Baby Bunting’s shares fell through its 2015 float price of $1.40 yesterday after it upset investors with an earnings guidance downgrade.
The shares fell to low $1.26 after news of the downgrade was revealed at the company’s annual meeting yesterday.
The company listed at $1.40 in October 2015 and was trading around the $3 mark in the middle of last year. The shares rebounded to end at 41.41, down 5.6% on the day.
But the shares have been on a steady slide to below the listing price over the past year on fears about the arrival of Amazon, concerns about rising competition in the sector and intense discounting by rivals.
The company said yesterday it now expected to report earnings before interest, tax, depreciation and amortisation in 2018 of about $23 million, in line with its performance last year.
The company previously gave guidance of between $25.3 million and $27 million, but on Monday said it had to lower its forecast due to aggressive discounting by rival retailers and supply delays.
Baby Bunting said it missed out on about $2 million of sales because of supply issues from a leading baby car seat brand. It had expected the supply issue to be fixed by October but it was only starting to be resolved now.
“Given the challenging conditions in the first four months [of fiscal 2018], we think it appropriate to adjust our guidance,” Baby Bunting chief executive Matt Spencer said in a statement to the ASX.
Baby Bunting’s total sales for the four months to November 13 were up 11.4%, Mr Spencer said, but comparable store sales were flat (this measure strips out the extra sales from new stores and sales lost through closures).
The company said it had experienced price deflation of 4.3% in the current financial year, which began on June 26.
As a result, gross margin is currently running about 170 basis points lower than the prior year’s level and this is likely to be reflected for the first half, Mr Spencer told shareholders at the company’s annual general meeting on Monday.
While gross margin will continue to improve over the year, the full-year margin is expected to be about 100 basis points below the prior year’s level, he said – hence the need for the updated guidance and downgrade.