10th Jan 2023 12:43
(Alliance News) - UK consumers were expected to be watching the pennies during the recent festive period due to cost-of-living pressures, but Christmas trading updates so far suggest that may not have been the whole story.
AO World PLC and Card Factory PLC upped guidance, while fast-moving consumer goods seller Supreme PLC also impressed the market. Shares in toy train maker Hornby PLC fell, though its Christmas was better than 2021's.
The slew of updates followed one from Next PLC last week, which set the tone for the retail and consumer products sector.
"New year joy for the small cap scene," Shore Capital analyst Clive Black commented.
"Big guns B&M European, Greggs and Next set the scene for a Christmas time that was inflation fuelled but well navigated. Today, several smaller cap players provide more comfort and some joy."
Card Factory PLC said it is trading ahead of expectations, as the greeting cards, wrapping and gift card seller said it has noticed a post-Covid shift back to the high street by UK shoppers. Strikes at Royal Mail hurt online sales, however.
In the 11 months to December 31, sales surged 28% to GBP432.6 million from GBP337.3 million in the same period a year earlier.
Card Factory now expects annual earnings before interest, tax, depreciation and amortisation of at least GBP106 million, ahead of consensus of GBP96.9 million. This would mean a pretax profit of around GBP48 million, it said, multiplied from GBP11.1 million. Ebitda in financial 2022 amounted to GBP85.6 million.
AO World PLC, which endured a tough 2022 on the stock market, upped annual guidance, slightly surprising Shore analyst Black.
"Pigs are flying. AO World has been a pretty joyless place for equity investors for some years now for a variety of well-versed reasons, not least of which was a failed European adventure. As such, it is most pleasing to see that the profitability light has shone," the analyst remarked.
AO said UK revenue in the three months to December 31, its third-quarter, fell 17% year-on-year, an outcome line with expectations.
"However, the actions taken by the business to reduce costs and improve margins, as described in our interim results in November are gaining traction, and profitability is now running ahead of our previous expectations," it said.
AO World now expects adjusted earnings before interest, tax, depreciation and amortisation in the range of GBP30 million to GBP40 million, ahead of previous guidance of the top end of a GBP20 million to GBP30 million range.
AIM-listing Supreme said trading in the third-quarter to December 31 was "strong", with revenue and gross profit up 30%. It expects to meet market expectations for the full-year.
Elsewhere, Marks Electrical Group PLC topped expectations and fashion retailer Sosandar PLC backed its outlook after a fifth successive quarter of record profit.
There was bad news from Hornby, as it warned of a full-year loss with sales below budget. More positively, the model railways seller said trading in its third-quarter to the end of December improved year-on-year.
Shore's Black added: "All in all, a very good morning for UK small cap retailing, when was the last time that we were able to make that comment? We would expect the market to respond warmly to these updates, perhaps upwardly fuelling the often-lowly rated equities, noting the current macroeconomic headwinds for the UK consumer."
Supreme shares surged 11%, Card Factory rose 5.5% and Marks Electrical added 4.9%. Shares in AO World were down were 0.1% lower, despite being some 10% higher in early trade. Sosandar fell 3.6%, while Hornby tumbled 14%. Next was down 2.9%, though it is up 5.3% so far in 2023.
By Eric Cunha, Alliance News news editor
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Related Shares:
Ao WorldCard FactorySupreme PlcHornbyMarks ElectricSosandar