Toys R US, page-28

Just thought i'd add to this following the re-entry of Toys'R'Us/Babies'R'Us into the market.

Looking at the TRU/BRU website it looks like their model is going to be online only with a few 'showroom' type stores, I don't think this will be able to fully compete with Baby Bunting existing physical footprint, especially when you consider the propensity of new parents to want to touch/try/feel the goods before a new baby arrives. Additionally they will take some time to set up, thinking 12 months at least to establish fully. Indeed the BRU website is not even functional in AU yet.

In other sectors I would say the online model/second hand marketplace would be concerning and a significant threat, but as a recent first time parent myself I know how much we wanted everything to be brand new and just right, and for once, the financial aspects were placed to one side. Also the nature of the baby shopping experience is to go into the store for a significant item, e.g. a Pram or Cot etc but inevitably are introduced to supplementary products you were not aware you needed/wanted. I think from memory from the last annual report only around 11% of BBN sales are through the online side, albeit a growing figure.

To refer back to BBN, I expect to see them take advantage of this lack of serious competition over the next 2-3 years and think they are decidedly undervalued from this perspective. they are trading close to the bottom of the 12 month range (since last annual figures released) and i would expect more positive news to come out of the end of year figures too.

Would welcome others thoughts, specifically around headwinds against BBN, as I can't think of too many...

Regards

GM