Card Factory plc (“Card Factory” or the “Group”)
Q1 trading update – Solid seasonal performance in a tough trading environment
Card Factory, the UK's leading specialist retailer of greeting cards, dressings and gifts, announces a trading update for the quarter ended 30 April 2018 to coincide with its Annual General Meeting to be held later today.
Key highlights
· First quarter Group sales growth of +3.0%, with Card Factory like-for-like (“LFL”) sales -0.4%, against strong comparatives and in a tough retail environment
· Continued store roll out with 10 net new stores opened (Q1 FY18: 11); on track for our target of c.50 openings for the full year
· Strong cash generation with a reduction in net debt since the year end
· Board's expectations for the full financial year unchanged
Trading
In the context of a tough trading environment for retailers, Card Factory's total and LFL sales over the quarter represents a robust performance, reflecting the strength of our offer and the continuing work to re-design and refresh products, particularly in our seasonal card and gift ranges. Research continues to show these are appreciated and valued by consumers, relative to both discount and more expensive alternatives.
The opening of 10 net new UK stores (Q1 FY18: 11) and 1 store in the Republic of Ireland brings the total estate to 925 stores in the UK, with a further 7 trial stores in the Republic of Ireland as at 30 April 2018. The planned delivery of approximately 50 net new stores in the current financial year includes a number of stores in retail parks, where we continue to see a good performance.
Revenues from cardfactory.co.uk continue to grow strongly following a successful Q1. Customers are responding well to range expansion and new designs across card and non-card products, both personalised and non-personalised. Furthermore, our social media presence is maturing with growing communities and engagement across key platforms, with updated and refreshed creative, photography and landing pages.
The trading performance at Getting Personal has continued to be disappointing, faced with a market environment of heavy discounting and increasing customer acquisition cost. Against this backdrop we continue to pursue other channels of customer acquisition, consistent with our strategy of delivering profitable sales.
Financial position
The Group remains highly cash generative, driven by its strong operating margins, limited working capital absorption and relatively low capital expenditure requirements.
As at 30 April 2018, before the forthcoming payment of the proposed final dividend for FY18 of £21.9m (FY17: £21.5m), net debt was £147.7m (30 April 2017: £125.4m), before deduction of capitalised debt costs. This is £13.6m lower than the level reported at 31 January 2018 of £161.3m, compared with a reduction in net debt of £10.4m over the same period last year.
The Board currently anticipates, subject to trading performance, making a further return of surplus cash to shareholders, in line with our stated policy, towards the end of the current financial year. A further update will be given with our interim results for the 6 months ending 31 July 2018, due for release in late September.
Karen Hubbard, Card Factory's Chief Executive Officer, said:
“We have had a solid start to the year with further sales growth despite an ongoing sector trend of subdued footfall, which impacted the like-for-like performance. We have seen a good customer reaction to our seasonal products over the quarter, with record card volumes for both Valentine's Day and Mother's Day, as we continue to improve the range and quality of card and non-card options. Our store opening programme remains on track and we are pleased with the performance of this year's openings.
“We have also seen strong sales growth from cardfactory.co.uk with our range expansion resonating well with customers. Whilst the sales performance of Getting Personal has been disappointing, a cost effective method of customer acquisition is being adopted to enhance the profitability of sales.
“Overall, Card Factory remains in a strong position as we look forward to the lessening impact of cost headwinds and the benefits of a significant number of business efficiencies being implemented during the year. This will put in place a platform for further growth in the medium term. The Board's expectations for the full financial year remain unchanged and I look forward to providing further updates as the year progresses.”