How Baby Bunting’s Store Revamp Sparked a 228% Profit Surge

Strong Financial Performance Amid Challenging Conditions

Baby Bunting Group Limited has reported a robust FY25 financial year, showcasing a remarkable turnaround with pro forma net profit after tax (NPAT) soaring 228% to $12.1 million. This performance places the company at the upper end of its guidance range, underscoring the effectiveness of its strategic initiatives amid a tough consumer environment.

Record total sales of $521.9 million, up 4.7% from the prior year, were supported by a solid 4.2% comparable store sales growth, accelerating to 6.2% in the second half. The company’s gross margin expanded impressively by 340 basis points to 40.2%, a new high for Baby Bunting, reflecting disciplined pricing strategies, improved supplier terms, and supply chain efficiencies.

Store of the Future Program Drives Growth

A key highlight was the ‘Store of the Future’ refurbishment program, which has exceeded expectations. The three stores refurbished in FY25 delivered an average 28% uplift in sales post-reopening, alongside a modest gross margin improvement above network averages. This success has prompted Baby Bunting to increase its targeted growth rate for refurbished stores to between 15% and 25%, signaling confidence in the new store format’s ability to enhance customer experience and profitability.

Exclusive and private label brands now constitute 47.1% of total sales, up 110 basis points year-on-year, illustrating the company’s strong product innovation and curation strategy. Customer acquisition remains healthy, with total active customers rising 4.5% to 828,000, supported by a refreshed value proposition and marketing efforts.

Balance Sheet Strength and Growth Investment

Baby Bunting’s balance sheet also improved, with net debt reduced to $4.6 million from $13 million the previous year. However, the board has decided against paying a final dividend, opting instead to reinvest funds to support the company’s ambitious growth plans.

Looking ahead, the company plans to refurbish 10 to 12 stores under the Store of the Future program in FY26, alongside opening five new large-format stores and several small-format pilot stores. While refurbishment closures may temporarily impact sales and costs, management expects a strong rebound with post-refurbishment sales growth targeted between 15% and 25%.

Outlook and Market Position

Baby Bunting projects FY26 pro forma NPAT between $17 million and $20 million, supported by continued comparable store sales growth and gross margin expansion to 41%. The company aims to leverage its market leadership in specialty baby retail in Australia, with significant room to grow market share in the $3.4 billion soft goods segment, where it currently holds around 3%.

CEO Mark Teperson emphasized the clear pathway to sustainable, profitable growth, driven by the Store of the Future blueprint and a strong pipeline of new store opportunities. The company remains committed to achieving greater than 10% EBITDA margins on a pre-AASB 16 basis as it executes its strategic plan.