Baby Bunting eyes off ASX float as its 27-store chain grows up
Monday, March 16, 2015/
Australian mums and dads will be able to own a piece of the country’s largest specialist retailer of baby products when Baby Bunting floats on the Australian Securities Exchange later this year.
With early signs of another strong year of Australian floats, Baby Bunting will be hoping to follow in the steps of organic baby food producer Bellamy’s Organic, which recorded a 48% price jump on its first day of trade and a 67% price increase between August and December.
Baby Bunting was founded by the Nadelman family more than 30 years ago when it opened its first one-stop-baby shop in the Melbourne suburb of Balwyn.
There are now 27 Baby Bunting outlets across Australia, with more than 400 people employed in the stores and the Baby Bunting warehouse in Melbourne.
Fairfax reports the Baby Bunting management team revealed plans to take the company public when it presented the retailer’s half-year results to shareholders in February.
Based on half-year update, the shareholders were reportedly told Baby Bunting is on track to turn over more than $175 million for the financial year ending June 30, with earnings before interest, tax, depreciation and amortisation to come in at around $12.5 million. Same-store sales are growing at around 8% year-on-year.
According to Fairfax, Baby Bunting has invited retail stockbrokers and investment banks to pitch for the initial public offering, which is slated for November.
Baby Bunting’s largest shareholder is TDM Asset Management, which holds 46% of the retail chain. The Nadelman family previously sold a stake in the business to private equity group Blackwood Capital in 2007.
David Gordon, retail expert and partner at accounting firm Lowe Lippman, told SmartCompany the Baby Bunting numbers add up.
Gordon says based on the projected figures, each Baby Bunting store would be turning over around $6.5 million on average. Baby Bunting has also developed a model of larger format standalone stores, located close to but not inside large shopping centres.
“That is a much more comfortable position than having many stores and being beholden to shopping store owners,” Gordon says.
Baby Bunting caters for parents of children from newborns to three-year-olds, selling products from more than 8000 lines, including brands such as Mountain Buggy, Bugaboo, Babylove, Johnsons, Huggies and Bonds.
While this puts Baby Bunting in direct competition with the likes of Target, Kmart and Big W, Gordon says the retailer would have benefited from recent consolidation among other specialist baby product retailers.
“Most of the other specialist baby retailers have disappeared, there has been a spate of insolvencies,” says Gordon, pointing to the troubles faced by the likes of Mothercare and Babies Galore.
In February, family-owned retailer PramWarehouse collapsed into voluntary administration after operating for more than 25 years.
Gordon puts Baby Bunting’s success down to its focus on “concentrating on what they know and did well” and not being “overly ambitious” in its growth strategy.
He says an IPO may provide an exit strategy for Baby Bunting’s founders, as well as its private equity owners, as well as an opportunity to raise capital to continue to grow.
“The growth opportunity will not only be in growing its footprint, but also expanding into consumables and other associated child and baby product categories,” Gordon says.
“If the IPO is going to provide them with the capital to allow them to do this, they certainly have the track record and their model would hold them in good stead.”
SmartCompany contacted Baby Bunting but did not receive a response prior to publication.