Customers’ return to High Street brings £14.3m pre-tax profit in half-year results
Customers returning to the High Street has seen Card Factory’s half-year revenue increase by 64.9% to £198million as the reversal of lockdown effects kick in.
While online sales at Cardfactory.co.uk were down year-on-year, more significantly, its store revenue grew by 81.8% for the six months to 31 July, 2022, which sees the UK’s largest greeting card specialist retailer post a pre-tax profit of £14.3m in its half year results, compared to a loss of £6.5m for the same period last year.
The release of such positive results today, 27 September, has seen the company’s share price rise by 1.30p to 46.70p.
Card Factory’s chief executive Darcy Willson-Rymer said: “We are pleased to report a strong performance through the half which reflects continued good momentum within the business, as well as the reversal of lockdown trends with customers choosing to return to the High Street.
“The pronounced shift in spend back towards stores supports our continued conviction in the value of our store estate within our customer proposition and as an enabler in our omnichannel ambitions.
During the half, we have made good strategic progress as we focus on evolving our customer proposition across different channels and taking it to new markets.”
The report revealed a shift from spring seasons – Valentine’s Day, Mother’s Day, Easter and Father’s Day – towards everyday ranges which typically represent 70% of sales, and there was good growth in life moments, such as weddings and christenings, as well as in cards with celebratory captions, reflecting a return to more normalised lifestyles and social events following the pandemic.
It stated: “This also demonstrates the success of our card strategy to meet customer demand through both our strong value proposition and our focus on range optimisation, including the full relaunch of our wedding card offer, leading to a notable improvement in our year-on-year market share.”
During the period the retailer looked to increase its presence in “underpenetrated markets” by opening six new stores in Ireland along with its first central London store in Tottenham Court Road, followed by a second in Fenchurch Street at the start of September, and it also rolled out its new model store format to five outlets.
Having opened 14 stores and closed eight, the estate now stands at 1,026 shops and the company is currently making final preparations for the launch of a trial click-and-collect service in 84 outlets, and its gaze is also overseas through international partnership with India and the Middle East highlighted as offering true potential.
Today’s report said Card Factory had “successfully completed” refinancing providing liquidity headroom to deliver strategy, and that it expects to face continued wage inflation going forward, while benefits from pricing actions will be more weighted towards H2 and into FY24.
It implemented targeted price increases as one part of its strategy to manage inflationary pressures, while choosing to protect its competitive entry price point and focus on building greater value into price points, and said this had shown “minimal impact on customer behaviour” with only around half of the 4.1% Card Factory like-for-like growth having been driven by price.
The retailer is confident it will manage the inflationary pressures through a combination of targeted price increases and efficiency measures and its expectations for the remainder of FY23 are unchanged.
Card Factory also reported a strong performance in complementary categories which promise an identified £5billion UK market potential. It highlighted an impressive 29% upturn in its balloon and partyware sales, reflecting the return of social events and celebrations following the lifting of lockdown restrictions while the expansion of its confectionery selection has rewarded the retailer with a 98% like for like sales surge. It launched new ranges in licensed gifts and partyware, with range expansions of flowers and alcohol on its online platform coming soon.
It said the pronounced shift in spend back towards stores that’s evident across the retail space, supports Card Factory’s continued conviction in the value of its store estate within its customer proposition and as an enabler in its omnichannel ambitions. Stores delivered good like-for-like growth of 6.1%, when adjusted for stores that were open in both the current year and the comparative period.
The retailer’s commitment to progress on sustainability as well as on the diversity and inclusion fronts was also stressed in the report pledging that 90% of its products will be free of single-use plastic by the end of FY24. All new card and gifts produced for Card Factory are now glitter-free and, by the end of FY24, it expects to have sold through any existing stock containing glitter.
Card Factory has also now entered into partnership with the Woodland Trust to support its work to protect, restore and create native woodland in the UK. In addition, it has appointed an energy consultancy to provide enhanced insight and recommendations to reduce Scope 1, 2 and 3 emissions.
Looking to trading in the short and medium term for the retailer, Darcy added: “The inflationary pressures we are all facing into are well known, however the pre-emptive actions we have taken, such as the fixing of energy costs until September 2024 and targeted price increases, have helped to offset these.
“Despite these ongoing challenges, we remain confident that our customers will continue to want to celebrate life’s moments and that value for money is increasingly important to them.
“While we remain mindful of the challenging economic backdrop as we head towards the Christmas season, we feel well placed to navigate this and retain our focus on transitioning Card Factory to a market-leading omnichannel retailer of cards and gifts.”
Top: The Bury shop reopened as part of Card Factory’s new model store concept