Shares in Card Factory (CARD) rallied 5% to 51.5p on Monday after the greeting cards-to-gifts purveyor said sales continue to recover as shoppers return to its physical outlets and the retailer has seen an encouraging start to the all-important Christmas selling season.
Making positive strides under new CEO Darcy Willson-Rymer’s ‘refreshed’ growth strategy, Card Factory assured the market well-documented supply chain delays are having a minimal impact on its business, while also reporting a reassuring year-on-year drop in net debt from £142.5 million to £108.4 million.
‘GRADUAL’ SALES IMPROVEMENT
For the third quarter to October 2021, Card Factory’s two-year like-for-like sales, compared to the equivalent quarter in pre-pandemic 2019, showed ‘gradual’ improvement, down just 3% with high street and retail park locations outperforming shopping centres.
And while transaction numbers were lower, Card Factory’s average basket value over the quarter ‘continued to exceed pre-pandemic levels’, with 22.5% growth on a two-year like-for-like basis.
Card Factory added that its online business is trading in line with management expectations and ahead of pre-pandemic levels, with the stronger performance of Getting Personal offsetting a reduction in sales from the cardfactory.co.uk website.
FESTIVE RANGES SELLING WELL
Customers are responding well to Card Factory’s Christmas ranges, which are said to be selling well at this early stage of the season.
And while a ‘relatively small proportion’ of products sourced from the Far East are being impacted by supply chain delays, Card Factory believes ‘our contingency planning will ensure any delays to store deliveries are minimised and short lived’.
Liberum Capital stressed that Card Factory has also put through some ‘minimal’ price increases to help mitigate higher costs.
‘Recruitment of seasonal store staff has started strongly’, added the card-led retailer, which under Willson-Rymer’s leadership, believes it can grow sales to north of £600 million by 2026 as it develops online sales, expands its gifting and party ranges and leverages retail partnerships.
THE LIBERUM VIEW
Liberum forecasts a roughly break-even result at the pre-tax line for the year to January 2022, improving to pre-tax profits of £28.3 million in the year to January 2023.
‘Longer-term, we see material upside, as the balance sheet is improved and profit recovers driven by improvements to the store offer, online growth and more capital-light retail partnerships’, commented the broker.
