Baby Bunting issues trading warning as competitors collapse

Baby Bunting1Baby Bunting has warned investors that its full year earnings guidance could be adversely impacted by sector consolidation, which has claimed the scalps of the third and fourth largest retailers in the baby goods category in the last week.

Infant goods chain Baby Bounce collapsed on Tuesday morning and is in the process of closing at least 2 of its 10 remaining locations in NSW and Queensland, while the future of Sydney-based Baby Saving’s 4 NSW stores is in doubt after it fell into administration last week.

Both businesses have begun clearing stock, with Baby Bounce swiping up to 80 per cent off in its Chatswood store in Sydney and Baby Savings dropping prices by between 15 – 65 per cent in Chatswood, Prospect and Kotara.

A Baby Savings representative has confirmed that the business is in administration, while Baby Bounce has disconnected 9 of its 10 store hotlines but appears to be still trading online.

The collapses follow the liquidation of Bubs Baby Shops late last year, which had 8 stores across Queensland and NSW, and comes amid uncertainty over the future of Toys ‘R’ Us’ Babies ‘R’ Us chain.

The developments have prompted Baby Bunting, the market leader with 43 stores, to issue a trading update, warning that margins have come under pressure in recent weeks.

Baby Bunting reported a 27.2 per cent decline in its first half profits in February as a result of margin pressures driven by sector consolidation.

“The effect of the current Baby Bounce and Baby Savings administrations is, at this stage, unknown,” the company told investors on Tuesday afternoon. “In the short term, it is possible that Baby Bunting’s sales and gross margin performance may be adversely affected.”

Baby Bunting revealed on Tuesday that its Q318 comparable sales were up 4.7 per cent on the prior period, while top line sales have grown by 13.7 per cent.

Baby Savings

Baby Savings website has shut down, directing customers to an information hotline.

It has also opened three stores so far in the second-half, taking two NSW sites that were previously occupied by Bubs Baby Shops and plans to open another in Chatswood in early FY19, capitalising on vacancies that are likely to be left by Baby Savings and Baby Bounce.

“These changes may have an effect on our financial performance in the short term. However, with our low cost of doing business, strong balance sheet, established multi-channels strategy and great team, Baby Bunting is very well placed to capitalise on these market changes now and in FY19 and beyond,” Baby Bunting chief executive and managing director Matt Spencer said in a statement.

More to come…

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Comments

2 comments

  1. Avatar

    Jan Deane posted on April 11, 2018

    This is puzzling with the growth in population in Australia, a lot of which comes from migration I know, but where do the parents of the tens of thousands of babies born each year buy their nursery equipment? The department stores no longer seem to sell prams and cots etc., so not sure where they are going, if not to specialist baby retailers. It is the same with kids' clothes - compared to women's fashion retailers there are hardly any stand-alone childrenswear shops now, so do Target, KMart, Myer and DJs have the entire market to themselves? Perhaps one of the retails experts out there can enlighten me? reply

  2. Avatar

    Susan steel posted on April 13, 2018

    Hi Jan, The problem - as I see it - is not that there aren't tens of thousands of potential customers for baby goods and equipment - but that the massive online baby stores and other crass discounters- shot everyone in the foot with their race to the bottom on prices. The prices they offered these goods at, gave an unrealistic view of the actual cost, value proposition etc of these brands and products.This meant it was basically barely worth the while of physical stores (especially the behemoth department stores - who's days are nearly done anyway) stocking the big outlay equipment as they cannot compete with these no-margin -left-to-pay-bills prices. These massive discount online sites, involved in some ruthless rush to diminish the perceived and actual value of quality items, will naturally eventual fall due to the mistaken thinking that all consumers care about is getting as much crap as fast and as cheaply as possible. In the end - the low price strategy loses out (exceptions: if they are the importers, rebranding crap products as quality and sell at quality price- unethical but profitable-, and other wholesalers who sell direct to public, or if you are Amazon who just keeps getting injections of investment money irrespective of whether they are profitable or not, or if you don't pay your bills, or if you can get your cash reserves up, your loans in control, run a very tight ship and simply hang in there longer than the other guys - and once they are gone you can hike your prices up - to a business sustaining level - even this is problematic -as there is always a newbie who thinks undercutting is a successful proposition). And there are plenty of stand alone - small business baby/child toy/children's stores who are debt free and profitable enterprises - on a much smaller scale, who watch the big guys build up and fail one after the other, - while they quietly get on with running tight, smart businesses. The humans that run these places actually care about their customers: babies, children, parents, grandparents . While still profiting, they do not do so at the expense of ethics, the impact their products will have on the (child's future) environment, children's safety. reply

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