Baby Bunting Group Ltd

Sales & Gross Margin improved in 1H 2018: Baby Bunting Group Ltd.’s (ASX: BBN) stock rose 5.8% on February 16, 2018 after the company reported 9.8% growth in the total sales and the total transactions grew 14.2% (against the prior corresponding period) with comparable stores seeing transaction growth of 2.3%. However, BBN’s pro forma EBITDA fell 19.2% to $8.4 million and on a statutory basis first half EBITDA was down to $7.6 million from $9.8 million in 1H FY17. The total comparable store sales for the half have fallen 1.7% against the prior corresponding trading period as the late November to mid-December were subdued. Further, the competitor store closures and aggressive discounting has created near term price deflation, that affected both the total sales growth and comparable store sales growth. Moreover, the gross margin improvement is expected to continue into the second half as a result of some stabilisation of competition as well as internal initiatives, including increasing exclusive products in core categories, increasing FOB direct importing and improving trading terms with the supply partners. Meanwhile, BBN stock has fallen 4.84% in three months as on February 15, 2018 and is worth a watch given the trading scenario while we give an “Expensive” recommendation on the stock at the current price of $1.56
 

1H 18 Financial Performance (Source: Company Reports)
 

a2 Milk Company Ltd

A2M expands US business to the North East:a2 Milk Company Ltd.’s (ASX: A2M) stock rose 0.82% on February 16, 2018 after the company announced about expanding US business to the North East from January 2018. Therefore, A2M will increase its range from approximately 3,600 stores to potentially approximately 5,000 retail stores across the US from January. Further, the expansion in distribution will lead to increased marketing investment behind the “Love Milk Again” advertising campaign. This increase is incorporated in the forecasted higher marketing expense for the Group in 2H18 relative to 1H18. Additionally, A2M is also investigating specific new product opportunities for the US market to further capitalise on the growing brand awareness and expanded distribution. On the other hand, A2M stock has risen 24.56% in three months as on February 15, 2018 and is trading at a very high level. We give an “Expensive” recommendation on the stock at the current price of $8.59

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