Highlights

  • Baby Bunting (ASX:BBN) delivered FY26 sales growth and improved profitability, supported by stronger margins and operational initiatives.
  • Gross Margin increased to a record 41.2%, while pro forma NPAT rose 33.9% to $16.1 million.
  • The company continues expanding its Store of the Future format and increasing private label product contribution.
  • FY27 guidance points to further Earnings growth, supported by sales expansion and margin improvement.

Baby Bunting (ASX:BBN) is progressing through a retail transformation phase focused on improving profitability, strengthening customer engagement and rebuilding earnings momentum.

The specialist baby products retailer delivered improved FY26 results, supported by higher gross margins, comparable sales growth and ongoing operational improvements. The company continues investing in store upgrades, exclusive product ranges and digital capabilities as it seeks to build a more efficient retail platform.

While FY26 marked progress in the turnaround strategy, investors remain focused on whether these improvements can translate into sustained growth and stronger long-term returns.

FY26 Performance

Baby Bunting reported FY26 sales of $556.0 million, representing growth of 6.5% compared with FY25.

Gross margin increased to a record 41.2%, improving by approximately 100 basis points year-on-year, supported by product mix improvements and higher contribution from exclusive and private label products.

Pro forma net profit after tax increased 33.9% to $16.1 million, while statutory NPAT rose 17.5% to $11.2 million.

The company’s EBITDA margin improved during the year, supported by stronger gross margins, cost management and operational improvements across the retail network.

Online sales continued gaining importance, reaching $140.5 million and representing 25.3% of total sales.

Baby Bunting ended FY26 with net Debt of $16.2 million and did not declare a dividend, with Capital allocation focused on reinvestment into the business.

Retail Transformation

A major component of Baby Bunting’s strategy is its Store of the Future refurbishment program.

The company has been upgrading stores to improve customer experience, product presentation and operational efficiency. By the end of FY26, 15 refurbished stores were operating, with management reporting improved sales performance following upgrades.

The company has maintained a focus on achieving attractive payback periods from these investments while gradually expanding the refurbishment program.

The strategy aims to strengthen Baby Bunting’s physical retail network while complementing its growing online presence.

Growth Drivers

Baby Bunting’s future growth strategy is supported by three major areas: store optimisation, product expansion and digital growth.

Private label and exclusive products remain a key contributor, with these products accounting for more than half of total gross profit. The company continues expanding exclusive partnerships and direct sourcing opportunities to improve margins.

The company has also strengthened its product offering through Brand partnerships, including exclusive arrangements in nursery and baby product categories.

Digital remains another important growth channel, with online sales continuing to increase as customers adopt flexible purchasing options, including delivery and click-and-collect services.

FY27 Outlook

Baby Bunting has provided FY27 guidance reflecting expectations for continued improvement.

The company expects total sales of between $585 million and $600 million, comparable sales growth of 3% to 5% and gross margin of approximately 42%.

Pro forma NPAT is expected to reach between $19 million and $21 million, representing further earnings growth compared with FY26.

Capital expenditure is expected to remain elevated as the company continues investing in store upgrades, technology and network improvements.

The company is also targeting improved performance from its New Zealand operations, with the Business aiming to reach profitability during FY27.

Strategic Priorities

Baby Bunting continues focusing on improving customer experience, expanding its store network capability and increasing operational efficiency.

The company’s long-term store strategy includes expanding the Store of the Future format across its larger Australian locations.

Management is also focused on improving product profitability through higher private label penetration and strengthening supplier relationships.

The combination of physical retail improvements and digital expansion is intended to create a more integrated customer experience.

Key Focus Areas

Investors will continue monitoring whether Baby Bunting can sustain margin improvements as the retail environment remains competitive.

The pace of store refurbishment benefits, private label growth and online sales expansion will be important indicators of future progress.

The company’s ability to balance capital Investment with cash generation will also remain a key consideration.

Progress towards New Zealand profitability and potential Dividend reinstatement will provide further insight into the company’s financial position.

Risks

Baby Bunting operates in a consumer discretionary category that remains sensitive to household spending conditions, interest rates and broader economic confidence.

The company also faces structural challenges from changing birth rates, requiring continued Market Share gains to support growth.

The Store of the Future program requires ongoing investment and execution, with temporary disruption possible during refurbishment periods.

Competition from online retailers and larger general merchandise businesses may also affect pricing, margins and customer acquisition.

Supply chain costs, including freight and sourcing expenses, remain additional factors that could influence profitability.

Future Outlook

Baby Bunting enters FY27 with improved earnings momentum, stronger margins and a clearer retail transformation strategy.

The FY26 result demonstrated progress in rebuilding profitability through better product mix, operational improvements and customer engagement initiatives.

The next stage of the turnaround will depend on whether the company can maintain margin gains, successfully expand its upgraded store format and continue growing digital sales.

With FY27 guidance pointing to further earnings improvement, Baby Bunting’s ability to deliver consistent execution will be central to determining whether the current recovery develops into a sustainable Long-term Growth story.