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Impact Of Lockdowns To Push Card Factory £10M Into The Red

“In a year, the like of which none of us have ever experienced before, I am hugely proud of the way in which the Card Factory family has risen to the many challenges faced,” said Paul Moody, executive chairman of Card Factory in a trading update the retailer issued yesterday (January 14) detailing its performance for the 11 months to the end of 2020 as well as its tentative predictions for 2021.

The hard facts were not unexpected, given that its stores were closed effectively for over a third of the period. Its overall sales were well down £281.4m as compared to £424.5m the equivalent period the previous year. Its store sales saw a decline of 38.1% year-on-year, while online sales increased 137%.

Above: The fact that the Card Factory shops were closed for over a third of 2020 has impacted on its financial position.
Above: The fact that the Card Factory shops were closed for over a third of 2020 has impacted on its financial position.

In common with many other card retailers, Card Factory experienced encouraging early Autumn sales boosted by consumers shopping early for Christmas. This was reflected in a +17.7% uplift from 1 October 2020 to the closure of Card Factory stores across the UK on or before 3 November for Lockdown 2.

Above: Paul Moody, executive chairman of Card Factory.
Above: Paul Moody, executive chairman of Card Factory.

The trading update warns that the company is likely to break its banking covenants at the end of this month to tide it over. “Our short term cash requirement can be covered within our existing £200m bank facility, we anticipate that current covenants will be breached at the end of January as the significant impact of the November and current national lockdowns are reflected in our trading performance. We continue to have constructive discussions with our banking syndicate,” explained Paul Moody.

Sharing a pragmatic view of the future, a £10million pre tax loss is on the cards for Card Factory for the full financial year.

Above: Known for its value proposition, Card Factory is having to work hard for investors.
Above: Known for its value proposition, Card Factory is having to work hard for investors.

Commenting, Paul Moody added: “I remain convinced that the Card Factory brand, and quality with value proposition, resonates strongly with customers. Despite the obvious uncertainties in the first half of 2021, I am confident that we have the opportunity to return the business to sustainable profitable growth and will do all that is necessary in the near term to ensure that we can maximise that opportunity”.

The trading update comes a few weeks after the announcement that Darcy Willson-Rymer has been appointed chief executive officer of Card Factory. Darcy joins the UK’s largest specialist greeting card retail chain from Costcutter Supermarkets, where he has served as ceo for the last eight years. Prior to this Darcy was ceo of Clinton Cards from 2011 to 2012.

https://www.pgbuzz.net/darcy-willson-rymer-appointed-as-card-factorys-new-boss/

PG Buzz put Adam Dury, chief commercial officer of Card Factory in the hot seat to go into more detail about his views on Christmas and hunch for 2021…

Christmas verdict? “Unpredictable!!!”

What was your Christmas strategy? “We made sure we had as much of our Christmas offer online to max sales when stores had to close so our customers could still shop with us.We launched our Christmas offer in stores earlier in region, or stores, where the customer footfall demanded it. Later in the season, as the country moved to more regional variations of lockdowns we were able to carefully manage the stock to ensure it was in the right stores at the right time.

Above: Adam Dury, talking at Card Factory’s Market Day presentation to investors.
Above: Adam Dury, talking at Card Factory’s Market Day presentation to investors.

We gave our customers more multi-buy offers within the Christmas ranges, plus removed flitter from all boxed and as much plastic as possible from our boxed card offer without any adverse results.”

What changing customer buying patterns did you clock in the Christmas run-up? “People were buying earlier, afraid of further lockdowns, with a particular focus on Christmas product in their baskets. We noticed changing customer behaviour with regards to wrapping presents. Customers seemed to favour roll wrap in particular, which we have assumed was due to posting parcels for Christmas, rather than being able to visit friends and family.”

Above: It was an “unpredictable” Christmas, as described by Adam Dury.
Above: It was an “unpredictable” Christmas, as described by Adam Dury.

What were your top performers? “We were really pleased with the positive interest in our close caption cards and our breadth of offer overall.”

What’s your hunch and approach for 2021? “We’re always reviewing our offer and all the learnings from 2020 will be built into our new plans for the coming Christmas, to make sure we have a continually improving offer. We are frustrated with the further lockdowns for the High St, as all retailers will be, but we know we have a responsibility to ensure our shoppers are safe. We’re all looking forward to opening again and trading some of our postponed new launches which were due this month!”

Top: Card Factory, like so many other non-essential retailers is craving more time in the sun!

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