- Cards-to-gifts seller reinstates shareholder reward
- Store estate performing well
- FY25 profits will be second half weighted
Shares in Card Factory (CARD) rallied 6% to 106.6p after the value-focused greeting cards-to-party supplies retailer announced a welcome return to the dividend list, having paused payouts during the pandemic.
The reinstatement of dividends signalled confidence from Card Factory and alongside a surge in full-year profits driven by a strong trading performance in its stores, made the market sit up and notice of the story.
With a strengthened balance sheet marked by a 40% year-on-year drop in net debt to £34.4 million, Wakefield-headquartered Card Factory recommended a 4.5p dividend for the year to January 2024.
CEO Darcy Willson-Rymer insisted that three years into his Opening our New Future Strategy, Card Factory is financially and operationally ‘a much stronger business. This means that we are able to both reinstate the dividend and invest in the future, while effectively navigating the ongoing economic environment.’
THE PRICES ARE RIGHT
Card Factory is demonstrating there remains a place for a shop selling greetings cards and birthday balloons on British high streets if the prices it charges are right.
Group revenue rose 10.3% to £510.9 million last year, which Card Factory said reflected ‘continued positive momentum across the business and effective execution of our strategy’.
Adjusted pre-tax profits surged 27% higher to £62.1 million thanks to revenue growth and margin improvement amid adept management of inflationary pressures and the implementation of targeted price increases.
Total store revenue ticked up 8.7% year-on-year, boosted by a net 26 new store openings during the period, which grew the UK & Ireland estate to a year-end 1,058 stores, while like-for-like sales were up 7.6%, driven by a strong store performance, with growth in card, gifts and celebration essentials, combined with positive traction online.
And the retailer flagged ‘good progress’ on its partnership strategy with both new and existing retail partnerships, plus the acquisition of SA Greetings in South Africa, driving revenue growth of £12 million to £17 million.
This included positive contributions from Card Factory’s new partnership with Liwa in the Middle East and from expansion of its partnership with Matalan in the UK.
GOOD START TO FY25
Card Factory said trading since the start of the new financial year has been in line with the board’s expectations, with continued positive momentum across cards, gifts and celebration essentials for the spring seasons of Valentine’s Day and Mother’s Day.
There was no change to guidance, although Card Factory does expect pre-tax profit growth in full-year 2025 will be weighted toward the second half due to the phasing of planned investment and inflationary recovery actions.
EXPERT VIEWS
With a ‘buy’ rating on Card Factory and a 175p price target, Liberum Capital remains ‘very favourable on the outlook and Card Factory’s disruptive, value-focused market position where the new strategy remains on track to deliver exciting medium-term ambitions.’
Russ Mould, investment director at AJ Bell, explained that Card Factory has been a beneficiary of ‘the woes of rival Clintons and the exit of Paperchase as a standalone entity, even if the latter serves a more premium market.
‘To its credit, Card Factory has carved out a value-focused niche for itself which is resonating with customers who are having to watch every penny.
‘The company does face headwinds like the impact on costs from the increase in the National Living Wage but it has demonstrated an ability to run the business with efficiency and this should stand it in good stead moving forward.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
