Bubs Australia 1H FY26 slides: US growth drives EBITDA turnaround

Bubs Australia Ltd (ASX:BUB) reported a pivotal turnaround to profitability in its first-half fiscal 2026 results on February 27, 2026, driven by substantial growth in the US market. The infant formula maker achieved its first positive underlying EBITDA of $4.4 million, reversing from a $0.7 million loss in the prior corresponding period, while revenue increased 14% year-over-year to $55.5 million. The company's strategic focus on the high-growth US premium natural infant formula segment has proven successful, with US sales reaching $34.2 million, representing 48% growth and accounting for approximately 62% of total group revenue. The results demonstrate a significant strategic shift toward the American market while navigating challenges in traditional markets including China and Australia. The company's shares traded at $0.12, near their 52-week low of $0.105, reflecting broader market skepticism despite the improved operational performance. The financial performance highlights exceeded several key commitments, with gross profit margins at 48%, slightly below the prior year's 50% but well above the 40% guidance threshold. Gross profit increased 9% to $26.6 million, demonstrating pricing power and product mix improvements despite inflationary pressures. Operating expenses declined 3%, reflecting restructuring initiatives implemented in prior periods. The company now holds 8% of the premium natural infant formula market in the US, despite representing just 1% of the total market, with retail distribution expanding significantly at major retailers including Target, Amazon, Walmart, Sprouts, and Sam's Club. Bubs projects a 59% increase in US store count, positioning for continued momentum in this high-growth segment. While the US delivered exceptional results, Bubs faced challenges in traditional markets. China sales declined 27% to $7.5 million, though the company highlighted encouraging trends in O2O distribution, with store count increasing 77% to 1,783 stores and 50% sell-through growth. In Australia, the company's home market, sales declined 9% to $9.5 million, prompting increased marketing investment from 8% to 12% of net sales. The balance sheet reflected strategic inventory build, with cash and cash equivalents declining to $9.9 million from $17.4 million at June 2025, primarily due to inventory investments increasing from $20.1 million to $28.1 million. Based on first-half momentum, Bubs upgraded its full-year FY26 outlook, projecting revenue between $120.0 million and $125.0 million with underlying EBITDA of $9.0 million to $11.0 million, representing a significant milestone as the company positions for its first full year of positive EBITDA.