Card Factory sees positive start to the year

Card Factory's chief executive Karen HubbardCard Factory's chief executive Karen Hubbard
Card Factory's chief executive Karen Hubbard
Budget greetings card retailer Card Factory has reported a positive start to the year despite the uncertain macro outlook and challenging consumer conditions.

The Wakefield-based group said like-for-like sales rose 2.3 per cent in the three months to April 30 in spite of negative footfall on the high street.

The firm reported record card sales for both Valentine’s Day and Mother’s Day.

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The group, which has 979 stores in the UK and Ireland, said total sales including new stores rose 6.4 per cent in the three months to April 30.

Card Factory said the first quarter sales hike was in part due to weak results a year ago, but added it expects like-for-like sales to be “marginally positive” over the full year as it revamps ranges and designs.

Chief executive Karen Hubbard said: “We have had a positive start to the year with like-for-like sales growth despite challenging consumer sentiment and negative footfall on the high street.

“We have seen a good customer reaction to our seasonal card ranges over the quarter, with yet again record card sales in volumes and value for both Valentine’s Day and Mother’s Day.”

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The group confirmed it is on track to open around 50 stores this year on a net basis which is in contrast to many of its retail rivals which are closing down stores. It opened 14 net new stores in its first quarter.

The trading update showed that the Getting Personal online gift business continued to suffer due to heavy discounting in the market and as it invested heavily to attract new customers.

The update follows a difficult past financial year for Card Factory, which saw annual profits drop 8.3 per cent and like-for-like sales growth grind to a halt.

It has already cautioned that earnings in 2019-20 are expected to be flat, due to continuing cost pressures.

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Zoe Mills, retail analyst at GlobalData, said: “Card Factory’s first quarter results hint to a turnaround in performance as like-for-like sales return to positive territory.

“However, the weak comparative quarter last year has played a part in these more encouraging results, with the economic climate remaining challenging and the demand for everyday occasion cards such as birthday, new job and new home weakening.

“With Card Factory stating that it expects like-for-like performance to be marginally positive for the year, it echoes our thoughts that maintaining like-for-like store sales growth in this sector is a difficult, if somewhat impossible, task unless there is an element of product diversification.“

Russ Mould, investment director at AJ Bell, said: “A lot of people would assume the greetings card industry has no future. The advent of email, text and messaging via the likes of WhatsApp theoretically could be the nail in the coffin for hand-written letters and cards.

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“However, Card Factory’s latest trading update shows there is still life in the act of sending a piece of card in the post, be it for birthdays, condolences or more.

“A 2.3 per cent rise in like-for-like sales is reassuring for a business operating on the troubled high street, hence why the share price has risen today. “However, it must be noted that Card Factory had an easy set of comparative figures to beat as last year’s period was weak with a 0.4 per cent like-for-like sales decline.

“Card Factory has historically had a pile ‘em high, sell ‘em cheap approach, relying on high levels of sales volumes to help pay the bills and make a profit on the side. However stores do offer a range of pricing points and so the challenge for management is to get customers to trade up to the higher priced products.”