Should I Buy Baby Bunting Shares?

Hi Barefoot,

I remember you saying in a column once that people should invest in companies they understand. Well, my partner and I are pregnant and have been spending a lot of time, and money, at Baby Bunting. So it got me thinking. I have been looking at the share price and it is down quite a bit. It hit a high of $3.20 last year, then dropped below $2, but recently it has been going up again. It seems like a good investment, but is now the right time to buy?

Andrew

Hi Andrew,

Over the past few years I too have dropped a large chunk of change at Australia’s largest baby goods chain, Baby Bunting. But I won’t be investing in them.

Right now Baby Bunting enjoys wonderful gross margins of 34.5 per cent (something I grumble to my wife about as we shop for strollers). However, they’ve got a stinky nappy that will soon need to be changed.

In the US, Amazon has a killer membership called ‘Amazon Moms’. For $99 a year, mums get 20 per cent off nappies (the high-frequency purchase), ultra-low prices on everything else (to add to your virtual cart when you’re getting the nappies), free two-day shipping, plus access to Amazon FreeTime, which is an all-in-one streaming service with “thousands of kid-friendly books, movies, TV shows, educational apps and games”.

When they roll this out in Australia they will crush the competition. After all, when you’ve got a newborn, there are two things in short supply: money and time. Amazon solves both.

Avoid.

Scott