Card Factory full-year profits hit by cost headwinds

The value card specialist said pre-tax profits declined 12% to £72.6m in the 12 months to January 31. 

On an underlying basis, pre-tax profits fell 5.5% to £80.5m. 

Chief executive Karen Hubbard said the retailer faced “strong headwinds of £14.6m in the year, principally due to the combined impact of foreign exchange and national living wage”. 

Card Factory hailed a strong sales performance, despite a “tough consumer environment” and a backdrop of declining footfall. 

Total sales jumped 6% to £422.1m during the period, while like-for-likes advanced 2.9%. 

Strategic progress

The retailer said it had made good progress across its four strategic pillars in the year. 

It grew sales both in-store and online, which it attributed in part to a “significant uplift” in its complementary non-card offer. 

While sales at the Card Factory website surged 67%, it said growth at its online Getting Personal business was “disappointing” – up just 0.5%. 

Card Factory ploughed ahead with its aggressive store opening programme. It launched 50 new stores during the period, taking its total to 915 UK shops, in addition to six trial stores in the Republic of Ireland. 

The retailer made business efficiencies to mitigate the impact that cost headwinds – including product sourcing, supply chain and stock handling – had on its margins. 

It reported underlying EBITDA margins of 22.3%, a slight decrease from 24.7% the previous year. 

While the cost pressures are ongoing, Card Factory said it has “laid the foundations for further efficiencies to be delivered in the future”, and said the foreign exchange and national living wage headwinds are expected to ease in 2020.

The retailer said it was strongly cash-generative and gave “robust” returns to shareholders, totalling £268.4m since the firm floated in May 2014.

Outlook

Hubbard said despite a “tough trading environment” the business “sold more cards than the prior year” and served a “record-breaking” number of customers. 

However, she warned that, given the continuing headwinds, “any EBITDA growth in FY19 is likely to be limited”. 

“While the new financial year is just two months old, we are satisfied with the start we have made and particularly pleased with the record seasonal performances from Valentine’s Day, Mother’s Day and Easter, and being recognised by our peer group as Specialist Retailer of the Year at the recent Retail Week annual awards.”