- Online cards seller flags significant second half weighting
- Moonpig has work cut out to make numbers
- Retailer prioritises greeting cards over gifts
Shares in Moonpig (MOON) were the FTSE 250’s second biggest fallers, marked down 11.9% to 176.2p, after the online greeting cards-to-gifts site reminded investors of its return to pre-Covid seasonality.
The online cards leader is counting on between 58% and 60% of its sales arising arise in the second half of the financial year.
Though Moonpig reiterated its year-to-April 2023 guidance with ‘overall’ trading remaining in line with expectations, the share price reaction suggests investors believe the internet retailer has its work cut out in making the numbers amid a worsening consumer backdrop.
SIGNIFICANT SECOND HALF WEIGHTING
Moonpig now expects to generate 58%-to-60% of revenues in the second half, taking into account the consolidation of recently acquired gifting experiences business and Red Letter Days owner Buyagift from 13 July 2022 onwards.
This seasonality is ‘supported by a planned increase in the concentration of resources around our peak trading periods and by the expected impact of software engineers becoming available for the development of new revenue-generating functionality following the successful migration of (Netherlands brand) Greetz onto the Moonpig technology platform in September 2022’, explained the company.
‘We also expect a return to the typical seasonality of adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin rate,’ said Moonpig, ‘which will be weighted towards the second half of the financial year driven by the inherent operating leverage in our business.’
Back in June, the online retailer said it expects this year’s annual revenue to reach around £350 million, up from £304.3 million in the year to April 2022.
GREETING CARDS SHOWING RESILIENCE
Moonpig explained that in the current tough environment of high inflation and weak consumer confidence it has prioritised greeting card sales, which have ‘a demonstrable track record of being resilient across the cycle’.
The retailer intends to continue this focus for the remainder of the year, possibly, as Jefferies suggests, due to a softening of average selling prices for gifts.
‘Average order values have increased year-on-year, supported in particular by cards,’ added Moonpig, ‘and margin trends remain resilient in the absence of any significant pressure from input cost inflation.’
CEO Nickyl Raithatha insisted Moonpig’s trading ‘remains resilient’ and management are ‘confident that full year revenue will be approximately double the level achieved three years ago. The group continues to offer a powerful and unique combination of leading market positions, strong customer retention, high profit margins and robust cash generation.’
ANALYST VIEWS
‘Notwithstanding some pressure on gifting, we are encouraged that Moonpig continues to see resilience in its core card category and is able to sustain its EBITDA guidance,’ commented Jefferies. ‘We retain our positive stance.’
‘In our view,’ said analysts at Citi, ‘re-iteration of the full year 2023 guidance, both at the top-line and profitability level reflects the business’ resilience in a challenging macro environment. We don’t expect material changes to consensus estimates at this stage and the focus will now be on the company’s execution in H2 2023.’
