For much of 2017 things were going well for the UK retailer. Starting at £2.50 the stock climbed all the way to a 15 month high of £3.59. Yet, news of a 14.1% plunge in interim pre-tax profit at the end of September caused a near 18% single-session spiral, sparking the kind of decline that wasn’t adequately compensated for with November’s slightly more positive Q3 update. This left Card Factory at £2.94 by the end of the year – still a 17.6% increase across the 12 months, but an 18% drop from its September peak.
Any hopes that 2018 would reverse the negative momentum seen in the final quarter of 2017 were quickly quashed in early January, as the firm’s post-Christmas update swiftly wiped out 20% in value on the day of release. It’s continued to struggle since then, at one point hitting an all-time low of £1.85 in early February. Card Factory PLC now sits at a current trading price of £1.93 (Spreadex, 04/04/2018).
That January statement saw the firm reveal that for the 11 months to the end of December total sales rose 5.9%, compared to the 4.3% see for the same period in 2016. Like-for-like store sales, meanwhile, were up a solid 2.7% – a huge improvement on 2016’s 0.4% – a number that jumps to 3.0% when cardfactory.co.uk is factored in. This growth was driven by ‘lower margin non-card categories, such as gifts and dressings’, with card sales themselves actually flat for the period.
The overall strength of these sales figures, however, couldn’t prevent Card Factory from issuing a profit warning, with the same margin pressures that ruined the company’s interim report leading it to state full year EBITDA would come in between £93 million and £95 million. At the mid-point that would mark a 4.6% decline on the previous year’s £98.5 million.
In terms of the reaction next week, Card Factory ideally needs to hit the top-end of those earnings forecasts, alongside providing a slightly upbeat update on its current trading performance, if it wants to lift away from its recent lows.
Card Factory PLC (LON:CARDC) has a consensus rating of ‘Buy’ alongside an average target price of £2.50.
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