20th Sep 2022 14:27
(Alliance News) - Shares in Moonpig Group PLC plunged double-digits on Tuesday, despite the online greeting card and gifting company saying its trading performance has been in line with expectations.
Analysts suggested that concerns about the cost-of-living crisis, squeezed household budgets and rampant inflation were behind the dampened investor appetite for Moonpig.
Shares were down 8.8% at 182.50 pence on Tuesday afternoon in London. Earlier in the day, shares hit a low of 173.10 pence, making it the second-worst performer in the FTSE 250.
The company said average order values in the financial year to date have increased year-on-year, with margin trends remaining "resilient" in the absence of pressure from input cost inflation.
As a result, Moonpig said it expects annual revenue to reach around GBP350 million, up from GBP304.3 million the year before.
However, the firm explained that, given the current economic environment, it has decided to prioritise greeting cards sales moving forward, as they have a "demonstrable track record of being resilient across the cycle."
Susannah Streeter, senior investment analyst at Hargreaves Lansdown, said it was this decision to prioritise cards over other products ranges that seemed to have knocked investor confidence, given that add-on purchases and expanded product ranges were considered to be "big drivers for growth."
Russ Mould, investment director at AJ Bell, agreed, arguing that the refocus on card sales rather than the little extras like chocolates and gifts, which he said provided "useful ancillary revenue", wasn't a message "engineered to enthuse shareholders."
Victoria Scholar, head of investment at interactive investor, however, said this refocus on its "bread and butter" greetings cards may help Moongpig navigate an "economic downturn".
In addition, Moonpig said that it expects the business to return to pre-Covid seasonality, with between 58% and 60% of revenue anticipated to arise in the second half of its financial year.
This news, AJ Bell's Mould argued, wouldn't help bolster investor enthusiasm either and HL's Streeter suggested that such expectations may even be "wishful thinking".
"It seems Moonpig is battening down the hatches and focusing on its more resilient lines, to try and cope with the clouded outlook ahead," Streeter added.
Moonpig Chief Executive Nickyl Raithatha remained confident, however.
"Against the current macroeconomic backdrop, our continued performance reflects the strength of our data-led business model and the long term opportunities in our markets... we look to the future with confidence as we execute on our strategy to capture the secular shift in our markets from offline to online," Raithatha said.
By Heather Rydings; [email protected]
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