• Pro Forma NPAT: $4.8 million, up 37% on the prior period.
• Sales Growth: Up 2.4% with comparable store growth at 2.2%.
• Gross Margin: Increased 260 basis points to 39.8%.
• Net Debt: $9.1 million.
• Comparable Store Sales Growth (Second Half to Date): 2.8%.
• Online Sales: Grew 2.8% year-on-year, representing 22.4% of total sales.
• Marketplace GMV: $2.5 million, up 184% year-on-year.
• Total Sales: $254.4 million, up 2.4% compared to the prior period.
• Cost of Doing Business: $87.2 million, up $5.4 million from the previous year.
• Cash Conversion Ratio: 63.1%.
• Investment Expenditure: $4.4 million for the half.
• CapEx (Second Half Expectation): Between $6 million and $9 million.
• Exclusive Products Sales: 48.4% of total sales, up 330 basis points.
• New Customer Acquisition: Up 12% on the prior period.
• Store Network Expansion: Two new stores opened and one relocated in the first half.

• Warning! GuruFocus has detected 5 Warning Signs with ASX:BBN.

Release Date: February 17, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Pro forma NPAT increased by 37% to $4.8 million, indicating strong earnings growth.
• Gross margin improved by 260 basis points to 39.8%, moving towards the 40% target.
• Comparable store sales grew by 2.2%, with a notable acceleration in Q2.
• Exclusive product launches, such as the Maxi-Cosi Halo 360, are driving larger basket sizes and margin improvements.
• New customer acquisition increased by 12%, showcasing effective strategy execution in attracting new customers.

Negative Points

• Cost of doing business increased, largely due to strategic investments and inflationary impacts on operational labor.
• The decision not to pay a dividend reflects a focus on near-term growth, which may disappoint income-focused investors.
• Net debt stands at $9.1 million, although it has improved, it still represents a financial obligation.
• The retail environment remains challenging, with margins under pressure despite improvements.
• New Zealand operations are not yet breakeven, with a target set for FY27, indicating ongoing challenges in that market.

Q & A Highlights

Q: Cost of doing business has increased significantly as a percentage of sales. Do you see this as a structural change, and what are the levers to improve it? A: Darin Hoekman, CFO, explained that wage inflation and new store rollouts have driven the increase in costs. The strategy to improve includes store refurbishments and further store rollouts, focusing on lowering variable costs across freight lines and other business elements.

Q: Can you clarify the timing expectations for the $2 million to $3 million gross margin improvement from retail media? A: Mark Teperson, CEO, stated that the retail media initiative is expected to be earnings neutral in FY25 and contribute $2 million to $3 million in FY26.

Q: What is the pathway to breakeven for New Zealand operations, and what metrics are required? A: Darin Hoekman, CFO, targets FY27 for breakeven. Two stores are currently at breakeven with $4 million in sales, needing to reach $5 million. Additional store rollouts and margin improvements are also part of the plan.

Q: What are the major CapEx programs for FY26, and how much will be spent on them? A: Darin Hoekman, CFO, mentioned that outside of new store rollouts, the ERP and point-of-sale replacement project will begin, with significant investment expected in FY27. Sustenance CapEx will run between $2 million to $4 million annually.

Q: How is competition affecting your business, and is the positive comp growth due to a better consumer environment or better retailing? A: Mark Teperson, CEO, noted that the competitive landscape is stable, and the positive growth is driven by new customer acquisition and product innovation, rather than changes in the macro environment.

Q: Can you provide more details on cash conversion plans for the second half and full year? A: Darin Hoekman, CFO, stated that while specific cash conversion targets are not disclosed, inventory productivity improvements are expected, with a focus on reducing high fixturing in stores.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.