Shares of Wakefield-based greeting card and gift retailer Card Factory fell about 9% on Tuesday after it published results for the year ended January 31, 2020, and said it does not expect to resume paying dividends in the current year.
Card Factory previously announced that a final dividend would not be paid, and on Tuesday it added: “Our dividend policy remains unchanged over the medium term, and we will regularly review the most appropriate actions to take in the shorter term; however, currently we do not expect to pay any dividends in relation to FY21.”
Revenue rose 3.6% to £451.5 million in the year to January 31 but profit before tax fell 4.4% to £65.2 million.
Since lockdown started, online trading from Card Factory’s two web sites has been strong “with cardfactory.co.uk LFL since lockdown, at +302% and at +153% YTD.”
In its outlook, Card Factory said: “Before the impact of Covid-19, we had made a satisfactory start to the year.
“In the first major season of the year, Valentine’s Day, we achieved our fourth consecutive year of record sales growth in both volume and value.
“However, the Covid-19 pandemic has impacted trading and, given the uncertain economic backdrop, we do not think it is appropriate to provide financial guidance for FY21.”
Card Factory CEO Karen Hubbard said: “We delivered a reasonable sales performance in a challenging year for the high street, growing both our volume and value card market share in the mature and stable UK greeting card market.
“Our profitability was, however, impacted by a number of recurring cost pressures and other one off operational costs which we were not able to fully mitigate.
“Across the year we also developed a refreshed long term strategy for future profitable growth.
“The strategy is focused on strengthening both our market position and the financial performance of the UK business.
“During the second half of the year we tested our price positioning and elasticity, trailed new customer propositions, and developed partnerships to grow our UK market share through concessions and supply arrangements.
“These partnerships have enabled us to serve card shoppers when they are on impulse-driven purchases away from our own retail stores.
“We have developed further our online infrastructure and capability to ensure that we are set to deliver in what is increasingly becoming a multi-channel environment.
“We agreed a five year contract with The Reject Shop in Australia following a successful concession trial.
“This contract represents our first international business and is a potential template for other markets.
“We believe there is an opportunity to leverage our current infrastructure and supply chain and build market share in other card markets across the world under the Card Factory brand.
“Since the year end, whilst we have continued to evolve our medium and longer term plans, a key focus has been on appropriately managing our business and protecting our staff through the Covid-19 crisis.
“We have developed flexible plans which will ensure the safety of our colleagues and customers whilst allowing a phased re-opening of our stores from the 15th June in line with Government guidelines.
“Our board and management team have reacted rapidly to the very dynamic situation and I am confident that we will exit this crisis with an operating model and customer proposition that will make Card Factory the customers’ first choice for greeting cards, everywhere and for all occasions, however the customer wishes to shop, although given the uncertainty we are unable to provide guidance on future performance.
“I look forward to sharing in detail our exciting plans for growth on 28 July 2020.”
Analysts at Peel Hunt wrote: “There’s a lot of commentary in the prelims but what the share price all comes down to is social distancing.
“If CARD can cope with the issue in the way it believes it can, then the shares are probably very cheap.
“However, Christmas volumes are always massive and the stores are small.
“Can CARD really maintain 80% of volumes when queues could be an issue and its senior customer base may still be nervous?
“We believe the risk is that volumes don’t bounce back, so despite the lowly multiple, we are going to stick with a Hold.
“Strategic discussions about long-term direction are for another day.”