‘Throw your cards in’: Investors warned as Card Factory shares tumble

Shares in Card Factory have slumped after the group revealed it suffered a ‘challenging’ period of trading over Christmas and lowered its full-year earnings outlook.

Blaming dwindling High Street footfall, the General Election and weak shopper sentiment, Card Factory said Christmas trading had been ‘softer’ than expected and revealed it would not be dishing out a special dividend to its shareholders next year. 

The card retailer, which is listed on the FTSE 250 index, has seen its share price drop by over a quarter today, with shares currently trading down 25.77 per cent or 36.10p to 104.00p.   

After a disappointing Christmas sales period, the retailer said it now expects full-year underlying earnings to come out between £81million and £83million, against forecasts of around £87million.

Continuing its gloomy predictions, Card Factory said the problems of a weak pound, rising wage costs, and diminishing High Street footfall look set to persist well into its next set of financial results. 

Karen Hubbard, Card Factory’s chief executive, said: ‘The Christmas trading period continued to be challenging given the general election and weak consumer confidence, the impact of which can be seen in the footfall decline experienced in the period.’ 

Advising investors to ‘throw your cards in’ and sell their Card Factory shares, analysts at Peel Hunt said: ‘Card Factory’s Christmas update is truly shocking… [sales have] collapsed in recent weeks, and management seems to have lost all confidence: forecasts are being decimated, the special will become a distant memory and the ordinary will also probably be cut.’  

Meanwhile, Russ Mould, investment director at AJ Bell, said: ‘And so, after Vodafone, Marks & Spencer, Royal Mail and Centrica, another dividend yield that looked ‘too good to be true’ turns out to be just that, after Card Factory’s admission that it will not pay a special dividend in 2020.’

‘This has torn a huge hole in the share price as chief executive Karen Hubbard’s forecast of a third straight drop in the company’s preferred measure of profit (adjusted EBITDA, which itself prettifies the numbers), may be prompting some investors to worry whether the ordinary dividend will come under pressure at some stage.’

Mr Mould added: ‘Shareholders must now decide whether to tough it out or cut their losses. An unchanged ordinary dividend of 9.3p a share still leaves Card Factory on a dividend yield of 8.4 per cent.

‘But the prospect of a third straight drop in annual profits will surely start to beg the question of whether even the ordinary dividend is sustainable over the long term.’

Card Factory said it partially offset declining footfall by improving product quality and upping the amount shoppers spent in-store, but like-for-like sales for the period fell by 0.6 per cent, accelerating from a 0.1 per cent dip in the same period a year earlier. Overall group revenue grew by 3.6 per cent.

Online party and gift products helped the group’s digital store sales to grow by nearly 15 per cent over the 11 month period. 

Launched: Card Factory drafted in celebrity couple Stacey Solomon and Joe Swash to help launch its new festive photocard service

Rescued: Clintons was rescued from administration last month, saving around 2,500 jobs

To try and boost its fortunes over Christmas, Card Factory launched a ‘festive families photocard service.   

The chain drafted in celebrity couple Stacey Solomon and Joe Swash to help launch its new service, which ran from pop-up stores across the UK, as well as online.

The development came amid a trend for annual family photoshoots set by celebrities such as reality TV stars including the Kardashians.  

New store openings triggered a 3.6 per cent upturn in total revenues, as the group added 47 shops to its portfolio bringing its total number of stores up to 1,019.  

With the rise of online greetings cards and a reduction in the number of people sending cards and letters, Card Factory is not the only card retailer to find itself floundering in the last few years.  Rival Clintons was rescued from administration last month, saving around 2,500 jobs.

Figures released by the British Retail Consortium today revealed that last year was the worst year on record for high street retailers, with overall sales falling for the first time.