Cost pressures ahead for Card Factory

Wakefield-headquartered Card Factory has reported solid sales in the Christmas period, driven by a combination of like-for-like sales growth and its new store roll out.

This contributed to strong year-to-date like-for-like store sales growth of 2.7% in the 11 months to the end of December.

Forty-eight new UK stores were opened in the period, bringing the total UK estate to 913 stores.

The group also opened six new trial stores in the Republic of Ireland over the period.

“Looking ahead to our next financial year ending 31 January 2019, the group has a good pipeline of new store opportunities and we remain confident of continuing our historic opening rate of approximately 50 net new UK stores per annum,” the company said.

Card Factory also said that across the group, like-for-like sales growth has been driven primarily by lower margin non-card categories, such as gifts and dressings, with card sales stable year on year.

“Given this, and the previously announced margin pressures being experienced by the group, the board currently expects underlying EBITDA for the current year to be in the range £93m-£95m.”

Chief executive Karen Hubbard said: “As I approach my second anniversary with the business, it is pleasing to report that Card Factory has traded well through the competitive Christmas trading period with customers once again responding positively to our card and non-card ranges.  As a result, like-for-like store sales have improved in the year to date.

“As we have reported previously, the Group has faced significant cost pressures in the year; these, together with the further change in margin mix given the ongoing out-performance of lower-margin non-card categories, are reflected in our expected outturn.

“We anticipate that the combined impact of foreign exchange and wage inflation in FY19 will result in £7-8m of additional costs; whilst we have plans to mitigate this impact as far as possible, we recognise that against this backdrop, any EBITDA growth for the year is likely to be limited. Looking further ahead, cost headwinds should ease unless there is a further dramatic shift in sterling.

“We believe that our market leading proposition, underpinned by our unique vertically integrated model, provides our business with significant competitive advantage.”