26th Sep 2023 15:22
(Alliance News) - Card Factory PLC shares fell on Tuesday, breaking their 12-month trend of growth, as the company grapples with a "challenging economic backdrop" in the run-up to the key Christmas period.
It also posted interim earnings growth and said it is confident of meeting expectations for the full-year
Shares in the greeting cards and gifting firm were 12% lower at 97.60 pence each in London on Tuesday afternoon. In the last 12 months, the stock has more than doubled from 45.26p.
Card Factory said revenue in the six months to July 31 grew 12% to GBP220.8 million from GBP198.0 million a year prior. Pretax profit surged 73% to GBP24.7 million from GBP14.3 million.
Peel Hunt's Jonathan Pritchard, John Stevenson and Ruben Pathmanathan said the interim results are a "reflection of a strong H1."
Chief Executive Officer Darcy Willson-Rymer said: "We are delighted to announce a strong performance in the first six months of this year."
"Our value and quality proposition and the strength of our store estate resonates with customers and positions us well to navigate the challenging economic backdrop in the run up to the Christmas trading season. Continued leveraging of the insights gathered from our investment in customer data is enabling us to evolve and optimise our store formats and ranges across cards, gifts and celebration essentials, all underpinned by our discipline in maintaining a resilient financial position."
AJ Bell's Russ Mould said the numbers themselves are "impressive." He said they "show there is still a place for keenly priced greetings cards and gifts in the market, with the retrenchment of troubled rival Clintons Cards doing no harm at all to the company's competitive position."
However, Mould pointed out: "A warning that tough Christmas conditions are in the post is the likely reason for today's round of profit taking, even if the company sounds confident about navigating these challenges."
Card Factory said it is "confident in delivering a good outturn for the year". Trading since early-August has been in line with expectations, it added.
But, looking ahead to the festive period, Card Factory said: "We are well prepared for our key Christmas trading season. Our Christmas programme has now launched and includes our first fully integrated marketing campaign. New products include an expanded gift offer to provide customers with new and exciting ranges in areas such as toys, food and confectionery, and own label. As part of the space realignment project, we have continued to optimise space to ensure the correct balance between Christmas card, Christmas gifting and Christmas celebration essentials.
"From a supply perspective, all stock has been manufactured in line with the required delivery dates and there have been no issues with inbound logistics for any stock manufactured overseas. Recruitment of seasonal colleagues for the Christmas season has commenced and we are confident in our ability to not only meet staffing requirements for this seasonal peak but to also provide customers with an enhanced experience."
Based on this, Peel Hunt analysts said full-year forecasts are "unlikely to change."
"In our view, it is a good performance from a company that is improving its strategy and tactics. However, the shares were probably expecting an upgrade today and with the longer term fundamentals still questionable," Pritchard, Stevenson and Pathmanathan said.
Peel Hunt reiterated its 'hold' rating and 125.0 pence target price.
By Sophie Rose, Alliance News reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
Card Factory