Card Factory set on expansion despite profit decline

The greeting card specialist opened 51 new stores during the year ending January 31 and doesn’t seem to be slowing its expansion strategy down anytime soon with its sights set on circa 1,200 stores across the UK, Republic of Ireland and Australia.

After posting a 1% decline in like-for-like sales during the same period, Card Factory attributed the 4.9% drop in underlying EBITDA to lower footfall and “Getting Personal’s disappointing performance”.

However, the specialist retailer is continuing its expansion strategy and online development, with chief executive Karen Hubbard insisting they aren’t “cannibalising their own sales”.

“We’re opening stores because they’re profitable and they’re profitable because there’s still quite a few catchments in the UK where customers can’t get access to Card Factory cards,” Hubbard said.

With low rents on smaller units, Hubbard said the specialist retailer tends to “return profits to our capex within 18 months at max and quite often in 12 months”.

“We are delivering profitable growth quickly in those new stores so for us it’s the right thing to do.”

Retail analyst at Global Data Zoe Mills said although store roll-out is a priority, the retailer must not “lose focus on protecting margins and stimulating spend”.

“Our consumer data shows that demand for greeting cards continues to drop year-on-year – with the throw-away nature of the product conflicting with consumers’ rising sustainability concerns and rising stamp prices dampening demand,” Mills added.

As CardFactory.co.uk sales increased 56.3%, albeit from a lower base, the card retailer reported GettingPerosnal.co.uk sales dropped by 8.4%.

Mills said: “With the likes of Moonpig.com and Funkypigeon.com outperforming, Card Factory lost share of the online market in 2018 and this trend looks set to continue in 2019.

”Considering the accelerating demise of its Getting Personal division, this year it must shift these remaining customers to its Card Factory branded website and shutter this fascia for good.

“This will ensure it is able to capitalise on strong brand awareness of the Card Factory name and make further cost savings, a measure it needs to take given weaker operating profits, through running just one online platform,” she said.

However, Hubbard doesn’t see any advantage of merging the two together.

She said: “The customer proposition is really clear it’s really different. In Card Factory every card is under £20, and Getting Personal has got a much wider range.”

The card retailer will shift its focus on “implementing a new and better digital marketing approach” to boost sales during the current year.