Card Factory shares climb as retailer boosts profit expectations

Card Factory shares soared on Monday after the group defied a weaker economic backdrop to see trading surpass forecasts during the first half of the year.

The greetings card and gifts company told investors it now anticipates its annual performance to be ‘materially ahead’ of prior expectations. 

It follows a May update in which the firm said sales in the first weeks of the current fiscal year had been ‘encouraging’ across its everyday and seasonal ranges, while it saw solid demand over the Valentine’s Day and Mother’s Day seasons.

Future plans: In the summer of last year, the business launched a three-pronged growth strategy that included plans to expand its store estate and online platform

It added that it was optimistic about alleviating cost inflation through a mix of price hikes and productivity improvements.

Card Factory shares shot up by 14.9 per cent, or 13.2p, to 102p on Monday morning, making them the biggest riser on the FTSE All-Share Index.

The retailer’s share price has climbed by approximately 97 per cent over the past 12 months amid a sustained rebound in its high street business.

Card Factory saw footfall severely impacted during 2020 and 2021 by pandemic-related restrictions forcing non-essential stores in the UK to temporarily close.

This particularly hurt the group’s revenues from major seasonal trading events, such as Christmas, while many Britons also turned to online-only brands like Moonpig for their card and gift purchases.

Such was the fall in orders that the Wakefield-based firm warned in early 2021 that it was at risk of breaching covenants with lenders.

Card Factory eventually agreed to a new £225million refinancing deal that comprised a £100million revolving credit facility, £75million loan and £50million through various Covid-19 loan schemes.

Loosening lockdown regulations helped the company swing back to profit last year as turnover exceeded pre-pandemic levels after customers shifted their spending back to shops, offsetting a drop in online demand.

Sales have remained healthy, even as cost-of-living pressures and Royal Mail strikes have hit the retail sector. 

Russ Mould, investment director at AJ Bell, said: ‘It seems Britons are still very attached to the idea of sending a greetings card to mark special occasions, and that’s reflected in a very upbeat trading update from Card Factory.

‘Card Factory has been consistently raising earnings expectations of late, so it must be doing something right in what is a very tricky retail environment.

‘The company’s offering is perfectly pitched for cost-conscious consumers – and while some of this market has migrated online, there are still plenty of people who want to go into a shop and peruse the cards while picking out extras like birthday balloons and party poppers.’

This post first appeared on Dailymail.co.uk