Baby Bunting lifts full-year profit up to 40% despite a softer fourth quarter

About Baby Bunting Group Ltd

Baby Bunting Group Ltd (ASX: BBN) is Australia’s largest specialty maternity and baby goods retailer, supporting new and expectant parents since 1979, with operations throughout Australia and a New Zealand presence following the opening of its first store there in 2022. The company’s principal product categories include prams, cots and nursery furniture, car safety, toys, babywear, feeding, nappies, manchester and associated accessories, with products primarily catering to parents with children from newborn to three years of age, and parents-to-be. Baby Bunting operates physical stores and an online channel across both countries, and offers services including car seat installation, breast pump hire and shopping consultations. The company’s strategic focus in recent years has centred on its Store of the Future refurbishment program, private label development and digital channel growth.

Group performance

Baby Bunting delivered meaningful profit growth for the full year despite a challenging consumer backdrop in the fourth quarter. Three RBA cash rate rises in the second half of the financial year, combined with higher fuel prices, weighed on consumer spending and added to the company’s distribution costs. Sales across the non-refurbished store network fell short of plan over the last seven weeks of the year, driven by softness in prams and car safety categories, which lowered average transaction values and pulled comparable store sales growth to approximately 3% in the second half, below the 6% to 8% assumed in prior guidance.

Despite this, the group is on track to deliver full-year pro forma net profit after tax of between $16.0 million and $17.0 million, representing growth of 32% to 40% on the prior year. Second-half pro forma net profit after tax is expected to be between $11.0 million and $12.0 million, growth of between 50% and 64% on the prior corresponding period, though below the previously guided range of $12.5 million to $14.5 million. Total sales for the year are expected to land between $553 million and $555 million, up approximately 6% on FY25’s $522.7 million. Group costs and capital expenditure remain in line with expectations.

Gross margin and Store of the Future

A standout feature of the result is the continued expansion of gross margin, which is expected to finish above 41% for the full year, improving from 40.2% in FY25, and reaching approximately 41.5% in the second half. The improvement reflects a combination of private label growth, a more favourable product mix and disciplined promotional management.

The Store of the Future refurbishment program continued to perform in line with expectations, with refurbished stores delivering sales growth of approximately 16% in the second half and approximately 18% for the full year. Two of the company’s largest-ever store openings took place in June, and the program remains a central plank of Baby Bunting’s strategy to modernise its store network and improve the in-store experience for expectant and new parents.

Online and New Zealand

Baby Bunting’s online channel sustained strong momentum, with online sales growth of approximately 16% for the full year. The digital channel has become an increasingly important part of the business, complementing the store network and supporting customer acquisition among digitally engaged parents-to-be. The company operates online stores in both Australia and New Zealand.

New Zealand also performed well, with sales growth in the second half above 15%. The New Zealand expansion, which began with the opening of the Auckland store in 2022, has built steadily and represents a meaningful growth opportunity for the group as it extends its market leadership in the specialty baby goods category beyond Australia.

Management view

CEO Teperson acknowledged the fourth-quarter softness but emphasised the underlying health of the business and the strategy being executed. He pointed to a strong new product pipeline in car safety, clear gross margin levers and a refurbishment program that continues to deliver, and expressed confidence in the group’s ability to continue driving value for customers and shareholders through FY27.

Conclusion

The FY26 trading update presents a picture of a business making genuine strategic progress at Baby Bunting, with gross margin expansion, online growth and the Store of the Future program all performing well, even as a consumer environment shaped by interest rate pressure and cost-of-living headwinds trimmed the final result. With full-year results due on 14 August 2026, the near-term trajectory will depend on whether consumer conditions stabilise, the continued rollout of the Store of the Future program and the group’s ability to recover momentum in its prams and car safety categories.