Elevated cost pressures pulled Card Factory’s profits sharply lower in the first half, the retailer has announced.
This was despite a strong uptick in group sales.
Following the announcement, Card Factory shares were last changing hands at 100.4p per share on Tuesday, down 5.1% on the day.
At £247.6 million, revenues at the greetings retailer rose 5.9% in the six months to July. Sales growth across its store network rose 2.9%, helped by the addition of 30 net new stores.
On a like-for-like basis, store revenues improved 1.5% year on year. Card Factory said this was “in line with the non-food retail sector and against a backdrop of softer summer high street footfall due to the hot weather.”
Like-for-like sales at cardfactory.co.uk dropped 11.3%, it said, “as we continued to evolve our offer to focus on higher margin sales.”
Turnover at its organic partnerships business rose 15.7% year on year, which Card Factory attributed to “the successful impact of our full-service model and how we are building on this through further range expansions with UK partners.”
Despite improved sales, the retailer’s adjusted profit before tax slipped 9% from the same 2024 period, to £13.2 million.
Net debt increased 5.3% in the first half to £78.9 million, though cash from operations improved to £30.5 million from £17.5 million.
Card Factory raised the interim dividend to 1.3p per share, up from 1.2p a year earlier.
Costs Weigh
Card Factory said its bottom line drop was driven lower rising costs, including “significant rises” in the National Living Wage and National Insurance contributions from employers.
It said it expects cost inflation above £20 million for the full financial year.
Investments to improve efficiency also pulled profits lower over the six months, the retailer commented. These included rolling out a new point of sale system for its tills across its store estate.
Card Factory said “continued efficiencies in store labour, optimisation of warehouse and agency labour and in-sourcing of printing and distribution of our store merchandising materials” had helped it mitigate cost pressures over the first half.
Staying Positive
Chief executive Darcy Willson-Rymer commented that “our resilient first half performance against a challenging retail backdrop demonstrates the effective execution of our growth strategy and our ability to navigate inflationary pressures.”
He added that “with the peak festive season ahead, we are well prepared for our most important trading period.”
Card Factory kept its guidance for the full year unchanged. It expects to deliver adjusted pre-tax profit growth in “mid-to-high single-digit” percentage territory.
Vigilance Needed
Analyst Adam Vettese of eToro commented that Card Factory’s half-year print “paint a picture of a retailer determined to grow, but increasingly challenged by inflationary pressures and cautious consumer behavior.”
He noted that “the company continues to deliver impressive top line growth… supported not just by its value-led proposition and expanded gifting ranges but also by its strategic acquisition of Funky Pigeon.”
Card Factory acquired online greetings retailer Funky Pigeon for £24.1 million in August to accelerate its digital growth strategy.
However, Vettese added that “higher debt levels and a sluggish recovery in profitability call for vigilance,” noting the impact of rising costs on the retailer’s profit margins.