Why Did Baby Bunting Shares Jump Despite Profit Missing Expectations-Is Sales Momentum Driving Optimism?

Source: Kapitales Research

Highlights:

• Comparable store sales rose 4.7%, beating guidance, while total sales reached $271.4 million.
• Pro forma NPAT of $5 million missed expectations due to one-off costs, despite stronger underlying earnings.
• Full-year guidance maintained at $17.5 million–$19.5 million, with sales momentum continuing into 2H FY

Baby Bunting Group Limited (ASX: BBN) delivered a mixed yet market-pleasing first-half FY26 performance, combining strong sales growth with softer-than-expected profit. At the time of writing, the retailer’s shares were trading around $2.42, up roughly 10–12%, as investors focused on accelerating revenue trends and upbeat guidance rather than short-term cost pressures. Recent earnings coverage confirms the result has already appeared across financial news platforms and earnings transcripts, highlighting the company’s record margins and continued sales momentum.

Strong Sales Momentum Drives Top-Line Growth

Baby Bunting reported total sales of $271.4 million for 1H FY26, up 6.7% year-on-year, with comparable store sales climbing 4.7%, beating earlier guidance. Refurbished “Store of the Future” locations continued to outperform, delivering roughly 25% sales growth since reopening — a key driver of improved revenue performance. Early trading in the second half remained encouraging, with comparable sales up 6.7% during the first seven weeks, indicating sustained customer demand.

Profit Misses Expectations Despite Underlying Improvement

While revenue impressed, pro forma net profit after tax (NPAT) reached $5 million — slightly below market expectations by about 5.4%. Management attributed the shortfall mainly to one-off costs linked to store relocations, refurbishments, and accelerated depreciation. Underlying NPAT rose sharply to $7.2 million, highlighting stronger operational performance beneath the headline numbers. However, statutory NPAT declined compared to the prior period, reflecting the impact of strategic investment and network optimisation expenses.

Outlook: Guidance Maintained as Investment Ramps Up

Despite the profit miss, the company maintained its full-year pro forma NPAT guidance of $17.5 million to $19.5 million. Capital expenditure is expected to rise to $41–43 million — around 29% higher — as Baby Bunting focuses on refurbishments and improving its operating model rather than aggressive store expansion.

Management expects comparable sales growth of 5–7% for FY26, with gross margins projected to remain above 41%, signalling confidence in the retailer’s longer-term growth strategy.

What Investors Are Watching Next

The market reaction suggests investors are prioritising revenue momentum and margin expansion over near-term profit volatility. Continued strong trading in the second half and execution of the refurbishment strategy could determine whether the recent share price rally is sustainable.

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