Greetings card seller Card Factory (CARD) is having to contend with higher costs, prompting a 13.9% drop in operating profit to £24.6m in the six months to 31 July.
The company has blamed currency movements, the National Living Wage and investments for longer term growth for the underwhelming set of results.
Despite a decline in footfall, Card Factory has delivered a 3.1% rise in like-for-like sales - although the market appears to be focused on challenges and headwinds that the company faces.
Shares in the retailer have slumped 15% to 301.9p, which AJ investment director Russ Mould believes could be an over-reaction.
Mould highlights the management’s confidence in Card Factory’s outlook through a 3.6% increase in the interim dividend and potential pay-outs in the future.
Liberum analyst Adam Tomlinson says revenue growth is in line with expectations but the cost headwinds have been stronger than expected.
‘The key positive is the £51m special dividend, which we believe gives a potential total dividend yield of 7% and strong cash generation,’ comments Tomlinson.
UBS analyst Adam Cochrane flags the company’s decision not to hike prices as partially responsible for the earnings outlook but believes it ‘may be the right decision for longer-term sustainability.’
