Shares in Baby Bunting have dived 5 per cent in early trade after Australia's biggest baby goods chain reported flat profit margins in the first half and tipped growth at its older stores to slow.
Baby Bunting, which sells products such as prams, cots, nappies and car seats, said same-store sales (excluding new stores) were up 8 per cent in the seven months to early February, thanks in part to strong growth in car seats and prams, but this would moderate for the year to June.
The Melbourne-based chain forecast earnings before interest, tax, depreciation and amortisation (EBITDA) to rise between 15 and 31 per cent to between $21.5 million and $24.5 million, due to growth at its older, new and online stores. Online accounts for about 6 per cent of its sales and is its biggest single store.
Baby Bunting has 40 stores and plans to open between four and eight outlets a year to reach more than 80 stores. It opened four stores in the first half (in Sydney's Belrose and Camperdown, the Melbourne suburb of Preston and Baldivis south of Perth) and plans to open a further three by the end of June.
After listing on the sharemarket in October 2015 at $1.40 a share, Baby Bunting shares reached as high as $3.21 in August last year on the back of strong same-store growth, its store rollout plans and the willingness of parents and carers to fork out big money on items such as prams.
But the company's shares fell 5.2 per cent, or 13¢, on Friday morning to $2.35, taking its year-to-date fall to 3.3 per cent.
Dean Fergie, director and portfolio manager at Cyan Investment Management, said the result "looked good across all metrics on the prior corresponding period, [with] sales up 18 per cent, same-store sales up 8 per cent and net profit up 22 per cent."
"However this has to be put in context of an evaluated valuation more than $300 million market capitalisation, and the price reaction today suggests that investors expected more than the company has delivered."
Chief executive Matt Spencer told investors that lower same-store sales growth of 8.2 per cent for the six months to January 1, 2017 was in line with its expectations. Statutory net profit was $5.2 million, up 131.1 per cent on the prior corresponding period.
Baby Bunting will pay investors a first-half fully franked dividend of 2.9¢ a share.
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