Baby Bunting issues trading warning as competitors collapse
Baby 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.
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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