Card Factory upgrades FY profit expectations

Greeting card retailer Card Factory lifted its profit guidance on Tuesday as it hailed better-than-expected trading, with customers returning to shopping in stores.

In an update for the 11 months to the end of December 2022, the company said sales rose to £432.6m from £337.3m in the same period a year earlier, reflecting "the continued good momentum within the business alongside the shift of customer spend back towards the high street".

Store revenues rose 7.1% on a like-for-like basis and Card Factory said trading over the Christmas period was strong, driven by improvements in both store transactions and average basket values.

Online sales fell 27.6% year-on-year as customers returned to bricks and mortar stores and due to Royal Mail strikes.

"Strong seasonal trading in stores over the Christmas period was supported by our range development and value for money offer across both cards and gifts," it said.

"Christmas trading also benefitted from the agility provided by our vertically integrated model, as well as forward ordering and delivery of Christmas ranges, which underpinned strong availability in stores across the Christmas period."

The group now expects EBITDA for the 12 months to 31 January 2023 to be "at least" £106m versus current consensus of £96.9m. This would approximate to pre-tax profit of £48m.

Chief executive Darcy Willson-Rymer said: "We're pleased and encouraged by the continued strong performance of the business. With delivery of our growth strategy progressing well, it is great to see some of the benefits from this work starting to come through in our financial performance.

"I'd like to thank all our colleagues who have supported these changes and worked tirelessly over the important Christmas trading period. There is still more work to be done but we are very excited by the opportunities ahead and have confidence in our Opening Our New Future growth strategy."

At 0820 GMT, the shares were up 6.9% at 93.19p.

Russ Mould, investment director at AJ Bell, said: "In an environment where every penny matters and the UK’s postal service has become completely unreliable due to back-to-back strikes, it’s a surprise to see a retailer of greetings cards do so well.

"One might have thought it was an easy decision to not send cards as that’s a quick way to save money. A phone call or text message is a cheaper alternative and hassle-free.

"However, Card Factory has been on a roll for quite some time, suggesting that its value proposition is resonating with cash-strapped consumers. When times are tough, sending a card and/or a small gift to someone can seem even more special than in ‘normal’ times.

"Whereas someone like WH Smith may charge £3 or £4 for a greetings card, Card Factory offers them for a fraction of that price. Perhaps it doesn’t matter that the card quality is inferior, it’s the gesture of giving that matters.

"Also playing to Card Factory’s strengths is the fact it is coping well with inflationary pressures including energy costs hedged until September 2024. It is one of the few retailers with genuine momentum."