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Consumer cutbacks and Royal Mail strikes hit Moonpig sales

The cost of living crisis and strikes at Royal Mail have hit sales at Moonpig, which has downgraded its sales forecast for the full year.

The online cards and gifting group described its first half performance as “solid” despite the progressively more challenging trading conditions. 

UK orders were impacted by the industrial action at Royal Mail.  

The two companies have a partnership that stretches back more than 20 years to when Moonpig was originally founded. Last year it was extended to Sunday deliveries. 

Moonpig’s share price fell by 13.41% to 130.93p after it said that sales for the full year were likely to be £30m less than forecast, at £320m. However, its full year estimate for adjusted EBITDA is unchanged. The 52-week high is 398p, low 119p.

Sales in the six months to 31 October were flat at £142.8m, although underlying sales growth excluding last year’s Covid uplift was 12%. The adjusted EBITDA margin of 24.2% came in above expectations.

Moonpig’s customers have 79m reminders set up on its system and the group is focusing its efforts on its “large and loyal” existing customer base.

The group said that levels of new customer acquisition have decreased year-on-year “and we have seen consumers trading down to lower gifting price points at Moonpig and Greetz. UK card-only orders have also been impacted by industrial action at Royal Mail during September and October”.

Marketing spend has been reduced in order to “maintain new customer payback within our framework”.

Moonpig also swiftly introduced a new Moonpig “moments for less” range of gifts with prices from £8-£15 to make its gifting options more affordable. 

A new range of video message greeting cards has been launched with 50 designs initially, with a full roll-out planned for next year. Customers add a video message to their card which the recipient accesses via a QR code. 

It is also testing its Moonpig Plus annual subscription service aimed at driving customer purchase frequency and lifetime value. This will be rolled out in full during the 2023-24 financial year. 

CEO Nickyl Raithatha commented: “Our resilient business model offers a powerful and unique combination of leading market positions, strong customer retention, high profitability and robust cash generation, giving us flexibility to manage through the economic cycle. As a result, our expectations for profit for the current financial year remain unchanged.

“Despite the difficult trading environment, we have delivered a robust set of results and with our data-led model we are ideally positioned to capture the significant long term opportunities in our markets.”

Tangible capex this financial year of £11m-£13m includes two new gift fulfilment facilities, one in the UK at Tamworth and one in the Netherlands. Both are now fully operational.

Trading at Red Letter Days and Buyagift, acquired over the summer, was as expected. 

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