Baby Bunting Group Ltd (ASX:BBN) has an opportunity to strengthen its market position after a number of stores operated by two competitors recently entered into external administration.
It related to competitor Baby Bounce’s 10 stores across New South Wales and Queensland and competitor Baby Savings’ four stores in Sydney.
This industry consolidation further strengthens Baby Bunting’s position to grow its business and profitability in FY19 and beyond.
Mature network of 80+ stores
Baby Bunting continues to grow market share through its disciplined store roll-out program opening 4 to 8 new stores each year.
It remains focussed on achieving EBITDA margin improvement by gross margin expansion and cost of doing business leverage.
In Q3 FY18, comparable store sales growth was 4.7% against Q3 FY17 and total sales have grown 13.7% over the same period.
Short term discounting expected
Often retail businesses going into administration will liquidate their inventory through heavy discounting.
Naturally, this could result in a short term headwind for Baby Bunting.
The company’s earnings for the full financial year may be less than previous guidance of around $23 million.
It will update the market on full year guidance once the impact of the ongoing industry consolidation becomes clearer.