Baby Bunting Group Ltd. · ASX:BBN
Baby Bunting — FY2017 Earnings Presentation
39 slides from Baby Bunting's earnings presentation, Aug 11, 2017
Slide 1: Baby Bunting Group Limited Results presentation
Baby Bunting Group Limited Full year ended 25 June 2017 Results presentation 11 August 2017 Matt Spencer Chief Executive Officer & Managing Director Darin Hoekman Chief Financial Officer
Slide 2: Important Notice and Disclaimer
Important Notice and Disclaimer This document is a presentation of general background information about the activities of Baby Bunting Group Limited (Baby Bunting) current at the date of the presentation (11 August 2017). The information contained in this presentation is for general background infor
Slide 3: Agenda
Agenda 1 Results highlights 2 Baby goods market and category dynamics 3 Operating review 4 Invest to grow 5 Financial information 6 Outlook 7 Appendices 3
Slide 4: Results highlights
1. Results highlights
Slide 5: FY2017 Results highlights
FY2017 Results highlights 1 • Sales of $278.0 million, up 17.4% on the prior corresponding period • Comparable store sales growth of 6.9% Trading(1) • Gross profit income up 17.4%, gross margin of 34.3% • Cost of doing business (pro forma) improved by 37 bps from FY2016, to 26.0% of sales 2 • EBITDA
Slide 6: Baby goods market and category dynamics
2. Baby goods market and category dynamics
Slide 7: Baby Bunting is well positioned for future growth
Baby Bunting is well positioned for future growth Clear leader in a large and highly fragmented baby goods market Baby goods is a unique retail category in Australia Meaningful / highly valued relationships with customers Baby goods demand customer service Customer insights and data represent signif
Slide 8: Large addressable baby goods market
Large addressable baby goods market Baby Bunting’s addressable market is a component of the larger baby goods market The baby goods market is a $5.1bn market in Australia(1) Baby Bunting $2.4bn estimated addressable market breakdown by category Other Cots, mattresses $0.2 billion and nursery furnitu
Slide 9: Fragmented competitive landscape
Fragmented competitive landscape Large number of small, Strict Australian mandatory Baby goods is a $5.1bn BBN estimated addressable specialty players & product safety standards market in Australia market is $2.4bn department stores provide barriers to entry SPECIALTY BABY GOODS RETAILERS IN AUSTRAL
Slide 10: Baby Bunting is a clear leader
Baby Bunting is a clear leader Low market share in a leading position with significant scope to grow in a $5.1 billion market Online is 11% of $2.4bn Our online presence continues to 1 Total baby goods market $5.1bn (1) 2 BBN addressable market 3 evolve and grow Online market BBN online BBN addressa
Slide 11: Baby goods is a unique retail category in Australia
Baby goods is a unique retail category in Australia Australian mandatory product safety standards provide Bricks & mortar critical in showcasing products and barriers to entry supporting product innovation Mandatory product safety standards are administered In store experience is important to custom
Slide 12: Meaningful customer relationships built on trust
Meaningful customer relationships built on trust Customer service is relevant at each stage of the customer journey and drives word-of-mouth referral Pre Birth New Born Early Years Second Child… Parental stage • Highly considered purchase • New circumstances, • Driven by developmental • Journey reco
Slide 13: International retail market experience
International retail market experience Historical experience shows the Amazon + ebay marketplace have had varying impacts Notes: Australia (1) USA(1) Canada(1) United Kingdom(1) (1) Source: Euromonitor, Morgan AUD $bn USD $bn USD $bn USD $bn Stanley Equity Research estimates (2) Sample USA, Canada,
Slide 14: Baby Bunting competitively positioned on range & price
Baby Bunting competitively positioned on range & price Benchmarking analysis: Baby Bunting versus Amazon(1) comparing Baby Bunting’s top 250 SKUs • We compared price and availability against Amazon in USA, UK, Germany, and Canada • ~80% of Baby Bunting’s top 250 selling SKUs are not available outsid
Slide 15: Operating review
3. Operating review
Slide 16: Strong financial track record continues
Strong financial track record continues FY2017 sales growth of 17.4% and pro forma EBITDA growth of 23.0% SALES GROSS MARGIN FY2017 2H margin ($ million) (%) improved 25 bps 300 ~22.8% 278.0 on FY2016 2H CAGR 236.8 34.3% 34.3% 34.3% 200 180.2 33.3% 150.2 100 0 FY2014 FY2015 FY2016 FY2017 FY2014 FY20
Slide 17: Growth strategies
Growth strategies Multiple drivers of organic growth 1 Growth from new store roll-out • Disciplined roll out of 80 plus stores in identified trade catchments with a target of 4 to 8 new store openings each year 2 Growth from existing stores and online • 46% of stores are less than 3 years old • Mult
Slide 18: Growth from new store roll-out
1 Growth from new store roll-out 6 new stores opened in FY2017 Number of stores 80+ 80 60 42 40 36 31 21 23 19 20 12 15 9 0 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 Network Plan • 43rd store added in July 2017 • Pipeline – 5 to 8 stores in FY2018, including 2 or 3 regional stor
Slide 19: New store economics
1 New store economics New stores deliver positive returns from year 1 and strong ROIC by year 4 New Baby Bunting stores Group Average (all stores opened From June 2008) (all stores opened > 4 years) YEAR 1 YEAR 2 FY2017 Revenue per store ($m) 4.7 5.4 7.9 EBITDA per store ($m) 0.3 0.5 1.2 Store EBITD
Slide 20: Mature market economics
2 Mature market economics Case study: Melbourne metro – our heritage market made up of mostly mature stores (7 of 10) Melbourne metro – FY2009 FY2017 total market economics • Since 2009 we have opened 4 new stores # of stores 7 10 (including 1 relocation) within our Melbourne metropolitan market, gr
Slide 21: Growth from existing stores and online
2 Growth from existing stores and online Strong FY2017 comparable store sales growth(1) of 6.9% • 46% of our stores are less than 3 years old and in Store maturity profile at 25 June 2017 (years opened) their growth phase • Average comparable store sales growth of 6.8% pa since June 2012 >5 years 40
Slide 22: Strong progress in online engagement & sales
2 Strong progress in online engagement & sales babybunting.com.au continues to evolve & grow as the leading specialty baby goods website • 76% increase in online sales from FY2016, 39% growth TOTAL WEBSITE SESSIONS BY MONTH in website sessions (babybunting.com.au) (1) 1,500 1,350 • Online sales (inc
Slide 23: EBITDA margin improvement
3 EBITDA margin improvement Sales growth at constant GP% is driving CODB leverage Gross Margin Cost of Doing Business metrics (% sales) (1) • Gross profit income up 17.4% to $95.3 million, with Store expenses GP% constant as a percentage of sales at 34.3% • FY2017 2H gross profit improved by 25 bps
Slide 24: Investment in digital and the customer journey
3 Investment in digital and the customer journey Staying ahead of our customers’ expectations across all channels is an investment priority • CRM – invest to better understand and engage with our DC Store customers across all channels fulfilment fulfilment • Digital Team – investing in capability Cl
Slide 25: Strengthened supplier relationships
3 Strengthened supplier relationships Strong growth in private label and exclusive products(1) Supplier breakdown by sales (FY17) • Network of more than 230 suppliers across third party brands, private label and exclusive products • Top 10 suppliers represent 49% of sales Remaining Top 10 suppliers
Slide 26: Invest to grow
4. Invest to grow
Slide 27: We aim to be the most loved baby retailer for every family, everywhere
We aim to be the most loved baby retailer for every family, everywhere We finished FY2017 with our Net Promoter Score at 63. We continue to invest in the customer experience Convenience across all channels Deliver great value to the customer Offering a unique customer experience Investing in growing
Slide 28: Investment in value, supply chain, digital & IT
Investment in value, supply chain, digital & IT Building the supply chain of the future Enabling ourselves through IT & digital Undertaking review of supply chain Staying ahead of our customers’ expectations opportunities: across all channels is an investment priority • Distribution network design t
Slide 29: Leveraging customer data is a significant opportunity
Leveraging customer data is a significant opportunity Enabling customer loyalty through meaningful engagement CRM allows precise understanding of where customers are in their journey – Baby Bunting can be relevant to the customer, offering products that are needed at a specific point in time… in sto
Slide 30: Financial information
5. Financial information
Slide 31: Summary Pro Forma Income Statement
Summary Pro Forma Income Statement Pro forma statement of profit or loss Pro Forma Pro Forma Change Financial highlights FY2017 FY2016 $ million • Total sales of $278.0 million, up 17.4% Sales 278.0 236.8 17.4% ̵ Comparable store sales growth of 6.9% Cost of sales (182.7) (155.7) Gross Profit 95.3 8
Slide 32: Balance Sheet
Balance Sheet Statement of financial position Statutory Statutory Capital structure 25-Jun-17 26-Jun-16 • $1.6 million net cash position $ million Cash and cash equivalents 6.4 7.4 • Inventory increase reflects 7 new stores added Inventories 47.9 41.0 (~$5.2 million), and ~$1.6 million of inventory
Slide 33: Cash Flow Statement
Cash Flow Statement Statement of cash flows Statutory Statutory Financial highlights FY2017 FY2016 $ million • Change in working capital reflects 7 new store openings (including Munno Para which opened shortly after year end) and investment in inventory Underlying Statutory EBITDA1 23.0 18.8 to supp
Slide 34: Outlook
6. Outlook
Slide 35: Outlook
Outlook FY2018 guidance • ~$4 million capital for infrastructure and capability to deliver growth, plus investment in new stores and refurbishments, and up to $3 million investment in operating expenditure of which ~$0.5 million is non-recurring • After 6 weeks of trade (6 August) total sales growth
Slide 36: Appendices
7. Appendices
Slide 37: Statutory - Pro Forma Income Statement Reconciliation
Statutory - Pro Forma Income Statement Reconciliation FY2017 FY2016 Statutory Add Pro Forma Statutory Add Pro Forma FY2017 Pro Forma FY2017 FY2016 Pro Forma FY2016 adjustments (a) adjustments (a) $ million Sales 278.0 278.0 236.8 236.8 Cost of sales (182.7) (182.7) (155.7) (155.7) Gross Profit 95.3
Slide 38: Baby Bunting's store network
Baby Bunting’s store network 43 stores across Australia, with significant roll-out potential to over 80 stores Queensland Helensvale Booval Kawana North Lakes Fortitude Valley Burleigh Waters Townsville Capalaba Macgregor New South Wales and ACT Penrith Campbelltown 9 stores Warners Bay Camperdown (
Slide 39: Glossary
Glossary Comparable Store Sales Growth • Calculated as a percentage change of the total sales generated from stores (including the online store) in a relevant period, compared to the total sales from the same set of stores in the prior financial year, provided the stores were open at the beginning o