Profitability suffers at Card Factory due to foreign exchange and national living wage
Wakefield-based Card Factory has reported a pre-tax profit drop of 12% amid facing “strong headwinds of £14.6m” during a year which it was impacted by foreign exchange and national living wage.
The morning reporting on the financial year ended January 31 2018, the card firm said revenues stood at £433m, a 6% rise from £398m in 2017. However, pre-tax profit dropped 12% to £72m from £82m. Its like-for-like sales stood at 2.9%.
A special dividend of 15p per share was paid in December 2017 (FY17: 15p), a return of £51.2m to shareholders.
Karen Hubbard, chief executive, said: “We delivered strong like-for-like sales growth in a tough trading environment. We sold more cards than the prior year, and delivered a higher average card selling price and total basket size. We also saw a record breaking number of customers shopping with Card Factory for both card and complementary non-card products, demonstrating our resilience against a backdrop of High Street footfall decline.
“From a profit perspective, we faced strong headwinds of £14.6m in the year, principally due to the combined impact of foreign exchange and national living wage. Our cost saving initiatives during the year provided substantial mitigation and we have laid the foundations for further efficiencies to be delivered in the future. However, given the continuing headwinds, and as previously stated, any EBITDA growth in FY19 is likely to be limited.”
Hubbard added that Card Factory had a unique, vertically integrated business model which remained strong, with a solid platform for future growth. The firm expects to declare another special dividend with our half year results in the range of 5-10p per ordinary share.
“Whilst the new financial year is just two months old, we are satisfied with the start we have made and particularly pleased with the record seasonal performances from Valentine’s Day, Mother’s Day and Easter.
“I would like to thank our colleagues across all parts of the business who have helped deliver a strong performance in a challenging trading environment. They continue to work hard to give our customers a quality and value offering to help them celebrate their life moments.”
Card Factory is continuing its new store roll out. During the financial year, 50 new stores opened, bringing the total UK estate to 915. Six trial stores were opened in the Republic of Ireland. The firm said that there was a strong pipeline of new store opportunities for FY19.
It said that further business efficiencies had been identified for FY19, to provide partial mitigation of ongoing headwinds, including product sourcing, supply chain and stock handling. Card Factory added that foreign exchange and national living wage headwinds were expected to ease in FY20.
The firm has continued to development complementary online sales channels, with online sales increasing by 67%. It said the growth of gettingpersonal.co.uk sales was disappointing, but it remained a profitable contributor to the group in a highly competitive gifting market.
