Baby Bunting Group Announces Market Position Strengthens as Sector Consolidation Continues

Baby Bunting Group Limited notes that earlier today administrators were appointed to the companies operating the Baby Bounce business in NSW and Queensland. The administration relates to 6 Baby Bounce operated stores in New South Wales and 4 stores in Queensland. This follows the appointment of administrators to Baby Savings Pty Ltd on 6 April 2018. Baby Savings operated 4 stores in the Sydney metropolitan area, including one that traded as Baby with Style.

Both Baby Bounce and Baby Savings are specialty baby goods retailers. The immediate trading future of the Baby Bounce and Baby Savings entities is a matter for the companies’ respective administrators.

As measured by number of stores, Baby Bounce was the third largest speciality baby goods retailer in Australia and Baby Savings was the equal fourth largest speciality baby goods retailer.

The current level of industry consolidation experienced during the course of this financial year is unprecedented. This comes at a time when Toys “R” Us, Inc. in the US has also announced the intended sale or closure of some of its global subsidiaries which may include the Australian operations. These developments follow on from the industry consolidation that was observed in the first half of FY18, including the liquidation of Bubs Baby Shops (6 stores in Queensland and 2 stores on the NSW central coast) and the closure of Baby Bounce’s 3 stores in Western Australia, along with other specialty baby goods retailers. At that time, the Company’s sales performance and gross margin were adversely affected by the distressed retailing associated with the competitor closures.

In February, the Company reiterated that EBITDA (excluding employee equity incentive expenses) for FY18 is expected to be around $23 million.

In February, the Company reiterated that EBITDA (excluding employee equity incentive expenses) for FY18 is expected to be around $23 million.

The effect of the current Baby Bounce and Baby Savings administrations is, at this stage, unknown. In the short term, it is possible that Baby Bunting’s sales and gross margin performance may be adversely affected. If that occurs, there will be a risk that the Company’s earnings for the full financial year may be less than previous guidance of around $23 million.

The Company will update the market on full year guidance once the impact of the ongoing industry consolidation becomes clearer.

Matt Spencer, CEO and Managing Director, said “These changes may have an effect on our financial performance in the short-term. However, with our low cost of doing business, strong balance sheet, established multi-channel strategy and great team, Baby Bunting is very well placed to capitalise on these market changes now and in FY19 and beyond.”


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