- Strong partnership sales
- Challenging Christmas in prospect
Card Factory (CARD) may have delivered a surge in half-year statutory profits, but shareholders will also note that chief executive Darcy Willson-Rymer warned that the company, though well positioned, is faced with a “challenging economic backdrop in the run-up to the Christmas trading season”.
The festive season is central to the company's financial prospects, but the specialist retailer of greeting cards, dressings and gifts can certainly point to progress across its stores. Revenue here increased by 10.5 per cent on a like-for-like basis with management highlighting improvements in “store range and layout developments and the annualisation of targeted price increases”. From a product perspective, sales of gifts and celebration essentials led the way, although greeting cards also registered positive sales growth.
By contrast, financial results were set back by a 13.1 per cent contraction in like-for-like online sales. The company indicated that this was to be expected given the “continued rebalancing of retail sales between online and in-store across the sector”. The negative trend is expected to continue over the second half, and it is far from clear when the transition to an “omnichannel” offering will gain traction.
Partnerships form part of that transition, an effective refocusing of the sales channels, and they have proved rather more successful in the period under review. Excluding the contribution from newly acquired SA Greetings (completed in April 2023), partnership sales were up by 23.5 per cent to £4.2mn.
Trading since the August 2023 update has been in line with expectations and the board has expressed confidence in the ability of the company to achieve the long-term financial and operational targets set out at its Capital Markets Strategy Update in May 2023. The lowly forward rating of eight times consensus earnings reflects the question marks hanging over the business despite the respectable interim outturn. Hold.
Last IC view: Hold, 104p, 3 May 2023
| CARD FACTORY (CARD) | ||||
| ORD PRICE: | 105p | MARKET VALUE: | £359mn | |
| TOUCH: | 103-105p | 12-MONTH HIGH: | 117p | LOW: 40p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 7 | |
| NET ASSET VALUE: | 83p* | NET DEBT: | 60% | |
| Half-year to 31 Jul | Turnover (£mn) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
| 2022 | 198 | 14.3 | 3.40 | nil |
| 2023 | 221 | 24.7 | 5.60 | nil |
| % change | +12 | +73 | +65 | - |
| Ex-div: | - | |||
| Payment: | - | |||
| *Includes intangible assets of £331mn, or 97p a share | ||||
