Aggressive discounting in the baby goods sector, particularly for car seats, baby carriers and toys, have contributed to a significant fall in Baby Bunting's first-half profit.
Baby Bunting made a $3.48 million net profit during the six months to December 31, which is down by a third on the prior corresponding period's $5.22 million profit.
Chief executive Matt Spencer said the baby goods sector had experienced "aggressive discounting" as some retailers closed shop and cleared stock while others sought to maintain market share.
"Our pricing moved to meet these developments," he said.
However, he said, he expected conditions to improve in the second half due to a stabilisation of competition and company initiatives that include increasing the number of exclusive products and reaching better trading terms with suppliers.
"While our market share continues to grow, the impact of price deflation and some supply issues in the car seat, baby carrier and toy categories during the first half, constrained our earnings growth," he said.
"We are seeing some signs that market conditions are stabilising."
Total sales for the first half grew 9.8 per cent to $148.3 million but comparable store sales were down 1.7 per cent against the prior corresponding period.
The company said trade was subdued from late November to mid-December but it had had a strong Boxing Day and stocktake sales period and that had continued into the second half.
Comparable store sales during the first six weeks of the second half were up 4.5 per cent.
The company's expectation for its full-year earnings remains unchanged from its November guidance with earnings before interest, taxes, depreciation and amortisation (excluding employee equity incentive expenses) forecast to be around $23 million.
Baby Bunting shares rose 8.5 cents, or 5.8 per cent, to $1.56 on Friday.
PRICE CUTS WEIGH ON BABY BUNTING:
* Net profit down 33.3pct to $3.48m
* Revenue up 9.8 pct to $148.3m
* Interim fully franked dividend of 2.8 cents, down from 2.9 cents