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I don't think people should be worried about sales growth - yes, the shops are busy, more of them are open, and they are well-positioned in the market in terms of price. The problem is costs. Paper (and thus card costs) are up by at least 15% so far this year, and printing ink is soaring in price. So are all logistics costs. So gross profit margins are going to be hit hard. In terms of other operating costs, the electricity bill for each shop will be up at least 50% this year (not a small amount of money when you have 1020 shops) - and all this before one considers pay rises. (May be they can get away with that one, but unlikely). A lot will depend on the financing costs this year, but you don't have to be too pessimistic when you play with the numbers to come up with a scenario in which full year sales are around £420 million, but the level of profits is hardly changed from January 21. In which case, this stock is not the bargain it seems. The problem with small cap stocks is that there is so little research/information that all news, good or bad, is a surprise and there is a huge reaction. if they issue guidance along the lines of my calculations in September, the stock will be in the low to mid 30s.
Eusebius- I think your post is spot on . Its reasonable to assume costs rise 10-15 which would as you say dent profits badly if not passed on.
I'm assuming they will raise prices to and allready being the cheapest should not hit sales too much.
I know the price index is stratified into lots of small parts I shall have a look if greetings cards is one which should give some idea.
It's not part of the weekly shop. Ask yourselves how many cards you buy each time you go out shopping or order a delivery. Besides, there is nothing I know of below them other than the odd poundshop.
Eusebius
I don't think you are spot on at all with the costs.
First of all logistical costs for cards are absolutely minute. They do all their own printing as I am aware so buy ink paper in bulk. Material costs are probably the lowest cost item for card factory at probably no more than 10% So a 20% cost increase here translates into 2% only
Of course they buy in bulk.......and wholesale prices have been rising steadily, even for big buyers such as Card Factory. Why are logistics costs for cards different from any other product? Do their lorries run on cheaper fuel? Every business in the UK is being hit by rising costs, they will be no different.
Eusebius how many cards do you think you could transport in a 20 foot lorry container?
There are 33 cubic metres in storage space. On average each card has a volume of 24 inches area x let's say 20mm in depth. I.e. 5 cards per cm.
I just did the full calculation Eusebius...1 million cards would fit into a 20 foot container. Now figure it out even at an average cost of 80p per card that's potentially £ 800.000 of sales. How much do you think that container costs to do a 500 mile journey...that's delivering to multiple sales outlets. Maybe £1.000. That's nearly 1 thousands of the price of the card . Wake up mate and do proper research ok. And by the way I am a trained fund manager.
and similarly Eusebius ..electricity costs are a small cost for retail companies in comparison to rates, rent and staff which are the big three costs. So if you want to rant about significant cost increases you could look at labour costs maybe ..but then they are mitigating this with price increases and employing 16 to 18 year olds who cost less.
Your point about oil inflation is very relevant to transport companies and aviation yes who spend in normal times 30% of the sale price/revenue is oil cost. These companies will suffer by far the most...not a card retailer. Even if we have 40m in additional costs ..with 50% mitigation of costs that would translate still into likely 35m pre-tax profits for CF annually
My goodness there are some strange analysts in this group. Cost of manufacturing a card is tiny so increase in costs is easily countered with price rises. Biggest risk here is complete collapse of high street footfall (unlikely) and Covid coming back. Interest rates may rise further but debt is being paid down at a reasonable rate. If the share was worth 65p plus a few weeks ago it's sure worth 48p now. I've bought back another tranche of shares I sold a few days ago at 54p. It's almost like taking a profit!
But you learned nothing about risk management if you are happy to see a stock drop 30% and not question if you might be wrong!
Think medium term Eusebius.
If you are constantly bothered about daily fluctuations you are gambling
Thinking medium term is investing like investing in a share of an actual business
And you learned nothing from watching a stock rise 30% and not think you might be wrong. And the rise was after an update. The fall is speculative and mostly linked to market drop and Algo / hedge fund manipulation.
Having said that I have been taking profits on rises and buying again on dips. With this stock that strategy is working but I'm keeping a baseline holding ready for longer term rises and dividends returning. A way off - yes. But returns will be decent (probably and imho).
I agree Wiscos.
Cashola, You only buy cards when you need them and if people aren’t buying them why is it every new home I see when someone has moved in the window sill is littered with cards and the rise of happy birthday banners across doors. If there is a banner on the door it’s very doubtful the house won’t have multiple cards in as well.
With a population of over 60m and rising card giving won’t stop as for example if you were skint and it was your parents 40th anniversary would you turn up to their home with no card and no present? I think the card would be a definite!
Cards to teachers (end of year thanks), funerals, sickness, job losses, new jobs, new babies, weddings, birthdays, etc. People will buy smaller presents (suits CF too with their cheap tat!) but cards will not stop.
Mdunsire,
According to the most recent webcast, freight cost inflation and labour cost inflation are their main concerns, so Euse is echoing the concerns of CF’s management team. I did some more digging last night, and I must say, I’m no longer concerned about print cost inflation. I can’t say I’m concerned about freight cost inflation either and energy costs are being hedged against. Whilst labour costs are being mitigated against, I think the increase in staff costs since pre-pandemic times will see us fall significantly short of the pre-pandemic net margin. That’s based on a ballpark assumption though, as I haven’t quantified this yet, but I’ll have a go tonight. Something else at the forefront of my mind is CF’s progress (or lack of progress) towards £600m revenue in FY26. Why have we not seen any progress in this regard? Why are the board unable to provide us with any sort of guidance in regards to a timeline? On the subject of progress, how have they still not resolved the issues on the digital front? The only development I’m seeing In regards to CF’s digital offering is the development of a terrible reputation. Consequently, my primary concern isn’t cost inflation (which can be absorbed in the long-term), it’s the competence management team. A quick look at TrustPilot rings alarm bells. I wouldn’t order from CF online after reading those reviews, even if I was still a shareholder!
On reflection, I can’t really complain about the lack of development on the online front as survival has been the priority during the pandemic. The £23m earmarked capex spend should go a long way
Agreed that the management team seems to be pretty poor. But hard to tell from outside of course. And at least they avoided a capital rise. Obviously labour costs will rise but the basic product is sound so really no excuse to make some money - countless ways to improve it!
Everyone is raising prices on food, takeaways, beer etc etc so if card factory were to add even 10% to the price of a card would anybody actually be that bothered as they will still be the cheapest by far of any shop to buy a card.
Dddd - I and most others on here like Roxburys posts. He does his research, he's enthusiastic quite witty and certainly isn't encouraging any one to buy who does not want to
Your posting history by contrast is in the main fairly nasty with not much of substance.
I know who I would rather have a beer in the pub with and it's not eight d man.
Disappeared? I wish! I’m an addict Ha ha
I’ve been busy training for the Bolton Ironman, it’s this Sunday and I’m absolutely sheritting myself! OMG WHAT HAVE I DONE!!!!
Also trying to spend less time on these boards and my retirement time sat outside Card Factory shops!
Been away for a few days so just been checking out the chatter on a few of the shares I own.
Got nothing insightful to add to the poor state of the markets and in particular where card is but I did Feel the need to post here just to echo Banbury boys comments. I enjoy your posts Roxbury and if you have indeed thrown the kitchen sink at card then if you feel like being enthusiastic in said posts I would say you have earned the right having put your money where your mouth is.
I often see the ramper/deramper phrase thrown around like some form of put down or insult simply because one person has a more bullish/bearish view of a company than someone else. I still find it strange that some poeple think someone being positive about a share is somehow trying to influence people to purchase the share!! On that basis Roxbury has effectively fat shamed the board and encouraged us to go out and run a marathon just because he’s told us he is doing the Ironman in Bolton!!
Roxbury I was actually away to see some friends in Nice for a few days and the ironman took place there last Sunday. The swim course out into the sea looked idyllic but there was some chop in the water on Sunday so I bet that was an additional challenge. The bike course went out up into the hills with one part including a climb worthy of something on the Tour de France according to one local (thankfully there was a downhill bit too). The other local comment that resonated was that whilst it would make for a lovely scenic bike ride I’d only do it on a motorbike! The run course was set out along the promenade des anglais and was effectively a flat run from the end of the promenade in nice old town to the airport and back which they repeat several times. Whilst that meant it was great for spectators to line the route it was probably a bit of a boring track for the athletes and god it was hot on Sunday.
I reckon the weather will be far more suitable in Bolton Roxbury and even if some of the architecture isn’t as pretty as nice, if they’ve chosen the right route the bike ride will definitely have its moments. The very best of luck to you and I hope when you do get to rest afterwards it’s sat outside a pub with a beer in your hand rather than outside card factory with you ‘customer counter clicker’ in your hand!
Thankyou Pmoran1969 what a lovely post!
Yes, I’m as honest as the day is long and would never (intentionally) encourage anybody to buy anything without doing their own research.
I’ve enjoyed my time here in Card but with an average of 60p have only ever lost £ and the recent drop from 65p to 45p has been awful!
Currently Sat with a paper loss of over £100K !!!!!
Sold a chunk in the 60’s to buy Wrks but they have gone down more!
Sold a few more to buy 4D last Tuesday and they went into Administration on Friday!
Card is still my largest holding and it is still substantial.
All in all it hasn’t been a good few weeks but hey ho I genuinely believe that if you have got your health you really are a millionaire hence the reason I do triathlons.
The Ironman is the big daddy of them all, 2 1/2 mile swim, 112 mile bike ride followed by a 26 mile run.
Everyone here here is capable (health permitting) of doing one.
Check the link out below.
This man is my hero and the person who inspired me to do my first Ironman last year and I’m in my 60’s.
When you pass those pearly gates have a story to tell guys.
https://youtu.be/Ik8KO2Os7k4
Good Luck Rox with your extra curricular activities and your other shares. Afraid I sold out at 65p but I will be back in during the autumn in time for Xmas