Card Factory reports soft sales growth and opens 34 new stores in “challenging” retail environment

Card Factory has reported a 4.8% increase in revenue for the six months ending 31st July 2016 (H1 FY16: +8.0%).

As reported in the Wakefield-headquartered company’s 24th May trading statement, first quarter sales growth was softer than levels recently achieved with variability in retail footfall impacting weekly sales patterns.

This trend continued in the second quarter, both in the lead up to and following the EU referendum.

Like-for-like sales growth also increased by 0.2% (H1 FY16: +2.8%) with ongoing strong growth from the new cardfactory.co.uk website.

The website’s rate of growth, however, slowed in April. Excluding the website, like-for-like sales performance for the company’s store network was only a 0.1% rise (H1 FY16: +2.7%).

In the first half of 2016, Card Factory opened 34 net new stores bringing the total estate to 848 stores as at 31 July 2016. The contribution of net new store openings to overall Group revenue growth was slightly lower than the first half last year, partly as a result of openings being on average slightly later than in 2015.

Card Factory is still aiming to deliver approximately 50 net new stores in the current financial year, which will all be expected to open before the Christmas season.

The company also remains highly cash generative, driven by its strong operating margins, limited working capital absorption and fairly low capital expenditure requirements.

Karen Hubbard, Card Factory’s chief executive officer, said: “As highlighted in our Q1 announcement, the retail environment in the first half has been challenging and, as widely reported, footfall patterns in the first half have generally been soft. Card Factory is not immune to these wider factors and our sales growth over the period was lower than our normal levels as a result.

“It is too early to assess the precise impact on overall consumer sentiment and retail footfall from the result of the EU referendum. However, we enter the second half with confidence in the quality and value of our offer, including our new Christmas range, and we will target improved sales growth in the second half.

“Despite the near term challenges, Card Factory remains the clear market leader in the robust and resilient greetings card market with a strong value proposition, a unique vertically integrated operating model, significant scale advantages, superior margin structure and a strong management team.

“We remain as convinced as ever of the strong growth prospects for the business, and of our ability to deliver strong shareholder returns over the medium term. We are confident of delivering full year underlying profit before tax within the range of analysts’ current expectations.”