Challenging time for Card Factory as group sees lower high street footfall
BUDGET GREETINGS card retailer Card Factory said the Christmas trading period was challenging due to lower high street footfall.
However, the firm said it performed robustly in a competitive trading period. The Wakefieldbased group said year to date likefor-like sales were broadly flat at minus 0.1 per cent, down from 3 per cent growth in 2018.
The firm warned that underlying profits for the 2020 financial year are likely to be flat, as it braces for another “difficult” trading period.
The retailer said it still expects to deliver earnings of between £89m and £91m for the current financial year.
Card Factory’s revenue rose 3.4 per cent in the 11 months to December 31. This was largely due to 51 new store openings, which brought the total estate to 973.
Chief executive Karen Hubbard said footfall on the high street was lower than last year, but that like-for-like sales were in line with the third quarter performance.
Ms Hubbard said: “Although the group has faced significant cost pressures in the year, these have reduced and we have been able to take mitigating action to maintain robust gross margins.
“Whilst we expect ongoing challenges from the consumer and macro backdrop, we continue to lead the market with our proposition, underpinned by our ongoing investment in our unique vertically integrated model which provides our business with significant competitive advantages.”
Zoe Mills, retail analyst at GlobalData, said: “Card Factory’s latest results highlighted a poor festive period for the greetings card specialist as the occasion failed to drive increased footfall to store.
“While sales growth of 3.4 per cent is still a strong performance, new stores drove this, as its store like-for-like sales are forecast to have been negative.
“Despite having such a large store estate – at a time when many retailers are reducing the number of physical locations they operate, in response to declining footfall – the greetings card specialist shows no signs of slowing its expansion strategy.”
She said that while the strong performance in new stores is driving positive overall revenue growth, Card Factory should consider closing any underperforming locations, particularly in areas where there are a number of Card Factory stores, to reduce operational costs.
“Given the retailer’s tendency to perform better during seasonal occasions rather than everyday events such as birthdays, this year’s weaker Christmas trading is worrying,” she said.
This year’s weaker Christmas trading is worrying.
Zoe Mills, retail analyst at GlobalData