Card Factory store in Wales
First half trading at Card Factory was ‘materially ahead’ of expectations / Image source: Adobe
  • Inflationary pressures playing to Card Factory’s strengths
  • Profit to be ‘materially ahead’ of guidance
  • Clintons’ problems positive for Card Factory’s competitive position

Value-for-money greetings cards and gifts retailer Card Factory (CARD) has cheered investors with yet another earnings upgrade as the cost-of-living crisis continues to drive cash-strapped shoppers to its stores.

Following a strong first half and given its confidence in the outlook for the second half, the discount cards, mugs and birthday balloons purveyor now expects profits for the year to January 2024 will be ‘materially ahead’ of previous expectations, news that sent the shares surging 15% higher to 102p.

POSITIVE START CONTINUES

In a brief update following the close of its first half to 31 July, Card Factory said its positive start to the year has continued with trading in the six month period being ‘materially ahead’ of the board’s expectations.

However Card Factory, led by CEO Darcy Willson-Rymer, did acknowledge the macro backdrop continues to be ‘uncertain, and there is still much to be delivered over the remainder of the year’.

AND CLINTONS IS IN TROUBLE

Before today’s upgrade, broker Liberum Capital was forecasting a rise in pre-tax profits from £50.5 million to £52.2 million for the year to January 2024.

Wakefield-headquartered Card Factory’s success stands in stark contrast to the fortunes of Clintons, the rival card retailer reportedly considering shuttering around a fifth of its store estate to stave off insolvency.

Facing acute financial distress, Clintons has apparently drafted in restructuring advisers to work on a debt-for-equity swap and its troubles will not be unhelpful in terms of Card Factory’s competitive position.

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Even after pushing up the prices of its cards and related products, Card Factory’s ranges remain significantly cheaper than those at in Clintons, WH Smith (SMWH) or Marks & Spencer (MKS), which is why shoppers continue to flock to its stores.

Shares in Card Factory have pretty much doubled over the past year with the retailer in an upgrades cycle. The company raised its full year outlook in April, before reporting an impressive set of results in early May, announcing that its revenue had returned to pre-Covid levels.

THE EXPERT’S VIEW

AJ Bell investment director Russ Mould commented: ‘It seems Britons are still very attached to the idea of sending a greetings card to mark special occasions and that’s reflected in a very upbeat trading update from Card Factory.’

Mould explained Card Factory has been ‘consistently raising earnings expectations of late so it must be doing something right in what is a very tricky retail environment.

‘The company’s offering is perfectly pitched for cost conscious consumers – and while some of this market has migrated online there are still plenty of people who want to go into a shop and peruse the cards while picking out extras like birthday balloons and party poppers.’

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Tom Sieber) own shares in AJ Bell.

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Issue Date: 07 Aug 2023