Following the release of its first-half result, the Baby Bunting Group Ltd (ASX: BBN) share price has dropped lower by 5% to $2.35 in early trade.
Key takeaways from the result are as follows:
- Sales of $135.1 million, up 18.1% on the prior corresponding period.
- Comparable store sales growth of 8.2%.
- Pro forma EBITDA of $10.4 million, up 23.3% on the prior corresponding period
- Pro forma net profit after tax of $5.7 million, up 22.5% on the prior corresponding period.
- Diluted earnings per share of 4.1 cents.
- Interim dividend of 2.9 cents per share (fully franked).
- Four new store openings during the half, bringing the total store network to 40.
A big driver of top line growth was the company's strategy of growing sales at its existing stores. The company certainly achieved this with comparable store sales growth of 8.2%.
Although this was a disappointing drop from the first six weeks of the financial year, at its AGM management advised that this would be the case. So far in the second-half comparable store sales growth is at 8%.
The company's investment in improving customer experience has been a big factor in this success. During the half the company achieved a net promoter score of 58. Management believes this demonstrates a good level of customer loyalty with the Baby Bunting brand.
Another positive was the progress it is making online. Management has been working hard to improve its online sales through its click and collect service. I'm a big fan of the omnichannel approach and believe it will be key to retaining market share should Amazon launch in Australia.
Pleasingly its online investment appears to be paying dividends. During the half online sales grew 94.7% to account for approximately 5.9% of its total sales.
But despite the solid growth, management has remained firm with its full-year guidance of EBITDA between $21.5 million and $24.5 million. This equates to year-on-year growth of between 15% and 31%.
Should you invest?
Even after the drop today its shares are trading at 26x trailing earnings. At this price they are by no means cheap and come at a premium to fellow fast-growing retailers Premier Investments Limited (ASX: PMV) and Super Retail Group Ltd (ASX: SUL).
But the company does have strong long-term growth prospects from its plan to eventually double its store network to 80 stores.
If it delivers on this promise and continues to grow its online sales then it could prove to be a great long-term buy and hold investment in my opinion.
