Baby Bunting has flagged another profit downgrade as its competitors go under

Andy Casey / Barcroft Media / via Getty Images
  • The baby-product retailer flagged a full-year EBITDA downgrade of between 10-20%.
  • June quarter sales growth has been negative as failing competitors liquidate stock.

Shares in baby-product retailer Baby Bunting are under pressure after the company issued a profit downgrade today.

In its statement to the ASX, Baby Bunting highlighted competitive pressures stemming from the struggles of two large competitors forced into administration.

Both companies have since been forcibly liquidating stock at reduced prices.

As a result, Baby Bunting’s same-store sales growth fell into negative territory for the first six weeks of the June quarter.

“After comparable store sales growth of 4.7% in Q3, we have seen comparable store sales of negative 2.5% in the first 6 weeks of Q4, driven by a higher level of market discounting and reduced transactional volumes as competitors liquidate stock,” the company said.

The two companies — Baby Bounce and Baby Savings — were previously the third and fourth largest operators in the market for baby products.

The collapse of two competitors highlights the challenging conditions facing the market, as retail spending remains subdued.

And for specific sectors, the continued threat of online competition remains apparent.

Last August, shares in Baby Bunting fell by more than 10% after it forecast that Amazon and eBay would take around $50 million worth of market share in Australia.

Baby Bunting now expects full-year EBITDA for the 2018 financial year will be between $18-20 million — down from $23 million in November.

“What we have seen in the industry during this financial year in terms of the extent of consolidation is unprecedented,” CEO Matt Spencer said.

While challenging in the short term, these changes in market conditions present some great opportunities for the growth of Baby Bunting’s business and profitability in FY2019 and beyond.”

A short time ago, shares in Baby Bunting were down by 3.3% in afternoon trade, holding just above the company’s 2018-lows reached in early April:

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