The Baby Bunting Group Ltd (ASX: BBN) share price could be on the move on Friday after the baby products retailer released a strong half year result.
What happened in the first half?
For the six months ended December 31, Baby Bunting achieved sales of $177.7 million, up an impressive 17.2% on the prior corresponding period. This was driven by the easing of tough trading conditions, online sales growth, the addition of five stores to its network, and strong comparable store sales growth of 9.5%.
Online sales grew 61% during the period and now account for 11.5% of total sales. Click and collect was a key driver of this growth with sales growing an incredible 97%. Management revealed that in areas where Baby Bunting has a store, click and collect sales now represent 47% of online sales in that area.
Thanks to a 160 basis points increase in its gross margin to 34.6%, gross profit increased 22.9% to $61.5 million. Pro forma EBITDA came in 25% higher at $11.6 million and statutory net profit after tax rose 27.8% to $5.2 million or 4.1 cents on a per share basis.
This return to form allowed the Baby Bunting board to declare a fully franked interim dividend of 3.3 cents per share, up 18% on the same period last year.
Baby Bunting's CEO and Managing Director, Matt Spencer, was rightfully pleased with the company's performance in the first half.
He said: "I am proud of our first half performance. We started the year in unsettled trading times with major competitor disruption and Toys R Us / Babies R Us in administration. As a Team, we developed a plan to capture market share, stabilise gross margin and invest in our business to support the future growth opportunity. With great focus, we have achieved what we needed to do, and at the end of the half we have seen strong market share growth and a recovery in gross margins back to levels that support our ongoing growth strategy."
Management has held firm with its upgraded FY 2019 EBITDA guidance range of $25 million to $27 million, excluding employee equity incentive expenses. This represents growth of between 34% to 45%.
Should you invest?
In FY 2018 Baby Bunting was the victim of its own success when a number of its largest competitors were forced to close down, creating heightened levels of clearance activities. The good news is that not only have these tough trading conditions eased, but there is significantly less competition in the market now.
As this result demonstrates, I believe it puts Baby Bunting in a great position to dominate the market and deliver solid earnings growth over the coming years.
In light of this, I feel it would be a good retail share to buy along with the likes of Accent Group Ltd (ASX: AX1) and Super Retail Group Ltd (ASX: SUL).
