Pinned straw:
Baby Bunting released a market update last week and it was ugly to say the least.
This was likely due to rising household costs forcing new parents to minimise spending on new items for their newborns and children.
Guidance of FY24 was revised down to $2-4m (compared to $9m in FY23 and almost $20m in FY22).
This may be just based on my own anecdotal evidence as myself my wife are expecting our first child in the near future, but Baby Bunting is still our preferred go to place for all our needs for our coming newborn. Their 5% price beat policy means that even though we have shopped around for the best price, we still end up going there to purchase.
Further to this (and this may be just because we are getting to that age), we know of a lot of our friends who are also expecting. Perhaps it is due to the Chinese Zodiac being a dragon year which is amongst the most sought after zodiac signs for your child to be. This may not flow through in the numbers until the 2H.
I think BBN represents an interesting business to look into given its share price decline given its market dominance in the baby category and perhaps the next results could be the bottom of their cycle.
Wonder if anyone has any thoughts?
Disc: Not held but watching...
@BoredSaint i couldnt work out why BBN GMs are half of LOV and NCK (both held) and around BRG (also held) which makes stuff. given its apparent dominant market position why? BBN -not held
BBN lots of Competition in the market. Has been growing the Revenue.. But near future the Revenue is expected to drop off also..
Net Profit Margin is very weak 2023 at 2.8% and sliding @mikebrisy shows the online Competition List nicely
@BoredSaint I tend to agree with your assessment.
It is too simple to label categories as "discretionary" and "non-discretionary". When $BBN was a fundies favourite pre-COVID and through the pandemic Bull market, there was a rationale by many saying the the spend was non-discretionary, with Baby Boomer Grandparents' deep pockets being recession-proof.
However, as you make clear, there is a huge range of price points within each element of the product range.
My wife and I waited until we were relatively well-off before starting our family 20 years ago. I clearly remember getting all the nursery stuff, gagets and buggies and observing how price insensitive we were. (I insisted on a McLaren stroller, as well as an all terrain convertible pram, because I lost the battle on owning a grown-up one!)
Had we started 10 years earlier, we would have got the same items, but probably paid 50%-70% less. Of course, that's the business model for category killers - maximise the addressible market in the category. But it does mean that when "discretionary spend" takes a hit because customers are paying 2x or 3x on mortgage repayments or 50% more on rent, then there is ample scope for a big part of the mid-market to trade down, while still meeting their non-discretionary needs.
For example, consider the humble stroller:
- $114 Babyzen Yoyo
- $669.99 Bubaboo Butterfly (But coz times are tough, don't pay $829.00, save $159.01)
- Also ... no McLaren (but you can get one at Big W for $700)
They are all just strollers.
In that context, the $BBN result isn't too bad (I've not looked at any detail beyond your post).
As a retailer, its pretty low quality, with %NM historically only in the 2-4% range. Which means the negative operating leverage is deadly, particularly given its debt. But of course, provided it makes it through the trough, the upside could be spectacular. So for me, its not one to be early for in timing!
I generally like category leaders and category killers - so, I think its probably a good time to start catching up on $BBN straws, posts, and valuations.
Disc: Not held.
My retail holdings remain: $LOV, $NCK and $BRG (not strictly retail, but discretionary retail exposed).