Card Factory on track after resilient first half
Card Factory said on Tuesday it was “cautiously optimistic” for the second half, despite the uncertainty about the speed of the recovery, after interim numbers met expectations.
The card and gift retailer reported revenues of £116.9m in the six months to 31 July, a 16.3% improvement on the same period a year previously and in line with board expectations. Underlying sales declined 3.7%.
Stores were closed for more than ten weeks during the first half in the UK and Ireland because of lockdown measures.
The pre-tax loss narrowed to £6.5m from £22.2m, while earnings before interest, tax, depreciation and amortisation improved to £23.6m from £7.8m in 2020. Net debt excluding lease liabilities nudged lower, to £96.5m from £107.7m as at 31 January 2021.
The group said store footfall levels remained below pre-pandemic levels, but were “out-performing” high street averages.
Following a review of the business by new chief executive Darcy Willson-Rymer, the group is aiming to expand beyond its core card shop portfolio by increasing party and gift offerings, boosting online sales and expanding domestically and internationally.
Willson-Rymer said: “Although there remains some uncertainty about the speed of the post-pandemic market recovery in the short-term, I firmly believe in the resilience of the card and gifting markets.
“We look forward to successfully executing our strategy to transition Card Factory into a market-leading omni-channel retailer of cards and gifts, delivering sustainable revenue and profit growth, and driving value for all our stakeholders.”
Looking ahead, Card Factory said that since the period end, trading had been better-than-expected. While transaction volumes remained 21.9% below pre-pandemic levels, the average basket value was higher.
Like-for-like sales in the seven weeks to 19 September were down 3.6% and 6.3% on the same periods in 2020 and 2019, respectively.
The retailer noted: “Notwithstanding short-term uncertainty around the speed of the market recovery, the well-publicised disruption that is being seen in the supply chain, shortage of staff heading into Christmas, increasing freight costs, increased energy costs and adverse product mix, we remain cautiously positive about the second half of the 2022 full-year.”
As at 1030 BST, shares in the firm were off 4% at 57.6p.
Adam Tomlinson, analyst at Liberum, said: “With the interims in line with expectations, we do not expect any material changes to consensus forecasts.
“We continue to set our forecasts prudently, looking for roughly break-even pre-tax profits in the 2022 full year, improving to £28.3m in 2023. The reaffirmation of the long-term strategic targets is a positive, highlight management’s confidence in the recovery and growth opportunities ahead.
“The shares remain cheap…although with no update on the fundraise at this stage the overhang from the group’s elevated debt level is likely to continue to weight on the share.”
Liberum has a ‘buy’ rating on the stock.