Baby Bunting's stocks have dropped nearly 10 per cent in early trade despite the news its first-half net profit edged slightly higher.
The specialist baby goods retailer increased statutory profit by 0.6 per cent to $4.838 million in the six months to December 29, while revenue increased by 5.0 per cent to $186.39 million.
The board announced an interim fully franked dividend of 4.1 cents per share, up from 3.3 cents last year.
Pro-forma profit, which strips out the non-cash impact of employee equity incentive expenses and transformation project expenses, increased by 31 per cent to $7.51 million.
FY20 pro forma profit guidance of $20 million to $22 million remains unchanged.
The company told the ASX on Friday that sales from its private label and exclusive products grew 51.6 per cent for the period and now represents 35.5 per cent of total sales, driven primarily by the support of key suppliers expanding the range of products exclusively sold to Baby Bunting.
Meanwhile, a successful integration of the "Baby on Board" car seat installation businesses, purchased in the last quarter of FY19, resulted in car fitting sales jumping by 40 per cent.
Baby Bunting said although products were sourced, either directly or through distributors, from China, it ended the first half with relatively high levels of stock, having built these up with the earlier-than-usual Chinese New Year factory closures in mind.
Chief executive Matt Spencer said while the majority of the company's stock was manufactured in China, it had sufficient stock and also the ability to lay-by stock, which made up roughly 20 per cent of sales.
"The coronavirus is obviously top of mind for everybody," he told an investor call on Friday.
"But we're working with suppliers and actively monitoring the situation."
Mr Spencer also said Baby Bunting's the first-half results reflected continued profitability growth.
"We grew our store network, delivered sales and market share growth, and achieved improved profitability," he told the ASX on Friday.
"At the same time, we continue to invest in business transformation to build capability for future growth."
Baby Bunting opened three new stores in the first half, including in Doncaster in Victoria and Wetherill Park and Casula in NSW, taking the firm's total number up to 56 stores Australia-wide.
The company's stocks dropped 35 cents, or 9.21 per cent, to $3.45 at 1015 AEDT on Friday.