Online greeting cards-to-gifts site Moonpig (MOON) has upgraded revenue guidance for the year ending 30 April 2022 to ‘around £300 million’ to reflect a temporary boost from the impact of Covid-19 on customer behaviour in late December and January.
Trading as Moonpig in the UK and Greetz in Holland, the online cards leader also expressed confidence in a permanent uplift in ‘customer cohort frequency’.
The market reaction was muted however, with the shares edging up 0.3% to 238.8p to leave them languishing more than 30% below February 2021’s initial public offering price of 350p.
CEO Nickyl Raithatha attributed the upgrade to ‘continued strong trading performance post-lockdowns, including a very successful UK Mothers’ Day’ and said he remains ‘confident in the outlook for the year ahead’.
Yet the fact the upgraded sales guidance was attributed to another Covid wave added fuel to the fire that Moonpig is purely a pandemic winner.
Sales more than doubled to £368.2 million during the lockdown-boosted year to April 2021, so today’s upgrade implies a year-on-year sales decline of 18.5%.
REMAINING CONFIDENT
‘Trading in February and March has provided further evidence that supports our previously announced expectations of a permanent uplift in customer cohort frequency compared to before Covid-19,’ said Moonpig, which had previously guided to annual sales ‘at the upper end’ of a £270 million to £285 million range.
The FTSE 250 digital retailer also remains ‘confident in our existing expectations’ for full year 2023.
Moonpig continues to invest in its technology platform and operations network to increase capacity and with margin trends remaining ‘resilient in the near and medium term’, it reiterated its medium term adjusted EBITDA margin target of around 24% to 25%.
STEP CHANGE IN SCALE
Raithatha added: ‘Moonpig Group has delivered a permanent step change in scale over the past two years, with a larger customer base displaying higher loyalty than pre-pandemic.
‘The long-term opportunity remains vast, and we have never been in a better position to deliver against Moonpig Group’s strategy to become the ultimate gifting companion.’
However, Russ Mould, investment director at AJ Bell, argued Moonpig has ‘yet to convince cynics that a boom in sales in the past few years was not simply down to people being stuck at home and not being able to get to the shops to buy their greetings card, thus they tried the online alternative.’
Mould said Moonpig ‘needs to show decent growth at a time when consumers are free to shop wherever they want, as that will be the true indicator whether someone now prefers to buy cards online or go back to the old ways of picking one off the shelf on the high street.
‘Moonpig implied trading in February and March provided that much-needed evidence that its services are still in demand in a more normal environment, but the jury is still out judging by its underwhelming share price performance.’
DISCLAIMER: Financial services company AJ Bell, referenced in this article, owns Shares magazine. The author (James Crux) and editor (Steven Frazer) of tis story own shares in AJ Bell.
