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Baby goods retailer Baby Bunting (ASX: BBN) has downgraded its full-year profit guidance, warning that the Reserve Bank's cash rate increases, higher fuel prices and weaker demand for big-ticket items dragged on fourth-quarter trading.
The company now expects FY26 pro forma net profit after tax of $16 million to $17 million, down from the $17.5 million to $19.5 million range forecast when it released its half-year results in February.
Second-half pro forma NPAT is forecast at $11 million to $12 million, against a prior range of $12.5 million to $14.5 million.
Despite the cut, the revised guidance still represents profit growth of 32 per cent to 40 per cent on FY25's pro forma NPAT of $12.1 million.
Baby Bunting says trading softened through the fourth quarter, with weakness concentrated in the prams and car safety categories pulling down average transaction values across non-refurbished stores over the most recent seven weeks.
The company points to three RBA cash rate rises during the second half, combined with higher fuel prices, as key headwinds weighing on consumer spending.
However, Baby Bunting CEO Mark Teperson describes the growth achieved for the year, along with gross margin expansion, as a strong result in a difficult consumer environment.
"The three RBA cash rate rises in the second half, together with higher fuel prices, weighed on consumer spending and added to our distribution costs," he says.
"Sales across our non-refurbished store network did not meet plan over the last seven weeks, driven by softness in prams and car safety categories relative to expectations, which lowered average transaction values."
Teperson says he is proud of the progress made by the company against its strategic plan, adding that the fundamentals of the business and its strategy remain strong.
"The Store of the Future program continues to perform in line with expectations, growing approximately 18 per cent for the full year and included two of our largest ever store openings in June.
"We have held gross margins above 41 per cent, driven double-digit growth in our online channel and built strong momentum in New Zealand with sales growth in the second half above 15 per cent, all while maintaining disciplined cost and capital management and a strong balance sheet.
"We have a great new product pipeline in car safety, clear gross margin levers and a refurbishment program that continues to deliver. We look forward to continuing to execute and drive value for our customers and shareholders through FY27.”
The deterioration in the last quarter f FY26 marks a sharp reversal from the momentum reported at the half-year.
When Baby Bunting delivered its interim results in February, comparable store sales in the first seven weeks of the second half were tracking at 6.7 per cent growth, and the company guided to second-half comps of 6 per cent to 8 per cent.
Actual second-half comparable store sales growth has now come in at 3 per cent, pulling the full-year figure to around 3.5 per cent.
Total sales for FY26 are expected to land between $553 million and $555 million, up 6 per cent on the prior year.
Baby Bunting's downgrade aligns with a broader deterioration in consumer conditions.
Deloitte Access Economics flagged in late May that three consecutive RBA rate hikes, real wages falling 1.3 per cent year-on-year to March and record-low consumer sentiment were set to slow discretionary spending growth from 2.5 per cent in the year to December 2025 to just 0.7 per cent in the year to December 2026.
Australian Bureau of Statistics data for April showed total household spending fell 1.1 per cent month-on-month, with furnishings and household equipment down 0.1 per cent and clothing and footwear down 2.2 per cent.
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