Card factory warns on profits as weather dents sales
LONDON (BBC News): Shares in Card Factory have fallen 10% after it said weak consumer spending and “extreme” weather had caused a fall in sales and would mean lower profits.
The greeting cards company has struggled over the past year, and its shares have fallen by a third. It now expects underlying earnings to be between £89m and £91m this year, below analysts’ expectations of £93.5m.
Despite this, Card Factory is expanding its 900-strong store network and plans to open 50 outlets this year.
Card Factory said like-for-like sales – which strip out the impact of new stores – had fallen 0.2% in the first half of its financial year, compared with a 3.1% rise a year ago.
Chief executive Karen Hubbard said: “We continue to experience a weak consumer environment, made all the more challenging by the impact of this year’s extreme weather conditions on high street footfall.
“Our key fourth quarter trading period will of course be critical in determining the final result for the year, but we believe we are well positioned to deliver a good performance in our important Christmas trading season.
“The performance our seasonal ranges has been strong, with our best ever Father’s Day in terms of volume and value, although we recognise there has to be more focus on our everyday ranges, which have lagged the seasonal performance,” she added.
Card Factory’s shares were the biggest fallers in the FTSE 250 index, and were down 21.6p at 189.3p by early afternoon. For the first six months of its financial year, to the end of July 2018, Card Factory said total sales were up 3.2%.
But within its store network, like-for-like sales were down 0.7%, although there had been a “marginal improvement” in the second quarter.
Analysts at Liberum said: “While the overall [like-for-like sales] performance for the [first half] is clearly disappointing, we note that in the wider context of the retail environment and reporting, this could have been worse”.
In June, calculations by accountants EY showed there were 20 profit warnings by retailers in the first half of 2018, double the number issued a year earlier.
Card Factory’s shares have fallen in the past 12 months after a series of dents to its profitability. In September last year, the shares were hit after the retailer reported lower first-half profits and they were knocked again in January on concerns about higher wage costs and the weak pound.