Card Factory Issues Shock Profit Warning Amid Economic Uncertainty
The greeting card retailer Card Factory has delivered an unexpected blow to investors by issuing a profit warning during its peak trading period. This decision sent shares plummeting by more than 20% as investors struggled to come to terms with the company's lower-than-expected sales performance.
Economic pressure on consumers, which has been well-documented in recent months, appears to have taken a toll on Card Factory's business. With high street footfall softening, the retailer is now facing stiff competition from online retailers like Funky Pigeon, its own e-commerce arm that was acquired just last July for £24 million.
Card Factory attributed its poor performance to consumer confidence and shopping behavior, which have been impacted by economic pressures. While it still expects annual adjusted pre-tax profits of between £55m and £60m, this is significantly lower than the mid-to-high single-digit percentage growth it had forecast on last year's adjusted profits of £66m.
Analysts like Kate Calvert at Investec point out that Card Factory does not feel confident in making up for lost sales in the remainder of the year. The company's long-term strategy to mitigate high inflation remains on track, but its prospects now seem more uncertain.
Another factor affecting Card Factory's performance is the decline in physical letter mailings, which has been a staple of its business. With Royal Mail expecting the number of letters it delivers annually to drop from 20 billion two decades ago to just 4 billion in the next few years, the company is facing significant disruption in its traditional sales channel.
The recent changes to Royal Mail's postal service, including the end of second-class post on Saturdays and reduced services to alternating weekdays, are also likely to have had an impact on Card Factory's sales. The price of stamps has risen sharply, with a first-class stamp now costing 17p – the sixth increase in less than three years.
Despite these challenges, Card Factory is confident that its long-term strategy will deliver results. However, investors may be left wondering whether the company can navigate the changing retail landscape and maintain its competitiveness in an increasingly digital world.
The greeting card retailer Card Factory has delivered an unexpected blow to investors by issuing a profit warning during its peak trading period. This decision sent shares plummeting by more than 20% as investors struggled to come to terms with the company's lower-than-expected sales performance.
Economic pressure on consumers, which has been well-documented in recent months, appears to have taken a toll on Card Factory's business. With high street footfall softening, the retailer is now facing stiff competition from online retailers like Funky Pigeon, its own e-commerce arm that was acquired just last July for £24 million.
Card Factory attributed its poor performance to consumer confidence and shopping behavior, which have been impacted by economic pressures. While it still expects annual adjusted pre-tax profits of between £55m and £60m, this is significantly lower than the mid-to-high single-digit percentage growth it had forecast on last year's adjusted profits of £66m.
Analysts like Kate Calvert at Investec point out that Card Factory does not feel confident in making up for lost sales in the remainder of the year. The company's long-term strategy to mitigate high inflation remains on track, but its prospects now seem more uncertain.
Another factor affecting Card Factory's performance is the decline in physical letter mailings, which has been a staple of its business. With Royal Mail expecting the number of letters it delivers annually to drop from 20 billion two decades ago to just 4 billion in the next few years, the company is facing significant disruption in its traditional sales channel.
The recent changes to Royal Mail's postal service, including the end of second-class post on Saturdays and reduced services to alternating weekdays, are also likely to have had an impact on Card Factory's sales. The price of stamps has risen sharply, with a first-class stamp now costing 17p – the sixth increase in less than three years.
Despite these challenges, Card Factory is confident that its long-term strategy will deliver results. However, investors may be left wondering whether the company can navigate the changing retail landscape and maintain its competitiveness in an increasingly digital world.
they used to be a thing where ppl buy actual cards 2 celebrate events or just 2 say thanks n now it's all about online shopping which is bad news for them 
anyone else feel like we're losin somethin special when we switch 2 digital stuff 
? btw i'm more worried bout royal mail than card factory 
they're gonna b outta a job 2 deliver letters lol 
They're already struggling with people not shopping as much because of the economy, and now they're warning that they might not make their profits target? It's like, aren't they just trying to prepare everyone for a bad year or something? 
My kids are always asking me why grown-ups do things, right? 
But at the same time, they're trying to adapt by getting more online and whatnot. It's just one of those things where you feel for them but also kinda expect this kind of warning from a big retailer like that. The problem is, it affects all sorts of businesses not just Card Factory. I wonder how many other shops are struggling in similar ways... 
anyway whats going on with card factory? they shoulda seen this coming tho, everyone's been buying less physical stuff lately 
did u guys know that royal mail is gonna stop delivering 2 billion letters in a yr?? thats crazy 
how are people supposed to send cards and stuff? 
. I mean, who doesn't want to splurge on fancy cards and gifts when there's a recession around? 
But seriously, they need to adapt to this new normal. Funky Pigeon is killing it online, and if Card Factory can't compete, they're gonna be left behind 
.
. And yeah, the decline of letter mailings is huge, like what's the point of even having a store if people aren't buying stuff in person? 
. Fingers crossed for them, they'll bounce back from this 
!
. maybe they can find a way to make e-commerce work for them like how Amazon did? 
... but a 20% drop in shares? that's crazy 
... 55-60 million quid in profits for the year is still pretty decent imo 
still hope they can turn it around tho! 
maybe they can find a way to make card factories cool again 
. And let's be real, the postal service changes are just part of the way things are going - we can't change that 
. Their long-term strategy to mitigate inflation is looking solid 
. So many businesses are having to adapt to changing consumer habits and economic pressures 
of all things... card factories are supposed to be a safe haven for the masses but I guess not even love letters can save them now 
. But seriously, who knew stamps could be so pricey?! 17p now? that's like buying a packet of crisps or something 
. Guess you could say it's a "card"-inal mistake to underestimate the power of e-commerce 
.