Bad weather hits Card Factory

Karen Hubbard, Card Factorys chief executiveKaren Hubbard, Card Factorys chief executive
Karen Hubbard, Card Factorys chief executive
Budget greetings card firm '‹Card Factory has blamed the weak consumer environment and extreme weather conditions for a decline in first half underlying sales.

The Wakefield-based firm reported total sales growth of 3.2 per cent in the six months to July 31, but like-for-like sales fell 0.2 per cent.

Karen Hubbard, Card Factory’s chief executive, said: “We continue to experience a weak consumer environment, made all the more challenging by the impact of this year’s extreme weather conditions on high street footfall."

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Despite this, the group reported a record Father’s Day season.

“The performance of our seasonal ranges has been strong, with our best ever Father’s Day in terms of volume and value, although we recognise there has to be more focus on our Everyday ranges, which have lagged the seasonal performance," said Ms Hubbard.

“Taking into account the above, the board’s current expectation is that EBITDA for the year will be in the range of £89m to £91m. Our key fourth quarter trading period will of course be critical in determining the final result for the year, but we believe we are well positioned to deliver a good performance in our important Christmas trading season.”

The group said it is on target to open around 50 stores this year including a number of retail park stores, which continue to perform well. It opened 25 net new UK stores in the first half, bringing the total UK estate to 940 stores.

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The firm said extreme weather conditions have hit high street footfall and following consumer caution across the UK, like-for-like sales for the Card Factory store network fell by 0.7 per cent with a marginal improvement in the second quarter.

Card Factory said it has expanded and improved the range of card and non-card products available on its websites, both personalised and non-personalised, as it targets a significant increase in its share of this attractive segment of the market.

The Card Factory website reported year-on-year growth in traffic, conversion and average order value.

The group said it is on track to deliver business efficiencies to offset some of the cost pressures arising from wage inflation and other factors.

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It said the trading performance at Getting Personal remains challenging, with increased price competition and rising costs hitting the business.

The group said it remains highly cash generative, despite the tough trading environment, driven by strong operating margins, limited working capital absorption and relatively low capital expenditure requirements.

It said it will continue to return surplus cash to shareholders and it plans to return 5p to 10p per share towards the end of the 2019 financial year.

Analyst Adam Tomlinson at Liberum said: "A continued weak consumer environment and extreme weather which impacted footfall during ​the second quarter​ means that management is now guiding to ​a 2019 underlying EBITDA of £89m​ to ​£91m v​ersus​ consensus of £93.5m​.

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​"​Management does highlight strong seasonal performance (e.g. Father’s Day) and continued improvement in card and non-card​,​ but this has not been enough to over-ride the more difficult overall trading environment.​"

Mr Tomlinson said​ the Card Factory website delivered a strong performance.

​"​Getting Personal, the group’s online division continues to be disappointing with sales down 8.5​ per cent​ in the face of tough competition and rising customer acquisition costs​," he added.​

"The long-term total store target of 1,200 still remains, but we suspect the remainder of the openings will be more heavily weighted towards the UK as the Republic of Ireland trial (with a previous target of 100 stores in the territory) appears to be delivering results somewhat below expectations.​"