Card Factory enjoys store-led sales jump

Card Factory (CARD) is dependent on its stores for the vast majority of its revenue, meaning that the end of lockdown restrictions was a moment of great relief for the business in a financial year when stores were closed for 10 weeks (which was still much better than the five months of closures in 2021). The purveyor of greeting cards, gifts, wrap and bags returned to profit in these results as customers hit the high street once again and, with a refinancing completed after the year-end, the business is making steady progress on its long road to recovery.  

Investors will be buoyed to see the rebounding of store sales, up by a third to £336mn. Online sales fell by 2 per cent to £10.9mn, but are importantly up by almost a quarter on pre-pandemic levels. Darcy Willson-Rymer, chief executive, said that management is focused on turning the business into a “omnichannel retailer” but whether Card Factory’s online offering can take a bigger slice of the relative revenue take in the future remains to be seen – this is surely needed if management's target of £600mn in sales in financial year 2026 is to be achieved. 

The refinancing took place in April, and steadies the ship. Revised terms mean that the company is no longer obliged to raise new equity to prepay debt facilities, and is left with £150mn of facilities. Encouragingly, leverage was down to 2.3 times at the year-end which is consistent with pre-pandemic levels.

Consensus forecasts have the shares trading on seven times forward earnings. This looks cheap against the five-year average of 10 times. But there is still much work to be done to hit management’s revenue targets, with analysts expecting £445mn of sales in 2024. Hold.

Last IC View: Hold, 55p, 29 Sep 2021