# Card Factory plc Robust sales performance in a challenging consumer environment

- Link: https://www.directorstalkinterviews.com/card-factory-plc-robust-sales-performance-in-a-challenging-consumer-environment/412790245
- Published: 2019-08-13T07:32:27+01:00
- Author: Amilia Stone

**Card Factory PLC** (LON:CARD), the UK’s leading specialist retailer of greeting
cards, dressings and gifts, today announced the following trading update for the
six months ended 31 July 2019. 

**Key highlights**

·      Total group sales growth of +5.5% (H1 FY19: +3.2%)

·      Card Factory like-for-like sales +1.5% (H1 FY19: -0.2%), a robust sales performance
in a challenging consumer environment

·      Further expansion of our store network with 26 net new UK stores opened (
H1 FY19: 25) – on track for target of c.50 net new stores across the UK and Republic
of Ireland for the full year

·      Encouraging progress on a number of business development and efficiency initiatives

·      Continued strong cash generation with net debt within our policy range

·      Expect a return of surplus cash to shareholders towards the end of FY20

·      The Board anticipates profits for the full year to be broadly in line with
its previous expectations

**Recent trading performance**

We delivered a good overall sales performance in the first half of the year with
the store network’s like for like sales increasing by 1.2% (H1 FY19: -0.7%), following
a strong first quarter particularly helped by our successful Valentine’s Day and
Mother’s Day seasonal ranges.  The second quarter was a little weaker in the season
of Father’s Day, impacted by footfall.  The like-for-like sales performance of the
Card Factory fascia, including online was +1.5% (H1 FY19: -0.2%).

We are encouraged by the positive response from Card Factory online customers to
the improvements we have made to our online ranges, resulting in improved sales 
conversion and average order value. Despite this good progress, year on year sales
growth in the second quarter has slowed as anticipated, reflecting the strength 
of the prior year comparatives.  The trading performance at Getting Personal remains
challenging, with sales down 10.5% (H1 FY19: -8.5%), impacted by the continued intense
price competition and high costs of customer acquisition

In the first half we opened 26 net new UK stores (H1 FY19: 25) bringing the total
UK estate to 991 stores, with a further seven stores in the Republic of Ireland.
We remain on track to deliver approximately 50 net new stores in the current financial
year.  Our opening programme in the second half of the year will include both a 
number of retail park stores and further stores in the Republic of Ireland, which
continues to perform well.

We have made good progress with our ongoing business efficiency programme targeted
at mitigating structural cost pressures and there are further opportunities ahead.
However, Card Factory has incurred some additional costs related to the storage 
of increased stock levels, which includes preparation for the potential impact of
Brexit.

**Cash returns to shareholders**

The Group remains highly cash generative, driven by our strong operating margins
and relatively low capital expenditure requirements.

As at 31 July 2019, before deducting capitalised debt costs, net debt totalled £
170.3 million (31 July 2018: £159.8 million, 31 January 2019: £141.3 million), reflecting
strong operating cash generation during the period and the unwind of the favourable
working capital movement highlighted at the full year results, together with the
FY19 final dividend of £21.9 million being paid in the period.

It remains the Board’s policy to return surplus cash to shareholders.  As outlined
in the preliminary results announcement, a further return of surplus cash is expected
to be made towards the end of the FY20 financial year. We will provide confirmation
as to the quantum and timing of the next distribution at the time of our interim
results announcement for the six months ended 31 July 2019, due for release on Tuesday
24 September 2019.

> **Karen Hubbard, Card Factory’s Chief Executive Officer, said**:
> “Our quality and value proposition continues to resonate well with customers –
> reflected by the good performance of our seasonal ranges in the first half of 
> the year.  We continue to work hard at making sure we have the right ranges at
> the right prices for our customers, in the store and online.  Alongside that, 
> we remain focused on our important commercial and business efficiency initiatives–
> all of which will make Card Factory a much stronger business for the long term.
> “We continue with the trials within Aldi and The Reject Shop in Australia, a further
> update will be given at our interims announcement in September.
> Looking forward to the forthcoming key Q4 trading period, which will have a significant
> impact on the outturn for the full year, we believe we have the right ranges and
> products to deliver a good performance; although, we are cognisant of the economic
> and political uncertainty and weaker consumer confidence.  The Board anticipates
> profits for the full year to be broadly in line with its previous expectations.”

Share on: