HMC Capital Partners Fund I on Baby Bunting
Thesis
Despite a recent share price decline due to macro factors, Baby Bunting's turnaround strategy is progressing well, with expanding gross margins and successful store refurbishments. The stock is currently trading at approximately 5x EBITDA, well below its historical average of 10x. As the market leader, we believe Baby Bunting is well-positioned to navigate a consumer slowdown and offers a credible path to improved margins and earnings.
“Post the retracement, BBN is now trading at ~5x EBITDA compared to an average of ~10x since IPO back in 2015. Notwithstanding near-term headwinds with potential supply chain cost inflation and weakened consumer sentiment, we continue to see a credible pathway to further improvement in margins and earnings and view the results as validation of the turnaround thesis.”