Thu, 14th Nov 2019 07:00
14 November 2019
Card Factory plc
("Card Factory" or the "Group")
Q3 Trading update
Card Factory, the UK's leading specialist retailer of greeting cards, dressings and gifts, announces its trading update for the nine months ended 31 October 2019.
· Year-to-31 October 2019 ("YTD") Group revenue growth of +5.0% (2019: +3.4%)
· Overall YTD Card Factory like-for-like ("LFL") sales of +0.9% (2019: 0.0%)
· Continued store roll out driving additional revenue growth with twelve net new stores opened in the quarter; 38 net new UK and Republic of Ireland stores opened YTD
· On track to deliver approximately 50 net new UK and Republic of Ireland openings in the full year
· Card Factory website delivered YTD revenue growth of +21.9%, against a strong prior year performance (2019: +70.9%)
· The Board anticipates profits for the full year to be broadly in line with its previous expectations
* Comparator data set out in this announcement is for the nine months ended 31 October 2018
Recent trading performance
The Group has continued its robust sales performance, with a +5.0% increase in revenue for the nine months ended 31 October 2019 (2019: +3.4%), reflecting the contribution from new stores, CardFactory.co.uk growth and steady sales in a challenging UK high street environment.
Card Factory stores saw an increase in average spend, following the targeted improvements to our range of card and non-card products, but LFL sales were impacted by weaker footfall in the quarter and declined -0.4%. YTD Card Factory LFL store sales remain stable at +0.7%.
CardFactory.co.uk sales grew +16.2% in the third quarter against a tougher prior year comparative, as a result of the broader card, gift and party ranges, bringing YTD Card Factory website growth to +21.9%. Our new platform and website is expected to launch later this year.
Overall Card Factory LFL performance for the third quarter was -0.3% while LFL sales are up +0.9% for the nine months to 31 October 2019.
The business continues to face external cost pressures such as National Living Wage; with the year to date performance also impacted by increased storage costs, which we anticipate to substantially reduce in FY21. We continue to mitigate costs with our ongoing programme of business initiatives. The investment in the first half into the supply chain, operations and property management business efficiencies are expected to deliver savings in the second half of FY20.
Getting Personal was relaunched in the third quarter with a major restyling of the brand and imagery as part of the new strategy to target the more premium customer and improve performance.
Continued roll out of profitable new stores
Twelve net new stores, including four in the Republic of Ireland were opened in the third quarter, bringing YTD net new store openings in the UK and Republic of Ireland to 38. As a result, the total number of stores as at 31 October 2019 was 1,010 including eleven stores in Republic of Ireland. The business remains on track to deliver approximately 50 net new UK and Republic of Ireland stores in the current financial year and has a solid pipeline of new store opportunities for the next financial year.
Roll out of new retail partnerships
The roll out of Card Factory's new agreement with Aldi to supply half of their UK estate, totalling 440 stores, is anticipated to be completed by the end of November 2019. The Reject Shop roll out in Australia remains on track to commence in January 2020.
The Group remains cash generative, driven by robust operating margins, limited working capital absorption and relatively low capital expenditure requirements.
As at 31 October 2019, net debt, before deduction of capitalised debt costs, totalled £171.2 million, excluding IFRS 16 lease liabilities (2019: £172.0 million). The £0.9 million increase since the FY20 interim results reflects the slightly earlier build-up of stock for the forthcoming Christmas trading period.
The 2.9 pence interim dividend and 5.0 pence special dividend announced on 24 September 2019, amounting in total to c. £27 million, will be paid to shareholders on 19 December 2019.
Christmas trading and preliminary results announcements
The Group will announce its preliminary results for the year ending 31 January 2020 on Tuesday 21 April 2020. In addition, a post-Christmas trading update is planned for 9 January 2020.
Karen Hubbard, Card Factory's Chief Executive Officer, said:
"I am pleased with our year-to-date performance. Our ongoing focus on customer experience, and the quality and range of our card and complementary non-card products, has led to an increased average spend both in stores and online. This has helped us to substantially offset the effect of the lower high street footfall experienced in the quarter and the corresponding impact on our like-for-like sales.
"We remain on track with our new store roll out and are focused on pursuing other new growth opportunities and retail partnerships to extend our market penetration in the UK and overseas.
"Our quality/value proposition and new product ranges give us confidence that we are well positioned to deliver a good performance in our key Q4 trading period. The Board anticipates profits for the full year to be broadly in line with its previous expectations."
Card Factory plc via Tulchan Communications (below)
Karen Hubbard, Chief Executive Officer
Kris Lee, Chief Financial Officer
Tulchan Communications +44 (0) 207 353 4200
James Macey White / Elizabeth Snow / Amber Ahluwalia firstname.lastname@example.org
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 1000 Card Factory stores in the UK and the Republic of Ireland, 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.
In the financial year ended 31 January 2019, the Group reported revenue growth of 3.3% to £436.0m (FY18: £422.1m) and an adjusted underlying EBITDA decrease of 4.9% to £89.4m (FY18: £94.0m) at a margin of 20.5% (FY18: 22.3%).
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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