Belfast Telegraph

Soaring costs and weak pound give profits a battering at Card Factory

- BY HOLLY WILLIAMS

RETAILER Card Factory, which has around 20 stores in Northern Ireland, has seen annual profits tumble after taking a £14.6m hit from the weak pound and soaring wage costs.

The group — which specialise­s in greetings cards, wrappings and gifts — reported a 12.3% fall in pre-tax profits to £72.6m for the year to January 31 after its profit margins were hammered by rising costs as the Brexit-hit pound and national living wage took their toll.

It confirmed that earnings growth in the new financial year will also be “limited” amid ongoing cost pressures, despite efforts to offset this with savings across the business.

Card Factory saw shares tumble in January after it warned over the impact of a margin squeeze on its profits.

But in its full- year results, the firm cheered a solid performanc­e across its 915 UK stores in the face of “tough” trading conditions, with group like-for-like sales up 2.9% — a pick-up from 0.6% growth the previous year.

Chief executive Karen Hubbard said: “From a profit perspectiv­e, we faced strong headwinds of £14.6m in the year, principall­y due to the combined impact of foreign exchange and national living wage.

“Our cost-saving initiative­s during the year provided substantia­l mitigation and we have laid the foundation­s for further efficienci­es to be delivered in the future.

“However, given the continuing headwinds, and, as previously stated, any EBITDA (underlying earnings), growth in full-year 2018-19 is likely to be limited.”

The firm expects the cost pressures from the weak pound and living wage to ease in 2019-20 as it delivers a raft of “significan­t” cost-saving initiative­s.

It added that sales have continued to hold up well in the cur- rent year, saying it was “satisfied with the start we have made and particular­ly pleased with the record seasonal performanc­es from Valentine’s Day, Mother’s Day and Easter”.

Card Factory opened 50 stores over the past year, including six trial shops in the Republic of Ireland.

It plans to open further outlets and continue to grow its online arm, which saw sales jump 67% higher over the year.

Card Factory’s results come as a report shows the Beast from the East kept shoppers away from stores in March as people huddled in the warmth of their homes amid the big freeze.

A report f rom the British Retail Consortium (BRC) and KPMG, covering the final days of February to the end of March, said the period was volatile as the run-up to Easter helped to offset the impact on sales of the “seemingly endless” cold weather.

It said UK retail sales increased by 1.4% on a like-forlike basis compared with March 2017, when they had decreased 1% from the preceding year. On a total basis, sales rose 2.3% annually in March, against a decline of 0.2% in March 2017. Helen Dickinson, chief executive of the BRC, said: “March paints a volatile picture for sales.”

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