Soaring costs hit Card Factory profits

Card Factory CCO

Card Factory has seen a drop in full-year profits after taking a £14.6 million hit from the weak pound and soaring wage costs.

The greeting cards and gifts retailer posted a 12.3 per cent fall in pre-tax profits to £72.6 million for its fiscal year ending January 31 as rising costs had an adverse impact on profit margins.

Card Factory warned that earnings growth in the new financial year would also be “limited” thanks to ongoing cost pressures, despite efforts to offset this with savings across the business.

In fact, it expects the cost pressures from the weak pound and living wage to ease in 2019/20.

It comes after the retailer’s shares took a hit in January after it warned over the impact of a margin squeeze on its profits.

Despite this, like-for-like sales still managed to increase 2.9 in the full-year report, compared to 0.6 per cent growth the previous financial year.

In addition, it saw online sales skyrocket 67 per cent higher over the year.

“From a profit perspective, we faced strong headwinds of £14.6 million in the year, principally due to the combined impact of foreign exchange and national living wage,” chief executive Karen Hubbard said.

“Our cost-saving initiatives during the year provided substantial mitigation and we have laid the foundations for further efficiencies to be delivered in the future.

“However, given the continuing headwinds, and, as previously stated, any EBITDA (underlying earnings), growth in full-year 2018-19 is likely to be limited.”

Card Factory opened 50 stores over the past year, including six trial shops in Ireland.

It plans to open more new outlets and continue to grow its online arm.

Regarding the start of the current year, the retailer said it was “satisfied with the start we have made and particularly pleased with the record seasonal performances from Valentine’s Day, Mother’s Day and Easter”.

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