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Why the Baby Bunting share price is going bananas

Sebastian Bowen

The Baby Bunting Group Ltd (ASX: BBN) is soaring today after the company released its results for the 2019 financial year (FY19) to the market this morning.

BBN shares closed trade yesterday at $2.40 but opened this morning at $2.70 and have soared higher still – sitting at $2.72 at the time of writing, a rise of 13%.

The Baby Bunting share price has had a mixed year, with BBN shares see-sawing between $2 and $2.50 for 2019 so far, so today’s move represents a significant breakout.

Why have Baby Bunting shares gone bananas?

In short, the full-year results that Baby Bunting released this morning were very positive. Here are some of the highlights:

  • Total sales growth of 19%
  • Gross profit growth of 25.6%
  • Earnings (EBITDA) growth of 45.9%
  • Net profit after tax growth of 58.2%
  • Earnings-per-share at 12 cents – up 57% year-on-year
  • Final dividend of 5.3 cents per share, with dividends for FY19 up 58.5% year-on-year

You can read a full Foolish breakdown of Baby Bunting’s earnings here.

It seems Baby Bunting is doing a good job of staying one step ahead of its competition as well. In its report, the company noted that 70 competitor stores have closed around the country during FY18 and FY19 (including Babies-R-Us, Baby Bounce and Baby Savings). This (according to Baby Bunting) represents a $138 million market share opportunity for the company.

What’s next for Baby Bunting?

Baby Bunting is continuing to invest heavily in its successful online platform, which accounts for 11.8% of total sales. The company has noted that 75% of its top selling online products are not available on Amazon, which indicates the significant power of the Baby Bunting brand.

To further back this up, the company has also highlighted that 37% of its top 250 selling products are Baby Bunting exclusives. These numbers indicate that consumers are seeking out Baby Bunting over potential competitors, which bodes well for the long-term future of this retailer.

Having expanded from 9 stores in 2009, Baby bunting hit 53 stores this financial year and eventually plans to have a network of over 80 stores.

Foolish takeaway

In my opinion, Baby Bunting is a rare example of a retailer successfully carving out a hefty niche for itself in a highly competitive market. The company’s FY19 numbers are very impressive and explain the surge in BBN shares we have seen this morning. If you are looking to buy in, today might not be your best chance, but the market is certainly starting to recognise this company’s potential.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019