Card Factory in talks with potential overseas retail partners after 'satisfactory' half year sales performance

The Card Factory recently celebrated its 1,000th store opening.The Card Factory recently celebrated its 1,000th store opening.
The Card Factory recently celebrated its 1,000th store opening.
CARD Factory is holding talks with a number of potential overseas retail partners after delivering a "satisfactory" half year sales performance.

Karen Hubbard, chief executive officer, acknowledged that some consumers were nervous about the "uncharted waters" surrounding Brexit, but added: "Card giving is alive and well."

She said the company had bought stocks in early to mitigate any potential Brexit impact.

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She said the company was spending time listening to its customers and said analysts should "stay tuned" to hear about opportunities internationally.

The Card Factory has published it half year results.The Card Factory has published it half year results.
The Card Factory has published it half year results.

She added: "There are a number of Yorkshire towns we still need representation in."

In the six months ended 31 July 2019, the company's revenue increased by 5.5 per cent to £195.6m and the profit before tax was £24.3m, compared with £28.4m in the same period the year before.

The company said it had secured a "robust"sales performance, with overall Card Factory like-for-like sales growth of 1.5 per cent.

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There was also a 1.2 per cent increase in store like-for-like sales, which outperformed reported negative high street footfall, the company said.

Founded in 1997, the Wakefield-based firm sells greetings cards, gifts and balloons for special occasions. sales grew by 25 per cent which the company said was a strong performance against external and internal KPIs (key performance indicators).

Over the half year, there were 26 net new stores opened, which the company said will drive additional revenue growth.

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The company said customers were responding well to new ranges with a record Valentine's Day and Mother's Day performances in terms of both volume and value. The Card Factory said it was focusing on customer experience and improved use of space.

New retail partnerships are helping to extend Card Factory's market share in the UK and overseas. Following a successful trial across more than 130 stores, the company has secured an agreement with Aldi to supply half of their UK estate, totalling 440 stores, from November 2019.

It has also secured an exclusive partnership with the largest greeting cards retailer in Australia - The Reject Shop - to supply all of their 360 stores with Card Factory branded cards from January 2020. Branded concessions are being trialled in 15 Matalan stores and two new franchise stores opened in Guernsey and Gibraltar.

Card Factory said it was well established as the clear market leader in its sector and is growing its market share.

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The company said: "The underlying card market remains resilient despite continuing weaker consumer confidence."

Card Factory has also reported a strong pipeline of new store opportunities and is on track to deliver around 50 net new UK and Republic of Ireland openings by the year end.

It is in discussion with a number of other potential retail partners in the UK and overseas and is continuing to invest in its vertical supply chain, which is delivering margin improvements.

The board expects the Card Factory's adjusted underlying EBITDA to be in line with market expectations.

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Ms Hubbard added: "We have delivered a satisfactory sales performance in the first half of the year. A strong seasonal performance, which saw another year of record sales for both Valentine's Day and Mother's Day, was achieved against the backdrop of an increasingly challenging UK high street environment and consequent weaker footfall. The successful seasonal trading, combined with more sophisticated use of data and improvements to our customer experience, gives us confidence for the key Christmas trading period ahead.

"We are pleased with the progress made on the strategic initiatives that are underway. These include using consumer insight to develop our customer proposition across all channels and a number of commercial partnerships. Maintaining a sharp focus on the execution of these various initiatives is a key priority for the senior leadership team.

"Although the current economic uncertainty continues to impact consumer confidence, we remain positive about the resilience of the card market, the strength of the Card Factory business model, and our growth opportunities for the business over the medium term."

In a note, analysts from Investec, said Card Factory had delivered a "resilient" first half, delivering sales growth despite a challenging consumer backdrop.

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The note added: "Good progress seems to have been made on the group’s multiple efficiency programmes. The probability of a return to profit growth in FY21 has increased with the exciting news that the Aldi and The Reject Shop trials have become larger contracts. The cash generation is undervalued. Buy reiterated."