Good morning, everyone. Welcome to Baby Bunting's FY26 half-year results conference call.

I'm Mark Teperson, CEO, and joining me today is Darin Hoekman, our CFO. We'll be going through the presentation that was lodged earlier today with ASX, and there will be time for questions at the end.

We're pleased to have delivered another strong result, with record sales and record gross margins as we continue to build momentum in our strategy. We're here this morning to speak to the numbers, but before we do, it's worth reflecting on what's behind them.

The first years of life are formative. They shape confidence, security, and curiosity in ways that last a lifetime.

Anyone who has watched a child grow knows how quickly that window passes. When parents feel supported and confident during that time, it sets the foundation for everything that follows.

At Baby Bunting, our vision is clear: to give every child the best start in life so they can grow into their brightest future. That vision guides every decision we make, from the products we curate to the way we design our stores.

Our mission, to support and inspire confident parenting, sits at the heart of our culture. It's our team, right across the business, who bring this to life.

Their capability and commitment turn purpose into action every day, delivering great experiences for customers, driving innovation, and supporting parents. This alignment between purpose and performance is what underpins our results and the difference we make for families.

Turning to slide 5, I'm excited to share our first half FY26 results, a result that demonstrates the power of disciplined execution against our strategy. Total sales grew 6.7% on the prior year, driven by comparable store sales growth of 4.7%, exceeding our guidance for the half.

What I'm most proud of is the early validation we're seeing from our store-of-the-future program. During the half, we refurbished a further 6 stores into the new format, taking us to 9 trading locations.

Since reopening, these stores have delivered an average sales uplift of 25%, at the top end of our 15% to 25% target range. This is proof that our investment in elevating the store experience is resonating with customers.

Parents are spending more time in these stores, they're discovering more products, and they're coming back more frequently. On margin, we delivered a record result of 41%, an improvement of 124 basis points.

This expansion reflects the compounding effect of our margin enhancement initiatives, which we balanced with remaining focused on value and price. We're making meaningful strides towards our medium-term goal of being a 10% plus EBITDA margin business.

Pro forma NPAT was at the midpoint of our guidance at $5 million. Excluding significant items relating to store closures and refurbishments, our underlying NPAT was $7.2 million, up 44%, with EBITDA at 6% of sales on an underlying basis.

On slide 6, I want to take you through the significant operational progress we made during the half, aligned with our strategic goals. We've continued to execute at pace, and the strong performance of our store-of-the-future cohort has given further validation to our transformation.

In addition to refurbishing 6 stores, we opened 2 new large-format stores, and as part of actively optimizing the network, we exited our only loss-making large-format store and relocated another into a significantly stronger retail precinct within the same catchment. We launched our first 3 Baby Bunting junior pilot stores.

These smaller-format stores allow us to test new locations and shopping center formats that don't support our traditional large-format footprint, unlocking significant customer lifetime value. I'll share more on the early performance of these stores later in the presentation.

Underpinning this execution is our continued investment in leadership capability. During the half, we appointed a new GM of merchandise and planning, bringing deep large-enterprise experience, strong commercial credentials, and proven commercial acumen to the executive team.

Her background strengthens our capacity to scale the business with greater discipline and sophistication. We also appointed a senior property executive to optimize our leasing portfolio, sharpen occupancy economics, and improve network quality.

Early progress is encouraging and reinforces our focus on disciplined capital allocation and earnings productivity. Our omnichannel capabilities continue to mature.

We've now scaled online fulfillment to 100% from stores. This provides a better service to our customers, enabling faster order fulfillment and same-day, next-day delivery options.

This optimizes our delivery costs and leverages our existing store labor more efficiently. Finally, I want to highlight our retail media business.

Supplier campaigns have seen strong uptake, and the program is tracking to plan at 1% of sales. Our target for the retail media business remains a $2 million to $3 million incremental gross margin contribution for FY26.

I'll now hand over to Darin to provide additional details on our financials.

Thanks, Mark, and good morning, everyone. We're on slide 7, which steps out the key growth drivers underpinning our first-half sales performance.

Our 1H comparable sales growth expectation was to deliver around 3% growth. On the back of that, it is very pleasing to report actual comp sales growth of 4.7% for the half: 3.7% in the first quarter and 5.6% in Q2, noting this improving trend is continuing into 2H.

The comp acceleration was driven by the strong uplift from our refurbished stores post-reopening and a further strengthening of trade in the rest of our store network. Excluding the temporary disruption from stores undergoing refurbishment, underlying comparable store sales growth was 5.7% for the half.

Helping drive this improving sales performance has been targeted investments in our advertising spend. We've had another great half of online sales growth, which, including click-and-collect, grew 18% year on year and now represent 24.8% of total sales.

The key drivers were the introduction of same-day and next-day delivery and scaling fulfillment to our full store network. My final call-out is on New Zealand, where we reported 16.5% comparable store sales growth for 1H, a trend continuing into 2H, where sales growth to start the second half has been 17.8% for the first 7 weeks.

Turning to slide 8, I'm pleased to report a record gross profit result, with gross margin now at 41%, up 124 basis points year on year and ahead of last year's 2H result by 50 basis points. Delivering sales growth of 6.7% with enriched gross margin is a standout result when viewed in the context of the broader retail sector's performance.

Our margin improvement was driven by a suite of initiatives, including the annualization of the supplier trading terms we renegotiated over the past 18 months, and continued traction from elevation of exclusive brand partners in our ranging mix. Plex is now 48.6% of sales, and soft goods is up 14.2% for the period, reflecting product innovation and merchandising changes in our new stores of the future.

Looking at New Zealand, consistent with Australia, we have seen excellent gross margin improvement of 140 basis points, achieved while growing top-line sales by the 16.5% aforementioned. Turning to the P&L on slide 9, we had provided guidance to the market that our first-half pro forma NPAT would land between $4.5 million and $5.5 million, driven by comparable store sales growth of around 3% and margin of up to 41%.

At $5 million, our pro forma NPAT landed at the midpoint of our first-half guidance. As we have previously noted, our first-half NPAT guidance included network optimization costs plus store refurbishment expenses, including accelerated depreciation of the existing assets and store relaunch costs.

Looking through these impacts, we were pleased to deliver 44% underlying NPAT growth. In addition to the incremental costs projected to be incurred and called out in our FY26 earnings guidance outlook in October, we did incur some additional costs in Q2 over and above those assumed in our 1H guidance.

These included higher make-good costs at the side exits and compliance costs in relation to mandatory standard changes and tax compliance costs. A final point on the P&L is that our first-half underlying earnings growth of 44% was achieved without any net incremental earnings contribution from the 6 stores closed and refurbished in the half.

Those stores, in addition to the 3 refurbished in FY25, are anticipated to drive strong earnings growth through the second half of this financial year. I'm now on slide 10.

Cost of doing business reflects our deliberate investment in growth and capability during the half. We have segmented our CODB profile on this slide accordingly.

Looking at CODB increases connected to business growth, $2.6 million relates to store network expansion, that is the 5 stores opened in 1H this year and 2 stores opened last year. On a contribution basis taking into account sales, these stores are accretive in the half and will deliver future period profit growth as they mature in their catchments.

In terms of capability and scaling costs, we have expanded our retail media team, which is delivering incremental earnings, and our merchandise team. This has also allowed improved range innovation and margin enrichment.

Investing in data and analytics has been transformative in the speed of access to insights and data and in supporting our personalization initiatives, which will be accelerating as we move into FY27. Investment in marketing increased by $1.8 million in line with plan as we invested in brand awareness, social activation, and refurbishment launches.

Inflation had a sizable impact on our CODB profile, in line with the Fair Work wage outcome of 3.5%, which we have significantly mitigated through our improved optimization of store labor, which is now picking 100% of online orders, and the supply chain cost reductions achieved in New Zealand. Looking ahead to 2H, online fulfillment from stores will continue to deliver benefits in addition to a program of work currently underway to improve demand alignment to store labor hours.

The costs incurred in relation to our network optimization will have a payback of sub-2 years. As a final point on productivity, we're also implementing warehouse initiatives focused on lowering unit pick costs.

Moving to slide 11, as I mentioned, we increased our investment in marketing this half by $1.8 million, and it is now running at 2.7% of sales. This was a considered investment to elevate our brand presence across multiple channels, and it contributed significantly to our comparable store sales growth for the half, outperforming our initial predictions.

Beyond this period, we expect our marketing to stabilize relative to sales. The investments in the current period supported 2 key initiatives.

First, we materially up-weighted our spend towards store-of-the-future launch campaigns. In the half, we created brand events that reintroduced the new Baby Bunting store experience into these catchments.

The investment re-announces the brand to new, existing, and former customers in each catchment, which delivers a multi-period payback benefit well beyond the initial launch. These store relaunches also have a halo effect on our brand perception more broadly across our Australian retail network.

Second, we continued to prioritize brand advertising and increasing our share of voice online and on social channels. This investment improved our customer visitation metrics twofold: it drove customer growth up 2.2% in Australia, in a period where we had 6 store closures for an average of 10 weeks during the half, and secondly, we saw a 3.9% growth in returning customers in the important Q2 period.

In New Zealand, we achieved 12% customer acquisition growth. Moving to slide 12, our balance sheet remains in a healthy position after a period of unprecedented capital investment.

Inventory closed at $107 million, up $9 million on last half year. This equates to an average increase of 4% in store inventory, relative to our COGS profile, which is up 4.5% year on year.

Specifically, in addition to 5 new stores, the increase relates to higher levels of safety stock in core pram and car seat categories to support our exclusive product growth. Our net debt stands at $21.1 million; we have covenant headroom and financial flexibility to fund our growth initiatives.

Moving now to the cash flow statement on slide 13, our cash conversion ratio of 70.9% is in line with our historical averages and targeted range. Investment expenditures totaled $25.9 million for the half.

We invested more in the first half as we accelerated from pilot into our full refurbishment program, and we remain confident in the payback profile of these projects. On a full-year basis, we now anticipate CapEx closer to $41 million to $43 million, excluding the rent-free landlord contributions of $2 million—$1 million that we received in the first half and a further $1 million already confirmed for the second.

Our first-half investment included 6 store-of-the-future refurbishments, 3 small-format concept stores, 2 new large-format openings, 2 new large formats in progress that will be opening in Q3, and around $5 million across design and development costs for new stores and sustaining CapEx, including digital enhancement investments. Historically, the most store builds we've done in a single year has been 8 stores.

In this half alone, we had commenced 13 projects and completed 11. This is a big step up in activity as we accelerate our strategic execution.

We are confident this investment will materially elevate our sales and earnings performance and generate cost of doing business leverage in future periods. For the second half, we expect CapEx of approximately $15 million to $17 million.

This is incremental to our original estimates, but with all store-of-the-future projects anticipated to deliver capital paybacks of less than 3 years. I'll now hand over to Mark to provide a strategy update.

Thanks, Darin. Moving to slide 15, we've provided further detail on the capital program and volume of work underway.

In the first half, the average refurbishment investment was $1.7 million per store. This was above our original estimate as we prioritized speed to market, which resulted in higher build costs, including air freight and the deferral of some planned efficiencies.

The business case was deliberately structured around a sub-3-year payback threshold, and that return profile continues to hold. As we scale the format, we expect per-store CapEx to reduce through value engineering and operating model efficiencies.

In the second half, we plan to refurbish a further 6 stores, with the average investment expected to reduce to approximately $1.5 million per store, and progress on this is tracking positively. The second half will include accelerated depreciation of around $500,000 and one-off defit and launch costs.

Over the life of the program, we continue to expect the average investment per refurbishment to moderate materially while supporting sub-3-year paybacks and strong returns. Moving to slide 16, our rationale for small formats is clear: they grow customer lifetime value by improving convenience and accessibility for busy parents, while extending Baby Bunting into high-density, inner-city catchments with attractive economics.

With lower capital intensity and faster payback, each store targets $2.5 million in annual revenue and a 50% return on invested capital. The model is deliberately focused on higher-margin consumables and core baby essentials, supported by lower staffing requirements and optimized occupancy costs per square meter.

We currently have 3 pilot stores trading in centers located near established large-format stores, enabling a disciplined test-and-learn approach. Launched in the second quarter, early indicators are encouraging.

All stores are achieving gross margin targets, and we are seeing strong in-store conversion. The 3 pilot stores are in existing catchments, and we're seeing around 78% of customers in these stores being current Baby Bunting customers.

This shows that we can grow customer lifetime value with existing customers, as well as reach new customers at the same time. Also pleasingly, we've not seen any impact on the large-format stores in the same catchment.

Early performance varies, with 1 store trading to plan and 2 stores below initial expectations, showing steady improvement. This is consistent with pilot-phase testing, and we are getting rich insights, which are informing how we refine execution and trading.

We'll continue to optimize the model through the second half of FY26 before determining the next phase of expansion. On slide 17, you can see we have continued to make excellent progress in New Zealand and see a clear pathway to profitability from FY27.

For the first half, we delivered 16.5% sales growth and gross margin expansion of 140 basis points. The brand awareness campaign we invested in has had strong impact in market, with unaided brand awareness rising 600 basis points nationally and 800 basis points in Auckland.

In December, we also opened our first store of the future in Auckland. This has been incredibly well received, with strong initial sales performance, validating that the format translates in the New Zealand market.

Looking to the second half, we are running at 17.8% comparable store sales growth in the first 7 weeks. We're focused on driving profitability through enhancing labor productivity, targeting gross margin above 40%, and capturing further supply chain cost savings.

Moving to slide 18, in line with our Plex strategy, we are proud to announce a new 3-year exclusive partnership with Stokke, one of the world's most respected premium children's product brands. Founded in 1932, Stokke is a globally recognized premium children's brand with a long heritage of Scandinavian design, craftsmanship, and innovation.

This partnership is a strong endorsement of our strategy, our national store network, and our deep understanding of Australian families and the trust we have built with leading global brands. This partnership begins in April, with an exciting plan to launch the relationship in the final quarter with momentum into FY27.

Slide 19 illustrates how our strategy drives a powerful multiplier of shareholder value through 4 interconnected growth engines. First, gross margin, where our target is to get to 42% in FY27, a lift of over 500 basis points from the FY24 base, driven by supplier terms and mix, Plex expansion, and retail media.

Second, refurbishment-led sales growth: with 10 to 15 refurbishments per annum and a demonstrated uplift of 15% to 25%, this program is a durable growth engine for the network. Third, network expansion: we have a disciplined pathway to approximately 80 additional stores over time, comprising 44 large-format locations and up to 37 small-format stores, subject to pilot performance.

Fourth, operating leverage: as rollout velocity increases and capability investment normalizes, we expect to capture approximately 200 basis points of operating leverage from the FY24 base through scale and productivity initiatives. Together, these elements form a compounding growth model where margin expansion, network growth, and operating leverage reinforces one another.

This provides a clear and credible pathway to restoring Baby Bunting as a sustainably growing 10% plus EBITDA margin business over the medium term. To close, let's now move to the trading update and outlook on slide 21.

I'm pleased to report that momentum has continued into the first 7 weeks of the second half, with comparable store sales growth of 6.7%. Pleasingly, New Zealand has continued to outperform, up 17.8%.

We plan to refurbish 6 stores in the second half, in addition to opening 2 new large-format stores and continuing to refine our small-format pilots. We are pleased to reaffirm our 2H pro forma NPAT guidance of $12.5 million to $14.5 million.

For the full year, pro forma NPAT is now expected to be in the range of $17.5 million to $19.5 million. To close, I wanted to thank you for joining us today.

What you've seen this morning is a business executing with discipline and building momentum. We have delivered strong comparable sales growth with acceleration into the second half.

We have achieved record gross margin and are confident in further progression across the year. We are scaling our store-of-the-future program with demonstrated 15% to 25% uplifts while maintaining sub-3-year paybacks.

We are investing in growth engines that compound over time: margin expansion, refurbishment-led uplift, network expansion, and operating leverage. This is not a one-off result.

This is the outcome of a clear strategy, consistent execution, and a team aligned behind a long-term plan. We are building a stronger, more resilient, and more profitable Baby Bunting with a clear pathway back to sustainably delivering a 10% plus EBITDA margin.

Thank you for your continued support. I'll now open the line for questions.

Good morning, Mark. Good morning, Darin.

Very impressive presentation today. I want to talk about the refurbishments.

The sales uplift seems to be going very well, delivering 25% at the top end of your range. Within the 9 stores you've refurbished, there must be a range of sales uplifts.

How can you leverage the learnings from the better-performing refurbishments and the worst-performing refurbishment so far so that going forward, we might even be able to do better than 25%?

Thanks, Sam. It's a great question.

We track a series of customer behavior metrics across the store-of-the-future performance. These span across looking at known customers, looking at active customer rates of both new and returning customers, in addition to the spend profile per customer.

In that breakdown, we look at frequency, average transaction value, which is made up of average selling price and the number of items in the basket. Pleasingly, across all of those key metrics, we have seen uplift.

Whilst there is variability across the store network, that helps us identify where we can zero in to improve performance. I think you'd also appreciate that as these stores are trading towards the top end of our guidance, we're also learning about the demand profile in stock replenishment for our stores, and we've certainly identified opportunities to continue to tune the model to improve stock availability on shelf and further drive sales performance.

Overall, very, very pleasing result.

Based on the analysis of all these metrics you're tracking, as you do more of these refurbishments, can you get better and can you do better than 25%?

Look, I'm very happy with 25%, Sam, at the top end of guidance. We certainly are optimistic that with the visibility that we've got and the investments that we've made in data and analytics, we have very precise measures of how the stores are performing, and that gives us great insights to continue to optimize their performance.

What we do expect to see is that as the cohort gets larger and we went from 3 to 9 stores over this period, and that will increase by a further 6 stores in the next half, that the range of performance will vary as we hit different catchments. At the top end of range, we're very pleased with the progress and feel very confident that we've got our hands on the levers of the things that we can continue to do to optimize their performance.

Okay. Then can you help us understand the phasing of the sales growth uplift post the refurb?

Based on the 9 that you have done, typically how soon after the refurb do you reach peak sales growth, and how many weeks is that sustained for before starting to slow down?

The numbers that we've provided, or the way that we provide the performance, Sam, is in line with the guidance that we provided. So 15% to 25% is the cumulative performance that we expect to see in the first year post-refurbishment.

You would appreciate that that slightly moderates over time, but what you're seeing with the profile of 9 stores now is with a larger cohort and a consistency of the periods of reporting that we've been showing that these stores consistently are performing well within the target range that we've set.

Okay. Excellent.

Then last question: maybe we can just touch on the small formats. The 2 that are below expectations, when you say expectations, are you referring to sales or EBITDA?

At the sales line, Sam. When we look at those 2 stores, it's very clear again, just working with all of the data that we've got, the specific piece that we're working on at the moment is converting passing traffic from the shopfront into the stores.

That is the difference, the outlying difference across the 3 stores from the one that is performing to target and the 2 that are slightly behind. All of the in-store conversion metrics and then the category performance within those stores is consistent across the 3.

That gives us very good insight on the things that we need to do to optimize those 2 locations. That's been a good learning for us.

We are large-format destination retailers. As we've moved into shopping center environments, we've recognized that there is some finesse in the execution that we need to bring just in terms of how we convert more passing traffic into in-store shoppers.

The in-store conversion of our small-format stores is amongst the highest that we see across the network.

Okay. Thank you.

Hi, guys. I firstly had a question on the CODB in the second half.

I'm just trying to triangulate where you're thinking that'll land in terms of percentage of sales, and then longer-term, your thoughts on the potential leverage that you can get in future periods.

Thanks, James. We are definitely anticipating to see cost of doing business leverage through the second half.

Then looking beyond this current financial reporting period, ongoing leverage as we introduce more of these refurbished stores into the network and also add to the existing network of stores. Originally at the start of the year, we talked about achieving a modest amount of cost of doing business leverage.

I think it will be flat year on year. The only thing to note really is that with the additional CapEx investment in the first half, that will just result in a higher second-half level of depreciation in those stores.

That's a good segue into sort of CapEx. Can you just explain again what's changed on the CapEx outlook for the full year and specifically what's driven the uplift?

Thanks, James. Originally we talked about a CapEx range of $30 million to $35 million.

The relative comparable point is the upper end of that guidance, because we'll be executing a significant number of refurbishments and then new store rollouts. The $35 million I'd spoken about was net of landlord contributions.

That's the initial key call-out, how the contributions are flowing in as rent-free contributions, they'll end up as an amortized P&L benefit through the right-of-use asset line over future periods, but we do get the cash flow benefit in the current period. In addition to that, we obviously went from pilot straight into the program rollout, and we were targeting some first-half benefits in relation to sort of fixture engineering.

The builds are certainly very complex, and one of the key elements in regards to the future optimization of the build costs was about transitioning build into offshore manufacture the fixtures, so that lowers your fixture costs and it also lowers your build costs. If we were to sort of progress that in the first half, we were going to miss out on making sure that these stores were open and trading for the key Q2 trading period.

We've preferenced speed to market whilst incurring a moderate amount of increased CapEx, but still ensuring that we're on track to deliver sub-3-year paybacks for those stores.

I think you basically said that you expect the per-store CapEx to come down going forward. We should expect that the targets in terms of the relationship between rollout and total CapEx from FY27 onwards is essentially unchanged?

That's right. We've upped the range a little bit in future periods, but still overall, if there is going to be a variation in terms of average build cost, it's going to be moderate.

Okay. Perfect.

Thank you.

Thanks, everybody, for joining us this morning. Looks like we have another question.

Hey, guys. Thanks for taking my question.

Just quickly on the progress that you mentioned you were making on finding efficiencies for your average build cost, are you able to talk to me about what those were and whether you're now tracking in line with the $1.5 million that you were targeting?

They're second-half projections, James. We've forecast those out.

What we did is we were originally rolling out in the first half until commencement of the build in the second half has given us around a 9-month period to progress the detail that sort of underpins the future cost-outs that we were targeting. On that basis, we're on track for the $1.5 million build cost through the second half.

Great. Just one more from me on the small-format concepts, particularly the 2 that are perhaps underperforming relative to your current kind of expectations.

Is there any difference in terms of the location for those 2 stores, perhaps being proximal to maybe a Kmart or a larger competitor? Is there any difference in sort of the competitive intensity of the locations, or is it more just around, I guess, the storefront and the overall location?

It's a great question. Whilst the 3 stores are in slightly different locations within the shopping centers themselves, the competitive intensity isn't really different across the 3.

We've got DDS competitors, pharmacy competitors, and supermarket competitors in all 3 locations. There is some slight nuance across the 3 locations, but the problem statement which I was speaking about in the previous question around converting more passing traffic into the store is the consistent variable across the 2 stores which are performing slightly below expectation.

As I said, the in-store conversion of all 3 of these stores are amongst the highest that we see in our store network. We feel like we've got a very good handle on what we need to do to optimize this over the next 6 months, and look forward to sharing that progress when we next update the market.

Thanks, guys.

just a quick one for Darin. Just given the higher D&A in the second half, can you give us maybe a guide what we should expect for FY26 D&A?

It's coming in at around 44 on a full-year basis. Now that is depreciation and amortization for right-of-use assets and also CapEx depreciation.

Okay.

Which is an equivalency to the first-half trading, it's

Great. That's helpful.

Thank you.

Thanks for joining us this morning, everybody. For those of you that will be joining us on our roadshow, we look forward to catching up with you.

Otherwise, we look forward to updating the market again at our full-year results. Thanks very much.