, then rising 15% p.a. over 3 years in line with the 8 year historical growth up to FY22;
*8% dividends (13c dividend per share / 1.55c per share);
*50% due to PE ratio uplift from 10 to 15.

There is significant potential for additional upside risk due to PE ratio lifting beyond the assumption of 15. An additional 50% yield is earned for each additional 5 PE ratio. The business has market appeal as demonstrated by the historical PE ratio ranging from 20-30.

The estimated yield appears robust because there are multiple advantages to earnings growth. First, volume growth is backed by customers getting genuine value from Baby Bunting through accessibility to a large range of products, convenience as a one-stop-shop baby specialist store, and sharp pricing with a "price beat guarantee" that's enabled by cost efficiencies through baby bunting's scale in Australia. This is evidenced by revenue and earnings growth over the 8 years until FY2022. Second, a future catch up in Australian baby births to maintain the long term average of 300k p.a. registered births** following a slump over 2023-2024, would provide an additional boost in earnings. Third, earnings would boost from a forecast improvement in retail spending from FY2025 due to expected interest rate cuts given that inflation is now within 2-3% of the RBA target. Fourth, gross margins are improving following the end of unsustainable competitive pricing in the Australian baby goods sector, evidenced by recent improved gross margins. Fifth, the business is continuing to expand its store footprint to reach more customers.

There is a margin of safety by purchasing at a low PE ratio of 10* compared to estimated earnings growth of 15% p.a.
Worst case insolvency risk is considered low but non-zero. There are significant lease liabilities which do not appear to be an issue to service. The business has been continuously profitable since listing in 2015.

As a litmus test, the price of baby bunting is at an all-time historical low. This is a sign of good value.
Also management view the business as good value as there has been insider buying in 2024 (e.g. 21 Aug, 28 Jun)

*based on 210m AUD market cap and 10m earnings at FY22 prior to the baby slump and cost of living crisis
**has been 300k p.a. registered births over 2008-2022 per Australian Bureau Statistics. This still represents a general decline in fertility rate per global trends.

Have you tried posting this in another forum full of ratbags and nutters ?

Oh you have. Sorry. Keep on going. This is fascinating original stuff.





gg

asymmetric said:

As a litmus test, the price of baby bunting is at an all-time historical low. This is a sign of good value.

Click to expand...

Its also a sign of a dying business with no value!

You cant value a business using P/E for current price and earnings 2 years ago! The P/E is over 130 and I don't know anyone else who would argue that implied 'cheap'!

I also dont follow your thinking to create a 110% yield by mixing up earnings, dividends and margin expansion, that just reads like numberwanging!

I think your narrative speculation is doing a lot of heavy lifting here, maybe you are right and there is a turn around story here, but nothing in the financials suggest that is happening yet.

The thing that concerns me with just a casual glance at the historical financials is why has 10% CAGR in revenue translated into basically flat earnings over the 8 years of operations? (ignoring the massive drop in earnings last FY as an outlier.)

Re the comment
"You cant value a business using P/E for current price and earnings 2 years ago! The P/E is over 130 and I don't know anyone else who would argue that implied 'cheap'!"
The current PE based on most recent earnings is indeed insane, but I also don't think it's a fair representation because the view I've taken is the business is under a one-off shock. In this case, the PE is nonsensical.
Perhaps an alternative view that you may agree with is 20 PE based on 5 year average historical earnings. Is this cheap? Depends on your view of BBN's growth. My view is that baby bunting can restore to its earnings peak then grow further, and is therefore cheap, due to the multiple advantages to earnings growth.

Re the comment
"I also dont follow your thinking to create a 110% yield by mixing up earnings, dividends and margin expansion, that just reads like numberwanging!"
This is a simplification of the returns you'd get when you buy then sell a stock. Namely, you buy in, you collect dividends each year as you hold, then you sell at some price which I proxy as future earnings * PE ratio. This could be simply stated as a sell price but I prefer quoting in this manner to get a better sense of underlying drivers that influence the future price. This is the same manner a private equity fund would calculate final profits. It's one representation of what happens but you can use others.

Re the comment
"The thing that concerns me with just a casual glance at the historical financials is why has 10% CAGR in revenue translated into basically flat earnings over the 8 years of operations? (ignoring the massive drop in earnings last FY as an outlier.)"
There's been a slump over FY23-24 due to reasons mentioned in the original post. Before the slump, Baby Bunting earnings grew from 8.3m AUD to 19.5m over FY2016 to FY2022. This is the period of continuous growth, prior to the current slump.
The bet is this slump is one-off and the long term is optimistic

And to wrap up - yes I could be wrong. It's a bet after all.

The current P/E is not non-sensical, its simply a ratio of Price to Earnings. Its exactly correct at the moment!

You are mixing up actual cash returns (dividends) and a pie in the sky multiple to extrapolate potential capital returns. To suggest this implies a total return of 115% is numberwanging! It also highlights the problem of using P/E as a metric for valuation - the numerator being price makes the valuation dependent on price, which creates a circular argument.

The trouble is that earnings growth was very lumpy, and you are cherry picking the lowest and highest values and then extrapolating straight line growth.

Hopefully it is I that is wrong, and I am not a gambler so bets are not my thing. If nothing else you have made me look at BBN again, i did put my ruler over it when it was the darling of a few of the microcap funds who were pumping it hard at the time, and decided it wasnt for me. Its one I will keep an eye on and see how it plays out.

Good luck with your bet!

Meh.
Will remember this stock only if the grubberment starts offering big baby bonuses again.

"Latest ABS population data shows growth despite declining birthrate"

FY25 Results
Highlights
• Pro forma1 NPAT of $12.1m, up 228% vs pcp, at upper end of guidance range
• Record total sales of $521.9m, up 4.7% vs pcp
o Comparable store sales growth of 4.2% vs pcp (up 6.2% in 2H)
• Gross margin of 40.2% up 340 bps vs pcp, exceeding FY25 40% target
• Store of the Future refurbishment program delivered 28% sales uplift2 across three stores opened in FY25
• Improved net debt of $4.6m ($13.0m at June 2024)


.
Financial Outlook
Baby Bunting expects the Store of the Future refurbishment program to result in some unusual comparable store sales patterns through the year as well as some impacts to our CODB profile.

FY26 pro forma NPAT is expected to be in the range of $17.0 million to $20.0 million, assuming:
• full year comparable store sales growth of 4%-6% split:
• 1H: 1.5%-3% driven by refurbishment closures; and
• 2H: 6%-8% with post refurbishment sales growth targeted to be between 15% to 25%;
• gross margin to be 41%;
• retail store CODB investment: ~$7.0 million for new and annualising stores, $2.5 million of refurbishment related costs including accelerated depreciation and de-fit costs, plus $0.5 million of relocation costs for one store;
• targeting CODB (post AASB 16) leverage of ~30 bps;
• capital expenditure of $30 million to $35 million fully funded through operating cash flow.