Investors were greeted by a mixed bag of results from Card Factory (CARD) as pre-tax profit jumped 17.2% to £27.2m in the six months to 31 July despite flat like-for-like sales growth.
Like-for-like sales rose only 0.2% amid a weak consumer environment and lower high street footfall as inflationary pressures weigh on consumers.
Unfortunately, this is expected to continue.
High demand for cards to celebrate Valentine’s Day, Mother’s Day and Father’s Day are keeping sales growth limping along, but weaker sales for Card Factory’s Everyday ranges could offset this in the future.
Card Factory is faring better with online sales, growing by 85% in the period and is generously paying out £17.1m to shareholders via a 5p per share special dividend. The normal dividend is unmoved at 2.9p.
Investors are worried the card retailer could remain under pressure following a downgrade in annual earnings guidance in August with the shares shedding 2% to 182.4p.
AJ Bell investment director Russ Mould says there are several changes Card Factory could implement, including improving the quality of its cards, to help lure in customers.
He argues the greetings card seller has a strong enough brand to warrant producing higher quality items and charging more for them, while keeping cheaper cards around for those interested in them.
The investment director is also sceptical the company can keep paying out special dividends.
‘From an investment perspective, this trickle down of earnings means cash flow cover for the much-prized dividends is getting thinner, so the days of its special dividends on top of normal ones could be numbered,’ comments Mould.
