High Street retailer warns of covenant breach risk

Wakefield-headquartered retailer Card Factory has warned it is in danger of breaching its current covenants at the end of this month.

The business says that while its short term cash requirement can be covered within its existing £200m bank facility, it has suffered a significant impact on its trading performance from the November and current national lockdowns.

In a trading update today for the eleven months ended 31 December 2020, the company says it continues to have “constructive discussions” with its banking syndicate.

Its outlook adds: “With the certainty that all stores will be closed through to the end of January 2021, the company anticipates revenue for the full financial year of approximately £284m, and a loss before tax of approximately £10m.

“Until it is clear when we will be able to fully open all stores without risk of further, substantial periods of Government mandated closure, the company is unable to provide guidance for FY22.”

Card Factory’s store sales (gross) have experienced a year-on-year decline of 38.1%, with the business noting that mandatory store closures prohibited openings for 37% of available trading days.

Executive chairman, Paul Moody, said: “Throughout 2020 we unwaveringly did all that was necessary to protect our colleagues and customers, making our stores one of the most COVID-secure shopping experiences available. 

“The financial investment has been significant, but critical to enabling us to meet our social responsibility.

“I remain convinced that the Card Factory brand, and quality with value proposition, resonates strongly with customers.

“Despite the obvious uncertainties in the first half of 2021, I am confident we have the opportunity to return the business to sustainable profitable growth and will do all that is necessary in the near term to ensure that we can maximise that opportunity.”