Shares in Baby Bunting Group Limited (ASX:BBN) are surging to new highs

Shares in ASX specialty baby goods retailer, Baby Bunting Group Limited (ASX:BBN), surged to a new all time high price of $5.37 last week.

Despite the market upheaval caused by COVID-19, shares in Baby Bunting have climbed over 45% higher over the last 12 months.

They are now up an astonishing 250% since bottoming out at a 52-week low of just $1.51 at the height of the COVID-19 panic selling back in March 2020.

What does Baby Bunting do?

Baby Bunting is Australia’s largest retailer of specialty baby care, maternity, and nursery products. The brand caters specifically to children under three years of age. The company operates more than 50 stores across the country and also has a strong online presence.

What has driven the gains?

With no substantive news out of the company in recent months, it’s difficult to determine the cause for the rise in its share price. The most recent market update was released back in early October, providing a snapshot of the company’s financial performance for the first quarter of FY21.

The news was mostly positive, with comparable store sales growth of 17% versus first quarter FY20. Excluding metropolitan Melbourne, which was suffering through its most restrictive lockdowns during the September quarter, comparable store sales growth was still over 28%.

The company also saw a huge surge in online sales, including click and collect services. Sales through these channels surged by 126% versus the prior comparative period. Even excluding Victoria, online and click and collect sales were still up 92%.

Commenting on the results, Baby Bunting’s CEO and Managing Director, Matt Spencer, stated that the company’s strong performance reflected the “less discretionary nature of the maternity and baby goods category”.

In effect, babies and young infants have quite specific product needs, and new parents will still need to purchase these items even in an economic downturn – or a pandemic!

What is the outlook for FY21?

Citing market uncertainty surrounding the continued effects of COVID-19, Matt Spencer declined to provide earnings guidance for FY21. However, he did indicate that Baby Bunting would continue to expand its retail footprint, with plans to open a further 4 to 6 stores during this financial year.

In his AGM address, Company Chair Ian Cornell did give some insight into the growth pillars that Baby Bunting would be pursuing.

The first is to increase investment in the company’s digital presence to further grow online sales. The transition to digital sales is a key theme to emerge out of the COVID-19 pandemic and may permanently change the way many consumers choose to shop.

Beyond that, the company is seeking to expand its core business market share, while also seeking opportunities to enter new markets. And finally, it will look at ways to increase its profit margin.

More reading

• Top brokers name 3 ASX shares to buy today
• 2 ASX retail shares delivering stellar growth in FY 2021
• Why these ASX shares just stormed to 52-week highs or better

Motley Fool contributor Rhys Brock owns shares of Baby Bunting. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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