Inventory Challenges and Regional Sales Drops Cloud Bubs Australia’s Growth Outlook
Bubs Australia reported a 30% increase in net revenue to $25.6 million for Q1 FY26, driven by robust US sales and a return to profitability with positive EBITDA. Despite inventory challenges in other regions, the company maintains a solid cash position and anticipates FDA approval by year-end.
- 30% net revenue growth to $25.6 million in Q1 FY26
- Positive EBITDA of $0.5 million, reversing prior loss
- Strong US sales performance amid inventory rebuild
- Cash reserves of $12.9 million plus $10 million undrawn debt
- FDA approval expected by end of 2025
Robust Revenue Growth Led by US Market
Bubs Australia Limited has kicked off FY26 with a strong quarter, reporting a 30% increase in net revenue to $25.6 million compared to the prior corresponding period. This growth was primarily driven by the US business, which saw quarterly net revenue surge to $16.8 million from $11.3 million a year earlier. The US market's expansion reflects successful strategies including increased advertising, trade promotions, and airfreight logistics to meet customer demand despite ongoing inventory challenges.
Profitability Returns Amid Strategic Investments
The company achieved a gross profit margin of 46.4%, up from 43% in the previous year, supported by a higher proportion of sales from the US, which commands better margins. Notably, Bubs posted a positive EBITDA of $0.5 million, a significant turnaround from a $4.3 million loss in the prior period. CEO Joe Coote highlighted that this profitability was achieved despite increased investments in advertising, promotional activities, and airfreight costs aimed at protecting customer demand and supporting growth ambitions.
Inventory Rebuild and Cash Flow Dynamics
Consistent with expectations, Bubs experienced a net operating cash outflow of $4.4 million due to an ongoing inventory rebuild to support future sales growth. The company anticipates continuing negative operating cash flow into Q2 as it completes this cycle. Nevertheless, Bubs maintains a healthy liquidity position with $12.9 million in cash and an additional $10 million in undrawn debt facilities, providing a total funding buffer of $22.9 million.
Regional Performance and Leadership Changes
While the US market showed strong momentum, other regions such as China, Australia, and Rest of World faced year-on-year revenue declines, largely due to stock availability issues. Bubs expects these inventory shortages to be resolved by the end of the current quarter. The company also made key executive appointments, including Jasmin Manner as President USA and Chris Lotsaris returning to lead commercial operations in Australia and Rest of World, signaling a strategic focus on strengthening leadership in key markets.
Regulatory Outlook and Future Prospects
Bubs continues to engage positively with the US Food and Drug Administration (FDA) following the submission of its final application, with approval anticipated by the end of 2025. This regulatory milestone could unlock further growth opportunities in the US infant nutrition market. The company plans to provide additional updates on strategic priorities at its upcoming Annual General Meeting on 20 November 2025.
Bottom Line?
Bubs’ strong US growth and improving profitability set the stage for a pivotal year, but inventory and regional market challenges remain key watchpoints.
Questions in the middle?
- How will the completion of the inventory rebuild impact cash flow and margins in Q2?
- What are the prospects and timing for FDA approval, and how might it affect US market penetration?
- Can leadership changes in key regions translate into a turnaround for China, Australia, and Rest of World sales?
