Berenberg starts Card Factory at ‘buy’

"Card Factory is a transformed business that is now leveraging its deep competitive moats to unlock growth from underexploited markets," the bank said. "It is the UK’s largest specialist retailer of greeting cards and focuses on the value segment of the market. Its estate of 1,058 stores provides greater reach and scale than that of competitors."

Berenberg said Card Factory’s deepest competitive moat is its store estate network. The benefit of the estate is significantly undervalued and misunderstood, it said.

"The network creates a broader distribution platform than possessed by peers, and would be costly and difficult to replicate," the bank said.

"The scale of the distribution platform has enabled Card Factory to take a significant market share in the largest (offline) segment of the UK greeting card market. Management is utilising its market share to disrupt online peers and establish a credible omnichannel presence.

"We expect an omnichannel platform to increase the wallet share of existing customers, in line with the experience of other omnichannel retailers we cover."

Berenberg also said it expects the reinstatement of a dividend to expand Card Factory’s appeal to income investors "and be a catalyst for investors to revisit this name".

At 0935 BST, the shares were up 2.6% at 96.40p.