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City Hangs Card Factory Out To Dry, Slashing Share Price By 25%

The City and the media have come down hard on Card Factory’s latest trading statement that covers the Christmas period. News that the value specialist has failed to match like-for-like sales (for the 11 months to December 31) by just 0.6% saw almost 25% being slashed off its share price. Overall turnover was up by 3.6% (the year previous up 3.4%) with 47 new stores opening in the period.

Despite the assurance that the UK’s largest specialist card retailer is still on course to report at least £81 million profit figure at its year end, the media swooped on analysts at Peel Hunt’s unfairly describing the performance as “truly shocking” urging shareholders to ‘throw your cards in’ and sell up.

Above: The Card Factory management team is underway on a strategic review. 
Above: The Card Factory management team is underway on a strategic review.

Respected analysts Investec however is advising investors to buy into Card Factory believing that the share price will pick up after April when a strategic review of the business will be completed by the management. ‘We do not believe CARD’s [Card Factory’s] vertically integrated, cash generative model is broken, with the strength of its UK market position, potential to optimise its store portfolio and a material longer term wholesale opportunity not reflected in current valuation.’

Karen Hubbard, Card Factory’s ceo admits that the Christmas trading period was “challenging given the general election and weak consumer confidence, the impact of which can be seen in the footfall decline experienced in the period.”

However she believes that the retailer’s investment in customer experience, operational efficiency and data to improve its ranges has helped “to mitigate some of the effects of the tougher retail environment and higher costs experienced in the year.”

Above: Karen Hubbard, ceo of Card Factory said the election and weak consumer confidence impacted on its Christmas sales.
Above: Karen Hubbard, ceo of Card Factory said the election and weak consumer confidence impacted on its Christmas sales.

While she says that a comprehensive review of strategy is not yet complete “the board is confident that it will yield a number of attractive medium term growth opportunities across both new and existing channels, albeit there may be a requirement for additional strategic investment in FY21 to support this future growth.”

Above: Card Factory cards are now on sale in 440 Aldi stores.
Above: Card Factory cards are now on sale in 440 Aldi stores.

The statement revealed how the roll out of a card selection in 440 Aldi stores was “performing in line with joint expectations” and had not resulted in “cannibalisation of sales” in Card Factory’s existing stores. It also referenced its trading relationships with other stores – the Matalan trial is now up to 15 stores while this month sees the roll out of a card offering into The Reject Shop’s 360 stores in Australia.

Told: Card Factory opened 47 new stores in the last 11 months.

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