RE: Drop29 Sep 2021 13:46
Hi Simes20,
On a like for like basis I think your calculation about cards volume decrease is roughly correct. It’s how from this piece of information you jump to the conclusion that Card Factory is going bust that makes me a little bit skeptical either on your thought process or your good faith...
First of all, we have to remember that we are comparing to a pre-pandemic situation, since HY2021 includes February and March 2020, to the situation in May, June and July 2021 where even if we were open, there might still not be such a huge propensity to party... given the environment, if I was buying 10 cards pre covid and now I buy 8 cards instead, I would not be so scandalised and would not point immediately to “terminal decline” without even giving the company the chance to report in a period totally free of restrictions...
People do less shop trips and spend more - given the fact that cards purchases may be considered a sort of “impulse purchase”, if you do less trips to the shops I would expect you end up buying less cards. If you add to this a little cannibalization from the online channel, reduction in volume are not as worrisome as you are pointing out without giving much weight to the context... management strategy to bet also on the expansion of other products aside from cards makes sense to me especially if you factor in more online sales and less trips to shops. Seasonality is also important: if I’m in the midst of a pandemic I may settle for renouncing to some minor festivities, but absent lockdown I would hardly do the same for Christmas for example...
In general I think people expected to much in terms of results for a period that is still far from normal.
Second, if Card is in a terminal decline as you suggest, who the hell is going to take all its market share in cards? And if Clintons is going bust as well (which could be for real in Clintons case) who the hell is going to sell all those cards? All Moonpig with a price point triple of Card Factory and no physical stores at all?
I think you forget that Covid is not a Card Factory specific issue... we are not in a rampant physical retail environment and Card is doing poorly alone or has some sort of issue with its business model... Competitors are suffering as well and Card can easily be in the position to gain further market share in the medium term, as it always did in the past - it’s a relative game and, as tough as the situation might be for Card Factory, rest assured that competitors are even worse.
Third, it’s tough to see pricing power as a negative for a company, but in some ways you managed to insinuate so... Pricing power is a huge protection here compared to competitors which already sell cards with a very high price point. In an inflationary environment let’s see if Moonpig is able to double the price of its cards from 4£ to 8£ without loosing customers or if it’s easier for Card to do so when it starts from a price point of 99p...
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