Card Factory share prices sliced despite Christmas sales holding up

Card Factory is planning to open around another 50 stores in 2018.
Card Factory is planning to open around another 50 stores in 2018.

Card Factory has a tough ride in the City and financial press over the last couple of days when the announcement of its trading statement for the period covering Christmas resulted in 20% being knocked off its share price.

Despite the fact that Card Factory reported increased like for like store sales (up 2.7%) for the 11 month period to 31 December 2017, and its card sales remained steady, analysts were quick to react to prediction that its end of year profit figure could be down slightly to between £93 million and £95 million, from the £98.5 million the previous year. Ignoring the reasons given were general – the exchange rate and higher wage costs – rather than specific to the retailer’s operations, city analysts penalised Card Factory and the share price tumbled.

While card sales held steady its sales of giftwrappings increased.
While card sales held steady its sales of giftwrappings increased.

The trading statement revealed Card Factory’s like-for-like sales growth (for the 11 months to 31 December) was driven primarily by lower margin non-card categories, such as gifts and dressings, but stressed that card sales were stable year on year.  However the latter point was ignored by many in the City who took any downgrading of profit estimates unfairly as a reflection of the greeting card industry.

Lower margin gift items also did well for Card Factory at Christmas.
Lower margin gift items also did well for Card Factory at Christmas.

The Telegraph was among the press to cover the share price tumble, quoting analysts at Peel Hunt that dropped its recommendation from ‘Buy’ to ‘Hold’ shares: “Card Factory’s Christmas trading statement is far more than a sales update: it gives us serious concerns about the state of the industry and the earnings potential of the business. The weakness in card sales at Christmas is disappointing but worse still is the company’s view that this will persist.”

However, the dip in the share value did provide Karen Hubbard, Card Factory ceo with a bargain opportunity to show her belief in the business, buying another 20,387 ordinary shares in the company at an average price of 239.1p per share.

Karen Hubbard, ceo with Ian McEvoy, the company’s retail operations director at The Retas last year.
Karen Hubbard, ceo with Ian McEvoy, the company’s retail operations director at The Retas last year.

Almost two years into role, Karen confirmed plans to continue opening around 50 new stores in the coming year. The retailer was trading from 913 stores as at the end of December 2017, including the six trial stores it opened in Eire.

While its ‘bricks and mortar’ side fared OK over Christmas its high hopes for its online side, Getting Personalised were “disappointing” only matching last year’s levels though the transactional cardfactory.co.uk grew strongly, albeit from a low base.

 

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