Card Factory’s (LON:CARDC) acquisition of Garven Holdings, a leading designer and wholesaler of gifts and celebration essentials in the US, its largest global market, is in line with the company's strategy of increasing international reach.
The acquisition establishes its physical footprint in the market and complements its existing wholesale supply partnership in 1,100 stores. In addition, CARD has provided a reassuring trading update, albeit with the peak Christmas trading period in the next few weeks.
Ahead of the trading update on 14 January 2025, we make no changes to our estimates.
We had included some benefit from the expected new partnerships in our forecasts. In addition, management has not publicly quantified the effects of the changes to employers’ National Insurance contributions in the recent budget and the National Living Wage increase from April 2025, and the potential mitigations of these.
CARD has a track record of offsetting wage and cost inflation through productivity, efficiency and range measures.
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Moreover, Garven has an established customer base of general and speciality retailers, presenting the opportunities of design and buying synergies, as well as the introduction of CARD’s own ranges into the wholesale market.
Management identified the US market an important opportunity at the capital market day in 2023.
The acquisition cost U$25m on a cash/debt-free basis and was funded from CARD’s existing cash and debt facilities. Management has quantified Garven’s sales at c 5% of CARD’s sales, suggesting mid-£20m in revenue, and indicated an acquisition multiple of c 5x EBITDA. The acquisition will make a negligible contribution to FY25 results.
The acquisition of Garven complements CARD’s other wholesale agreement. At the time of the H125 results, management reported that it had secured a nationwide wholesale retail partnership that would roll out in time for Christmas. Trading with the partner (name not yet disclosed) has commenced in more than 1,100 stores.
With respect to current trading, although the peak Christmas trading period is ahead, management has reported that trading in H225 to date was in line with its expectations and it is encouraged by the start of the Christmas season. Combined with the programme of productivity and efficiency savings, management’s profit expectations for FY25 are unchanged.