- Card Factory’s first-half profits before tax declined by 43.3% to £14m
- The National Living Wage increased by about 10% to £11.44 from April
Card Factory shares plunged in early trading on Tuesday as the high street chain reported a sharp fall in first-half profits.
The greetings card retailer revealed pre-tax profits declined by 43.3 per cent to £14million in the six months ending July, which it partly attributed to higher staff costs.
Britain’s National Living Wage increased by about 10 per cent to £11.44 from April for those aged 21 and over, while the National Minimum Wage for younger people and apprentices rose by 12 to 21 per cent.
Employee expense: Card Factory revealed its pre-tax profits declined by 43.3 per cent to £14million in the six months ending July, partly owing to greater staff costs
Card Factory said its employee pay hike led to store and warehouse wages contributing to gross margins declining by 4.2 percentage points to 32.6 per cent.
It also said earnings were hurt by higher freight costs and the ‘phasing of strategic investments’.
Card Factory shares dived by 18.2 per cent to 117p, making them the biggest faller on the FTSE All-Share Index.
Despite the result, the company has upheld annual forecasts after what it called ‘robust actions’ to dampen cost pressures and a ‘strong topline performance’ in the first half.
Revenue grew by 5.9 per cent to £233.8million, supported by strong demand for spring seasonal ranges like Valentine’s Day and Mother’s Day, as well as gifts and celebration essentials.
Card Factory’s store sales rose by 6.1 per cent despite reduced footfall and a more subdued retail environment amid poor weather and continued pressures on consumer spending.
Darcy Willson-Rymer, chief executive of Card Factory, said: ‘We continued to see strong performance across our growing store estate, with gifts and celebration essentials now a core driver of revenue growth.
‘As we move into the second half of the year and the important Christmas trading period, our expectations for the full year are unchanged, and we continue to focus on managing inflationary pressures within the business.’
Since the start of August, Card Factory has noted that inflationary pressures are easing while trading is in line with the opening six months of the financial year.
The Wakefield-based company further declared it had struck a multi-year deal with Aldi to be the low-cost supermarket chain’s exclusive everyday greeting card supplier across its UK and Republic of Ireland outlets.
It has also entered the US market after agreeing a wholesale partnership with an unnamed retailer in time for the critical Christmas period.
Russ Mould, investment director at AJ Bell, said that if the firm achieves its short and medium-term guidance, then today’s announcement will likely be viewed as a blip rather than anything more serious.
‘The increase in sales at least suggests there remains robust demand for Card Factory’s value offering of gifts, balloons, cards and party supplies. Britons don’t look to be going out of the card-giving habit any time soon.’
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