Card Factory's H1 sales lower than normal in challenging retail environment

Greeting card retailer Card Factory’s shares tumbled 6% on Thursday as it reported that the retail environment had been "challenging" in the first half of the year as sales were lower than normal.

In a trading update for the six months ended 31 July the company reported like-for-like sales growth increased by 0.2%, lower than the 2.8% growth reported last year. Sales from the company’s website cardfactory.co.uk slowed in April, which was expected.

Excluding sales from the website, like-for-like sales from stores was broadly flat with a 0.1% dip, compared to the 2.7% sales growth last year.

Revenues grew by 4.8%, lower than last year's growth of 8%. In the first quarter sales growth was softer than levels recently achieved from a footfall in retail impacting weekly sales patterns. The company said the trend continued in the second quarter, both in the lead up to and following the EU referendum in June, and the wider impact of the Brexit result remains uncertain.

Chief executive Karen Hubbard, said: "It is too early to assess the precise impact on overall consumer sentiment and retail footfall from the result of the EU referendum. However, we enter the second half with confidence in the quality and value of our offer, including our new Christmas range, and we will target improved sales growth in the second half."

Net debt was £121.7m as of 31 July, up from £109m in 2015, due to cash generation during the period, which was offset by the June payment of the 2016 final dividend of £20.4m and the start of the normal capital relating to Christmas stock.

Due to the fall in sterling after the EU referendum, the company is cautious about the foreign exchange margin pressure in 2017. Over 90% of the anticipated 2017 financial year US dollar cash requirement is covered at an average rate of about $1.50, which is significantly above the average spot rate for the period but about 8% below what was achieved in 2016. Additional hedging is in place for about one-third of the anticipated 2018 financial year US dollar cash requirement at an average rate of about $1.49.

The FTSE 250 listed company opened 34 new stores in the first half of the year bringing the total across the country to 848 stores. About 50 stores are due to open in the second half of the year.

Hubbard added: "We remain as convinced as ever of the strong growth prospects for the business, and of our ability to deliver strong shareholder returns over the medium term. We are confident of delivering full year underlying profit before tax within the range of analysts' current expectations."

Shares in Card Factory were down 5.68% to 302p at 0837 BST.