The Wakefield-based firm, which sells the majority of its cards for under £1, is proving popular with customers who are sick of paying steep mark-ups on greetings cards. Many of its cards are priced at less than 50p at a time when the likes of WH Smith have been criticised for selling cards at £3 and £4.
Card Factory said pre-tax profits leapt 96 per cent to £83.7m in the year to January 31 and it is rewarding shareholders with a 25 per cent increase in the total dividend to 8.5p a share.
Outgoing CEO Richard Hayes said: “We’ve got a core customer base we will defend passionately. We’ve also got new customers coming in and they’re becoming loyal.”
The group has extended its product range into new ranges of candles, picture frames, cushions and doorstops, which Mr Hayes said are selling well.
Card Factory benefits from in-house design, printing and warehousing, which significantly reduces external costs and keeps the price down. It designs and manufactures cards in Yorkshire and also uses third party providers.
The group said it anticipates that the significant cost pressures facing the retail sector, in particular foreign exchange rates and the new National Living Wage, will slightly reduce its operating margin in 2017.
“We estimate that the National Living Wage will cost the company £2.5m,” said Mr Hayes.
“We believe we can mitigate £1m so the net cost in 2017 will be £1.5m.”
Analyst Jonathan Pritchard at Peel Hunt said: “Card Factory’s prelims have beaten most expectations and although currency and National Living Wage headwinds will impact the new year, earnings progress will significantly exceed its peers and its relative position with the customer is likely to improve again this year.
“The best news out of the statement though is on cash: a 6p final dividend is a penny above expectations and means that with another special expected, a short 25p will come back to investors this year.
“That implies a 7.5 per cent yield, which makes Card Factory an absolute must for all income funds. Buy.”
Mr Hayes, who will leave the group at the end of June, is handing over the reins to Karen Hubbard, who has held senior positions at Asda, B&M and BP.
Chairman Geoff Cooper said: “Richard has led Card Factory with enormous success. Since he joined the senior management team in 2003 the group has grown from a 40-store discount chain to a vertically integrated high margin value retailer with over 800 stores and two transactional websites.”
Mr Hayes, 50, said he has no plans to work in the immediate future, but this may change.
“I’m probably going to spend half my time keep going into Card Factories. I’m very passionate about the business,” he said.
“I’ll enjoy the freedom.”
Mr Cooper said that the Board is confident that Ms Hubbard is the right person to take over.
“Karen has a huge amount of relevant experience in value retailing, both through store estates and multi-channel. She has a great deal of energy and ambition for the business,” he said.