Card Factory H1 Earnings Call Highlights

Key Points

• First-half revenue rose 5.3% to £260.8 million, helped by Funky Pigeon and wholesale growth, although adjusted profit before tax fell to £12.7 million as Card Factory invested in digital integration.
• U.K. store sales were pressured by weaker footfall, lower consumer confidence and reduced disposable income, but improved margins and cost controls lifted store EBITDA 5.7% to £50.4 million. Ireland performed strongly, with like-for-like sales up 5.6%.
• Card Factory reiterated its full-year expectations, citing improving recent U.K. like-for-like sales, strong cash generation and a broader cards, gifts and party offering. It declared a 1.4p interim dividend, while its digital business is expected to reach run-rate profitability by year-end.

Card Factory LON: CARD said first-half revenue rose 5.3% to £260.8 million, supported by the full-period contribution from Funky Pigeon and growth in wholesale partnerships, as the retailer continued to invest in expanding beyond its core greeting-card business.

Adjusted profit before tax was £12.7 million, down from £13.2 million a year earlier, while adjusted earnings per share increased 1.6% to 2.9 pence. Chief Financial Officer Matthias Seeger said the profit movement reflected improved store profitability alongside planned investment in integrating Funky Pigeon and cardfactory.co.uk into a single digital operation.

“The overall picture is one of resilient operating performance, strong cash generation with improved store profitability,” Seeger said.

Store sales affected by weaker U.K. footfall

Store sales declined £1.8 million to £226 million. U.K. like-for-like sales fell 2.3%, with total U.K. store sales down 1.4%, as lower consumer confidence, hot weather and pressure on disposable income reduced visits and transactions. The company said external industry data showed footfall in its locations fell around 3.5% during the first six months.

Net new stores partly offset the decline, contributing 0.9% growth. The Republic of Ireland was a notable exception, with like-for-like sales up 5.6% and total store sales increasing 24.3% in the first half.

Despite lower U.K. sales, store profitability improved. Product margin increased by 200 basis points, while cost controls and the company’s Simplify and Scale efficiency program helped offset lower sales and inflation. Store EBITDA over the last 12 months rose 5.7% to £50.4 million.

Average basket value reached £5.13, up 16.5% over three years. Gift and celebration essentials represented 55.4% of in-store sales, compared with 53.4% a year earlier, reflecting Card Factory’s effort to capture spending beyond greeting cards.

The estate comprised 1,126 stores across the U.K. and Ireland at the end of the period, after 23 net new openings over the past 12 months, including nine in the first half. The company said it would continue opening stores selectively while reviewing the productivity and future potential of existing sites.

Digital investment weighs on current earnings

Digital sales increased £12.8 million, primarily because of Funky Pigeon, which Card Factory acquired in August of the prior year. Excluding Funky Pigeon’s incremental contribution, group sales were broadly flat year on year.

The company is combining Funky Pigeon and cardfactory.co.uk into one digital business, while maintaining separate brand positions. Cardfactory.co.uk is focused on value and broader celebrations, while Funky Pigeon is focused on personalized products and attached gifting.

Seeger said the group invested during the half in Funky Pigeon brand marketing, organizational integration and operating capabilities. The integration is expected to generate £5 million of synergies from FY28.

Chief Executive Darcy Willson-Rymer said Funky Pigeon’s new-customer count rose 11% year on year in the first half following renewed marketing activity. Funky VIP membership increased 46% and represented 16% of the active customer base. The company completed more than 50 website test-and-learn experiments during the period and is moving both digital brands to a single technology platform.

Card Factory said its digital business is expected to be profitable on a run-rate basis by the end of the financial year, though it did not disclose a target online EBITDA margin.

Party, segmentation and Ireland expansion

Card Factory is positioning itself as a broader celebrations business, including cards, gifts, wrap, balloons and party products. The company rolled out a new party proposition in mid-July and said party sales had increased by double digits on a like-for-like basis since the launch.

Its store segmentation program also produced encouraging early results. A party- and gift-led format was rolled out to 118 stores, where sales performed 1.6 percentage points ahead of the rest of the estate. A separate cross-category format tested in 20 stores delivered sales 1.9 percentage points ahead of the broader estate. The latter format is planned for further rollout in FY28.

In Ireland, Card Factory had 49 stores at the end of July and said it sees the potential to expand the estate by around 50% over the next five years. New Irish stores are targeting a 24-month payback period. The company also introduced Card Factory products including cards, bags, wrap and gifts through the Garlanna wholesale business.

Wholesale partnership revenue grew £2.2 million, including double-digit organic growth. Seeger said Garvan and Garlanna performed in line with acquisition economics, while SA Greetings was behind expectations and is subject to improvement actions.

Cash flow, dividend and second-half outlook

Free cash flow over the last 12 months increased £9.9 million to £47.8 million. First-half adjusted free cash flow was nearly £1 million, which Seeger said was the first positive first-half free-cash-flow result in a decade, aided by working-capital management and a tax refund relating to prior years.

Capital expenditure rose to £11.8 million from £7.6 million, reflecting investment in manufacturing capacity, an HR information system and digital integration. The group expects free cash flow to exceed £30 million in FY27, with capital expenditure expected to return toward the lower end of its £20 million to £25 million guidance range from next year.

Net debt increased £8.5 million to £87.4 million after the Funky Pigeon acquisition and shareholder returns. Adjusted leverage was just below 1.1 times, below the company’s stated maximum target of 1.5 times.

The board declared an interim dividend of 1.4 pence per share, up 7.7% year on year and payable in December. The company also said 83% of its previously announced share-buyback program had been completed.

Looking ahead, Willson-Rymer said Card Factory entered the key Christmas trading period with a refreshed and broader offer across cards, wrap, gifts and party products. He said U.K. like-for-like sales had improved from first-half levels and returned to positive growth in recent weeks, although he cautioned that it remained early.

The company said it does not require a sharp recovery in consumer sentiment or footfall to meet full-year expectations, and reiterated confidence in delivering those expectations despite an uncertain consumer backdrop.

About Card Factory (LON:CARD)

We make sharing in and celebrating life's moments special and accessible for everyone. We believe life needs celebration. Celebrations bring us together, helping us show love and feel loved. They bring a happy dose of fun and break up the everyday. Time and again, consumers have told us of the powerful role celebrations play in their lives. However, they have also told us that finding what they need to celebrate isn't always easy. It takes time and costs can add up. At cardfactory, we help everyone come together, mark special moments and toast achievements; whatever the occasion, whatever their budget, wherever they are. Today, we design, manufacture and sell greeting cards, gifts and celebration essentials for all life's moments.

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