Baby Bunting extends gains as Citi upgrades stock
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More news: Baby Bunting shares continued to rise on the ASX as Citi upgraded the baby products retailer after it booked an improved first-half profit.
Baby Bunting shares were up 10.8% to $1.75 by 3:30pm AEDT.
Citi upgraded the retailer from 'neutral' to 'buy', noting that it is benefitting from improved like-for-like trends and better margins, despite a challenging consumer backdrop.
What they said: "In our view, these are early signs that the turnaround is going to plan, and further upside may come from i) the store refurbishment program and new store formats if the company can continue to execute, ii) gross margins continuing to surprise on the upside from the delayed impact of supplier renegotiations due to stock turns and the annualisation benefits," the analysts said.
Baby Bunting shares soar on first-half profit jump
The news: Shares in Baby Bunting surged after the baby products retailer posted an improved first-half profit and margin, and reaffirmed its full-year earnings guidance.
The numbers: Baby Bunting shares were up 8.2% to $1.71 by 11:45am AEDT.
The company reported $4.8 million in unaudited net profit after tax for the six months to December, up 37% year over year.
Its first-half gross profit margin of 39.8% marked a 260 basis point rise over the prior corresponding period. It leaves the company on track to deliver its full-year margin target of 40%.
Baby Bunting also recorded comparable store sales growth of 2.2%, spurred by Q2 growth of 4.5%.
The company reiterated its full-year NPAT guidance of $9.5 million to $12.5 million.
The context: Citi's analysts said the trading update "should give investors incrementally more confidence that the turnaround is gaining momentum, however don't think material [earnings per share] revisions are likely".
They said the key positives from the update were Baby Bunting's faster-than-expected acceleration in like-for-like sales, gross margin expansion and the reiteration of FY25 guidance.
What they said: "The November and December trading periods were particularly strong, with well-executed campaigns resonating with our consumers," said Baby Bunting's CEO Mark Teperson.
"At the same time, our focus on renegotiating supplier terms, simplifying our price architecture and our exclusive brands and private label works delivered significant gross margin expansion."
The sources: ASX announcement, Citi research
