Baby Bunting: Tony’s Insights on the One-Stop-Shop for New Parents

On this week’s episode, Tony did his pulled pork (a deep dive) on Baby Bunting (BBN), the go-to des­ti­na­tion for expect­ing moth­ers and new mums in Aus­tralia and New Zealand. From prams to nap­pies, this is a retail­er that’s been on the scene for over 40 years. But what’s real­ly going on behind those adorable store­fronts? Tony shared some fas­ci­nat­ing insights.

The Baby Bunting Story

From an orig­i­nal store in Cam­ber­well, Mel­bourne, the busi­ness has grown to 70 stores across two nations. Tony point­ed out some­thing inter­est­ing: the Nadel­man fam­i­ly, who orig­i­nal­ly set up the com­pa­ny, exit­ed around the time of list­ing. The rea­sons? Well, Tony spec­u­lat­ed that per­haps there was no one in the fam­i­ly to con­tin­ue run­ning the busi­ness.

The Competitive Landscape

BBN grew to dom­i­nate in Aus­tralia but Tony warned that New Zealand might be a dif­fer­ent ball game, espe­cial­ly with exist­ing com­peti­tors like Baby Fac­to­ry.

Its com­peti­tors in Aus­tralia now are Kmart, Big W, Tar­get and Myer. That kind of depart­ment start­ed off as Prams and Bassinets and oth­er mater­ni­ty cat­e­gories as well. But the ben­e­fit of Baby Bunting, of course, is the fact it’s all in one place, and it has a much wider range than you’ll find in a K Mart but it’s still pos­si­ble that peo­ple go into Baby Bunting, find the thing they want and go and try and shop around at K Mart and Big W or online and get a cheap­er price for it.

Corporate Responsibility

BBN’s focus on Envi­ron­men­tal, Social, and Gov­er­nance (ESG) is admirable and TK not­ed the com­pa­ny’s efforts in using recy­cled pack­ag­ing and avoid­ing prod­ucts from coun­tries with slave labor issues. A respon­si­ble approach for a brighter future, he observed.

The Financials

The high­lights:

• Sales were up 1.7% to $515.8 mil­lion
• How­ev­er, like-for-like sales were down 3.6%. Like-for-like (LFL) sales refers to the growth in sales as record­ed by the same num­ber of stores a year ago. Not a good sign.
• Online sales decreased over 8% to $103 mil­lion
• Net prof­it was down 51% to $14.5 mil­lion
• The div­i­dend was cut by more than half, to 7.5 cents
• Share price down more than 50% over the last 12 months
• Direc­tors own less than 1% of the stock, and there’s no own­er founder.

Tony did­n’t mince words about his con­cerns. Despite these fig­ures, the share price is trend­ing up, but he found the recent div­i­dend cut par­tic­u­lar­ly alarm­ing.

The New CEO

The appoint­ment of the incom­ing CEO, pre­vi­ous­ly the Glob­al Chief Prod­uct and Chief Strat­e­gy Offi­cer for After­pay, raised Tony’s eye­brows. He sug­gest­ed they might be “back­ing the wrong horse,” express­ing sur­prise we’re not see­ing a very expe­ri­enced retail­er come out of Wes­Farm­ers or Kmart or Tar­get or some­one like that to take on this role, which might sug­gest­ed peo­ple with more retail expe­ri­ence don’t like the busi­ness’s short-term prospects.

The QAV Analysis

All in all, the qual­i­ty score for this com­pa­ny is 3 out of 15, which is only 20%.

QAV score is 0.03, putting it well below our cut-off of 0.10.

When we looked at the Bret­ta­la­tor, BBN was below the buy line and still had a long way to go.

So there you have it, folks! A look at Baby Bunting through Tony’s eyes. Not a Buy for us at the moment.