Card Factory shares plummet as retail droop hits income

Shares in Card Factory fell by more than a fifth on Friday morning after the group warned a slowdown in its UK retail business would dent profitability this year.

The retailer told investors that ‘well publicised’ pressure on households in recent months had persisted ahead of its key Christmas trading period, with lacklustre in-store sales disappointing expectations.

It marks the latest evidence of the damage caused to UK retailers from pre-Budget speculation and uncertainty, as consumers held back on spending ahead amid tax hike fears.

London-listed Card Factory said: ‘It is an inescapable fact that these pressures have impacted consumer confidence and shopping behaviour, contributing to soft high street footfall.

‘Those conditions have persisted as we moved into our most important trading period, leading to a UK store sales performance which is lower than our previous expectations.’

Card Factory shares nosedive as retailer issues profit warning ahead of key Christmas period 

The retailer now expects annual pre-tax profits to come in a £55millionto £60million, implying a cut of around 19 per cent from previous guidance, according to UBS analysis.

Card Factory assured investors it continues to make progress on its long-term strategy, which includes a ‘simplify and scale’ productivity and efficiency programme designed to mitigate ‘ongoing high inflation impacting UK retail businesses’.

Its Irish and North American operations are performing in-line with expectations, while the integration of Funky Pigeon ‘remains on track’ after Card Factory agreed to buy the business from WH Smith in July.

Card Factory said: ‘The board remains confident in the group’s long-term strategy. 

The share buyback programme will continue and the board anticipates declaring a progressive full-year dividend, in line with its capital allocation policy.’

Card Factory shares were down 22.1 per cent at 75.1p in early trading. 

Analysts at UBS slashed their target price for the shares from 170p to 120p, but said Card Factory remains a ‘deep discount stock offering resilient growth and strong cash generation’.

The investment bank wrote in a note on Friday: ‘UBS Evidence Lab data corroborates the recent weakness in Card Factory UK, with year-on-year declines in total card spend and transactions.

‘December remains pivotal, with the next two weeks representing the most significant trading period of the year and likely to determine where [profit before tax] lands within the guidance range.

‘We see Funky Pigeon being a key medium-term catalyst for the group’s growth story, opening up a vital [total addressable market] as consumers move online.’