Trading Statement

RNS Number : 6745M

Card Factory PLC

10 January 2019

 

10 January 2019

Card Factory plc ("Card Factory" or the "Group")

Trading update

A robust Christmas trading period in a challenging consumer environment

Card Factory, the UK's leading specialist retailer of greeting cards, dressings and gifts, announces its trading update for the eleven months ended 31 December 2018. 

Key highlights

·      Year-to-date ("YTD") Group revenue growth of +3.4% (2018: +5.9%)

·      YTD Card Factory like-for-like ("LFL") sales broadly flat at -0.1% (2018: +3.0%)

·      Continued store roll out with 51 net new UK stores opened YTD

·      cardfactory.co.uk delivered YTD revenue growth of +59.1% (2018: 65.8%), reflecting a strong Christmas trading period

·      Getting Personal YTD revenue decline of -7.8% (2018: +1.0%)  

·      Business Efficiency programme remains on plan

·      Board's expectations for underlying EBITDA for the full year remain unchanged at £89m - £91m

* Comparator data set out in this announcement is for the eleven months ended 31 December 2017

Recent trading performance

The Group delivered creditable revenue growth in the festive period driven primarily by our new store rollout, with LFL trading reflecting the continuing weakness in consumer demand experienced across the retail sector in the run-up to Christmas.

Across the estate, Christmas trading remained robust, with LFL sales down -0.5% for the YTD, in line with our quarter three update in November.

Sales from cardfactory.co.uk continued to grow strongly, up 59.1% YTD. The combination of store and online sales, delivered overall Card Factory YTD LFL sales down -0.1% (2018: +3.0%).

51 net new UK stores were opened in the period plus one new store in Republic of Ireland. This brings the total estate to 973 stores as at 31 December 2018, including seven trial stores in Republic of Ireland.

Getting Personal continues to face a market environment defined by heavy discounting and increasing cost of customer acquisition. The business is focused on delivering profitable sales via lower cost acquisition channels and continues to be a profitable contributor to the Group.  

The Group continues to be highly cash generative.

Outlook

Assuming a steady state, we anticipate that the foreign exchange headwind should dissipate in FY20. We continue to mitigate a large proportion of expected cost challenges, including National Living Wage and electricity wholesale prices, which will result in £5-6m of additional costs. 

In light of the current consumer and macro-economic backdrop, we anticipate that FY20 will be another difficult year.

On a consistent accounting basis (i.e. excluding adjustments in relation to IFRS 16), we expect EBITDA to be broadly flat, based on limited sales growth.

Karen Hubbard, Card Factory's Chief Executive Officer, said:

"The Christmas trading period was challenging due to lower high street footfall. However, Card Factory performed robustly in this competitive trading period. As a result, like-for-like store sales have remained consistent and in line with our quarter three update in November.

"Although the Group has faced significant cost pressures in the year, these have reduced and we have been able to take mitigating action to maintain robust gross margins.

"Whilst we expect ongoing challenges from the consumer and macro backdrop, we continue to lead the market with our proposition, underpinned by our ongoing investment in our unique vertically integrated model which provides our business with significant competitive advantages."

Enquiries

Card Factory plc                                                            [phone]

Karen Hubbard, Chief Executive Officer

Kris Lee, Chief Financial Officer

MHP Communications                                                   [phone]

Simon Hockridge / Giles Robinson / Tim Rowntree

Preliminary results announcement

Preliminary results for the year ending 31 January 2019 will be announced on Tuesday 16 April 2019.  There will be a presentation for analysts at 9.30am at the offices of UBS, 5 Broadgate, London EC2M 2QS. Those analysts who wish to attend are requested to contact Nessyah Hart of MHP on the above number or at [e-mail].  A copy of the presentation will be made available on the Card Factory investor relations website (www.cardfactoryinvestors.com).

Notes to Editors

Card Factory is the UK's leading specialist retailer of greeting cards, dressings and gifts. It focuses on the value and mid-market segments of the UK's large and resilient greeting cards market, and also offers a wide range of complementary products associated with card giving occasions. Card Factory principally operates through its nationwide chain of over 950 Card Factory stores, as well as through its online offerings: www.cardfactory.co.uk and www.gettingpersonal.co.uk.

The Group's clear strategy is focused on four pillars of growth:

-     continuing to grow like-for-like sales in existing stores;

-     continuing to roll out profitable new stores;

-     continuing to focus on delivering business efficiencies; and

-     increasing penetration of the complementary online market.

Card Factory commenced operations in 1997 with just one store and has expanded its store estate primarily through organic growth into a market-leading value retailer with a nationwide presence. The Group's stores are in a wide range of locations including on high streets in small towns through to major cities, shopping centre developments, out-of-town retail parks and factory outlet centres.

Since 2005, Card Factory has developed a vertically integrated business model with an in-house design team, an in-house printing facility and central warehousing capacity of over 360,000 sq. ft.  This model differentiates the Group from its competitors by significantly reducing costs and adding value to customers in terms of both price and quality, underpinning the Group's motto: "Trusted for quality and value to help celebrate everyone's life moments".

In the financial year ended 31 January 2018, the Group achieved revenue growth of 6.0% to £422.1m (2017: £398.2m) and underlying EBITDA reduction of 4.6% to £94.0m (2017: £98.5m) at a margin of 22.3% (2017: 24.7%).

Cautionary Statement

This announcement is based on information from unaudited management accounts and contains certain forward-looking statements with respect to the financial condition, results of operations, and businesses of Card Factory plc.  These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement.  Nothing in this announcement should be construed as a profit forecast.  Except as required by law, Card Factory plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

 

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