13 August 2019
Card Factory plc
("Card Factory" or the "Group")
Robust sales performance in a challenging consumer environment
Card Factory, the UK's leading specialist retailer of greeting cards, dressings and gifts, announces the following trading update for the six months ended 31 July 2019.
· Total group sales growth of +5.5% (H1 FY19: +3.2%)
· Card Factory like-for-like sales +1.5% (H1 FY19: -0.2%), a robust sales performance in a challenging consumer environment
· Further expansion of our store network with 26 net new UK stores opened (H1 FY19: 25) - on track for target of c.50 net new stores across the UK and Republic of Ireland for the full year
· Encouraging progress on a number of business development and efficiency initiatives
· Continued strong cash generation with net debt within our policy range
· Expect a return of surplus cash to shareholders towards the end of FY20
· The Board anticipates profits for the full year to be broadly in line with its previous expectations
Recent trading performance
We delivered a good overall sales performance in the first half of the year with the store network's like for like sales increasing by 1.2% (H1 FY19: -0.7%), following a strong first quarter particularly helped by our successful Valentine's Day and Mother's Day seasonal ranges. The second quarter was a little weaker in the season of Father's Day, impacted by footfall. The like-for-like sales performance of the Card Factory fascia, including online was +1.5% (H1 FY19: -0.2%).
We are encouraged by the positive response from Card Factory online customers to the improvements we have made to our online ranges, resulting in improved sales conversion and average order value. Despite this good progress, year on year sales growth in the second quarter has slowed as anticipated, reflecting the strength of the prior year comparatives. The trading performance at Getting Personal remains challenging, with sales down 10.5% (H1 FY19: -8.5%), impacted by the continued intense price competition and high costs of customer acquisition
In the first half we opened 26 net new UK stores (H1 FY19: 25) bringing the total UK estate to 991 stores, with a further seven stores in the Republic of Ireland. We remain on track to deliver approximately 50 net new stores in the current financial year. Our opening programme in the second half of the year will include both a number of retail park stores and further stores in the Republic of Ireland, which continues to perform well.
We have made good progress with our ongoing business efficiency programme targeted at mitigating structural cost pressures and there are further opportunities ahead. However, Card Factory has incurred some additional costs related to the storage of increased stock levels, which includes preparation for the potential impact of Brexit.
Cash returns to shareholders
The Group remains highly cash generative, driven by our strong operating margins and relatively low capital expenditure requirements.
As at 31 July 2019, before deducting capitalised debt costs, net debt totalled £170.3 million (31 July 2018: £159.8 million, 31 January 2019: £141.3 million), reflecting strong operating cash generation during the period and the unwind of the favourable working capital movement highlighted at the full year results, together with the FY19 final dividend of £21.9 million being paid in the period.
It remains the Board's policy to return surplus cash to shareholders. As outlined in the preliminary results announcement, a further return of surplus cash is expected to be made towards the end of the FY20 financial year. We will provide confirmation as to the quantum and timing of the next distribution at the time of our interim results announcement for the six months ended 31 July 2019, due for release on Tuesday 24 September 2019.
Karen Hubbard, Card Factory's Chief Executive Officer, said:
"Our quality and value proposition continues to resonate well with customers - reflected by the good performance of our seasonal ranges in the first half of the year. We continue to work hard at making sure we have the right ranges at the right prices for our customers, in the store and online. Alongside that, we remain focused on our important commercial and business efficiency initiatives - all of which will make Card Factory a much stronger business for the long term.
"We continue with the trials within Aldi and The Reject Shop in Australia, a further update will be given at our interims announcement in September.
Looking forward to the forthcoming key Q4 trading period, which will have a significant impact on the outturn for the full year, we believe we have the right ranges and products to deliver a good performance; although, we are cognisant of the economic and political uncertainty and weaker consumer confidence. The Board anticipates profits for the full year to be broadly in line with its previous expectations."
Card Factory plc via Tulchan Communications (below)
Karen Hubbard, Chief Executive Officer
Kris Lee, Chief Financial Officer
Tulchan Communications +44 (0) 207 353 4200
James Macey White / Elizabeth Snow / Amber Ahluwalia [email protected]
Notes to Editors
Card Factory is the UK's leading specialist retailer of greeting cards, dressings and gifts. It focuses on the value and mid-market segments of the UK's large and resilient greeting cards market, and also offers a wide range of other quality products, including small gifts and gift dressings, at affordable prices. Card Factory principally operates through its nationwide chain of over 950 Card Factory stores in the UK and the Republic of Ireland, as well as through its online offerings: www.cardfactory.co.uk and www.gettingpersonal.co.uk
The Group's clear strategy is focused on four pillars of growth:
- continuing to grow like-for-like sales in existing stores;
- continuing to roll out profitable new stores;
- continuing to focus on delivering business efficiencies; and
- increasing penetration of the complementary online market.
Card Factory commenced operations in 1997 with just one store and has expanded its store estate primarily through organic growth into a market-leading value retailer with a nationwide presence. The Group's stores are in a wide range of locations including on high streets in small towns through to major cities, shopping centre developments, out-of-town retail parks and factory outlet centres.
Since 2005, Card Factory has developed a vertically integrated business model with an in-house design team, an in-house printing facility and central warehousing capacity of over 360,000 sq. ft. This model differentiates the Group from its competitors by significantly reducing costs and adding value to customers in terms of both price and quality, underpinning the Group's motto: "quality and value for all of life's moments".
In the financial year ended 31 January 2019, the Group achieved revenue growth of +3.3% to £436.0 million (FY18: £422.1 million) and underlying EBITDA decrease of -4.9% to £89.4 million (FY18: £94.0 million) at a margin of 20.5% (FY18: 22.3%).
This announcement is based on information from unaudited management accounts and contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Card Factory plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Card Factory plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.
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