Sales at the company’s Australian Greetings Direct business, which launched earlier this year, soared 50 per cent above expectations, giving the retailer confidence in its ambitions to extend its reach into more overseas locations.
Flying Brands chief executive Mark Dugdale said: “We are researching New Zealand, the US and Canada as potential markets and hope to enter the US next year.”
However, in the UK, bad weather stunted growth in August and the Royal Mail strikes compounded tough conditions. The retailer was hit by a delay in catalogues reaching shoppers, cancellation of orders and wastage of live product.
“The strikes were the catalyst that caused us to alert the markets,” Dugdale said. “Although we did offer customers a discount for ordering couriered delivery, many did not take up the offer, so even the short strike period had an adverse effect on us.” News this week that talks may have averted future strikes will be welcome for the retailer.
The Flying Flowers business is the driver of the group’s second-half performance and could be seriously affected by continued Royal Mail industrial action.
Flying Brands’ difficulties were exacerbated by higher levels of returns and bad debt at its Greetings Direct UK business last month.
Following the warning, house broker Landsbanki cut its 2007 pre-tax profit forecasts by 22 per cent – from£6.8 million to£5 million. Analyst Paul Deacon said: “Flying Brands could struggle to avoid a discount valuation relative to the UK retail sector.”
He added that there was some protection from lowering estimations because Sir Tom Hunter’s West Coast Capital, which owns a 29.9 per cent stake in Flying Brands, could stage a bid. However, Landsbanki reduced its 12-month target price to 200p.
Flying Brands also said it would discontinue its partnership with internet firm Mail Direct after difficult trading in the CD and DVD categories.
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