‘Difficult year’ ahead knocks Card Factory
SHARES in Card Factory tumbled by 14pc yesterday after a “challenging trading period” prompted the greetings card retailer to warn it would endure “another difficult year”.
The FTSE 250 retailer blamed lower high-street footfall for dwindling sales growth.
Like-for-like sales in the year to date had been broadly flat, dipping by 0.1pc, compared with growth of 3.8pc a year earlier.
Total sales rose by 3.4pc in the 11 months to Dec 31 compared with the same period in 2017. In fresh evidence of the shift of shoppers to the internet, Card Factory’s online card sales rose by 59pc in the last 11 months.
Despite the sales rise, investors balked at the company warning that “in light of the current consumer and macroeconomic backdrop we anticipate the fullyear 2020 will be another difficult year”. Shares in Card Factory closed down 26.6p at 168p yesterday, valuing the company at £574m.
“At first glance the Card Factory Xmas update looked solid enough, but the devil was in the outlook statement,” said analysts at Peel Hunt.
“In general, we’ve got no problem with management teams being cautious right now, but value greetings cards are a defensive purchase and there shouldn’t be a macro reason for caution. The areas of cost inflation have been known for a while,” they added.
Card Factory said it also faces higher costs of between £5m and £6m following increases in the national living wage and higher electricity charges.
Despite the additional costs Card Factory still expected annual profits before tax and other charges to remains unchanged at between £89m and £91m.
Karen Hubbard, chief executive, 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.”
Sales at the company’s gift retailer, Getting Personal, fell 8pc due to “heavy discounting and increasing costs of customer acquisitions”.
Kate Heseltine, of Edison Investment Research, warned Card Factory showed “limited signs of any marked improvement in the sales trend over the final two months of 2018”.
Despite the high-street crisis, the greetings card retailer has continued expanding its store portfolio and opened 51 outlets in the period.