Card Factory Share Discussion Threads

[wiseman1967] 17/7/2020 11:20

Thanks - that seems to have helped the share price rise above 44p ?

[mallorca 9] 17/7/2020 10:16

I have this morning increased my short position by a further 50 %

[monte1] 17/7/2020 09:10

Coronavirus: 'Dear customers, I face ruin, please come back'
City centres around the world are eerily quiet at the moment, as office workers try to work from home as much as possible. But there is a growing realisation that this is having a huge knock-on effect on small retailers, who rely on footfall.
Rumit Shah, who runs a chain of greeting cards shops called Cards Galore, has written an open letter explaining his plight.

[wiseman1967] 17/7/2020 08:49

Dave0011 - single greetings cards account for 52% of sales (p3 accounts) and non card complimentary ranges 46%. The gross margin on those non card products averages in the 50%s . Helium balloons will be a small fraction of sales and may be at lower margins to attract footfall in and are often bundled with party packs. CF's scale will give them pricing power in helium which may mean they can sell them at close to your cost price. Your comment on their stores being in [top] prime locations is wide if the mark. They are in secondary and tertiary locations often colocated with Poundland and Greggs. The average rent per store is close to GBP40k (annual lease cost gbp43.4m p124 accounts and they have over 1,000 stores). This will almost certainly come down further.

[mallorca 9] 17/7/2020 08:37

So Lastchance does not use a stop loss !!!

He didn't have a stop loss on Thomas Cook and pumped it all the way from £1.50 to .. erm zero.

He does not have a stop loss here and has pumped it pretty much from the same £1.50 to currently 40p. Heading for zero in 2020.

Lastchance criteria for picking a stock is obviously to pick one that has fallen a lot - hoping for a bounce.

Disaster.

Last chance .... I know that you are well down on this one and probably need it to double to get out even.

This one will fall and fall and fall , followed by suspension and closure.

A better PUNT for a recovery bounce would be BOO .

[lastchance23] 17/7/2020 06:45

Dave0011<< the bigger numbers come from head office and regional managers, they have 1000 shops, do you think a few 'so-called' phone calls would provide an accurate guidance when it is likely less than 10 shops (1% of stores).

The problem with the shorters on here, is that they entered this trade prior to covid, but covid is saving them £2m a month on debt interest, they have improved liquidity options, and they are now recognising the potential of the online business. Its not a perfect investment case, but it offers value, and is undervalued with a proven track record as consensus on simply wall street summarise.

[dave0011] 17/7/2020 06:19

Wiseman they don't only sell greetings cards, you need to look at the overall business model, helium balloons are sold on very low margins overall, some of them sold at a loss and that's a big chunk of their business, most of the cheap tacky gifts are made in China and profit margins on those are nothing like the 75% overheads are massive as the shops are in prime locations with too dollar rents, these may be on short term and rent reductions may come too late to save many stores and for now much lower footfall staffing those shops is far too expensive.

Lastchance, whether you believe my third party information is your choice but if you seriously think managers of stores across major cities really don't talk to each other and have no idea of their footfall.... Well good luck with that

[lastchance23] 17/7/2020 04:21

Mallorca<< I will send you proof if you don't believe, I did actually moan for a couple of days as I didn't buy at bottom and Amigo did not advise in the RNS that the major shareholder was selling off 1% a day (who had over 50%), however it pulled up and topped leader board two days in a row, I sold with a 66% gain in 10 days, and whilst it wasn't a huge play due to risk, the fact is I have proof. I have emails from Amigo, Contract notes, was on board.

fenners66<< You are taking my Amazon example out of context, it was to illustrate a business can change a lot from its origins. If Amazon was still a start up book shop in this macro environment, would you believe it would be what it is today??? Answer, No...You and Mallorca are short and glass half full, at least I don't resort to trying to set up new and long investors.

I noted Mallorca comment on stop loss, ofcourse he wants you to set up your stop loss, makes it easy for market makers to rinse you on a temporary drop and Mallorca to collect. My advice is to do your own valuation, fair value is £1.55, in March this was 90p after an aggressive sell off, it is trading at 72.5% discount, I believe this will go to 60p, which is still 25% less than 50% of fair value, however if market makers are temporarily on this, I would encourage you to look at active 'BUY' orders at YOUR own valuation metrics, this has averaged over 40p on the 90 day, next resistance 35p, with a low of 30p. There is no FY guidance, so next thing is a strategy update, so the next few months are going to be speculative, but my guess is this will pull up in line with progress of vaccine (report on Monday from Oxford), treatments, hurd immunity, broader market. DYOR, I provide unbiased commentary am clear on my position.

[fenners66] 16/7/2020 20:40

Lastchance re:
"Amazon started as a simple bookshop FFS."

Not a great example at all - they did not start with 1000 shops to close.
Also although I am not an expert on Amazon... how many years and how much debt did it take before Amazon retail made a profit ?
Furthermore I understand that the majority of Amazon's profit comes from the data services not retail.

Its clear if footfall and turnover remain at these depressed levels , and a second wave of CV in the autumn may well achieve that , then the covenant test that comes into play by January at the latest will be crucial.

There is not enough detail on the monthly test before then , but the fact that they introduced one means the debt holders are worried.

They will not care if the business is going to be profitable again in a year or two years , just let CARD fail a covenant test and take it off the shareholders.....

[mallorca 9] 16/7/2020 19:38

Sure you did Lastchance

why guy's like you pretend to make money all the time escapes me.

Buy the book - The Naked Trader

[lastchance23] 16/7/2020 19:35

Mallorca<< I haven't disappeared from board, I'm not on a losing position, I bought 6000 shares when CARD was 30p, I had 10k at one point, then sold off my major position at 51p and 50p as it was holding too long for my liking. I retained a base position, which I will average through the course of round 2, where its double or nothing in the ready money round...

I can spot an opportunity just as well as you, I netted a 66% return on Amigo Holdings in 10 days, when was last time you netted 66% in 10 days??? let alone a year...

[mallorca 9] 16/7/2020 19:14

BOO is worth a short term punt.
Pretty certain to move through £3 pretty quickly.
Might gap up first thing tommorow though.

Do you have a stop loss set for CARD ??

Another good one is Energean. ENOG ... for a fast rise.

Best investment shares (rock solid)
QQ.
SFOR
Serco

[wiseman1967] 16/7/2020 17:57

Mallorca - I misunderstood. I thought from your post the BOO share price had bounced from 210 to 380 and you had made gbp100k. Having looked at the share price which closed at 235p I see you will have made gbp15k - still not bad but using your logic if CF returned to 350p I would make a shed load more - But who cares?

[mallorca 9] 16/7/2020 17:55

Not a chance ... how do the fundamentals that you mention justify a market cap of £150m

They dont ... this is going bust , it's practically a certainty.

[wiseman1967] 16/7/2020 17:46

Well done Mallorca on Boo - it would be a shame to give all that gain back on Card Factory!

[wiseman1967] 16/7/2020 17:43

Dexdringle - the majority of the fall in share price from 350p to 50p was attributable to poor management in the guise of Karen Hubbard - and now she is gone! Covid pressures are still there but beginning to ease. With one of the issues gone and the other easing I believe it is a good time to buy. It is still a high margin, cash generative, market leading business, in a resilient retail sub sector and in my opinion the leverage is not so high. Don't forget that under Charterhouse ownership the leverage was over 3.5x ebitda compared to the latest figure of 1.76x. The shorters can bleat all they want but they won't affect the share price and certainly not the underlying financials of this business. They would get wiped out though if a PE fund were to bid for this!

[mallorca 9] 16/7/2020 17:41

Well I've been short on this for sometime now and I shorted TCG to zero netting £42k.

But Lastchance knows best.

Why do people with clear losing position hold and hold and hold ... then they suddenly disappear from the Board.

I also backed BOO heavily this morning in all my accounts ... SIPP. ISA, SB account ..... at £2.10.

A return to £3.80 will net me just over £100k profit

The Chairman then bought 5 million shares at 3.40pm ... lovely.

[lastchance23] 16/7/2020 17:36

Wiseman1967<< I see why they call you wiseman :D...That's a bloody good margin...

[wiseman1967] 16/7/2020 17:33

TexasPete2 - their debt was gbp143m not gbp 289m (see page 28 of the accounts).The higher figure represents the capitalisation of their remaining shop leases and is offset by a new asset on the balance sheet - called right of use assets. It is a new accounting standard that was ill conceived and has clearly confused many investors. It may even be part of the reason for the share price performance - misunderstanding the real debt number. Pull out their latest accounts and you will see they show figures on both the old basis and under this ridiculous accounting standard (and I am a chartered accountant!). I admit that the real debt figure will have grown under Covid but nowhere near the figure that includes capitalised leases.

[wiseman1967] 16/7/2020 17:21

Dave0011 as you own six card shops and have been in the industry for 20 years I am surprised you don't understand the CF model. It is far from low margin as you put it. They design and print their own cards which is why they make a gross profit of over 75% on single greetings cards - the only other type of retailer that makes that kind of margins that I have come across is opticians. You may have to buy cards from wholesale suppliers which is probably why your margins are lower - your suppliers and printers have taken their share.I agree footfall is an issue for however long Covid lasts but the summer months are some of the quietest months in card retailing.

[mr_spock] 16/7/2020 16:42

dave0011...I agree the figures were trending down, but they were still nicely profitable. What may help now is the rents. Rents will have to come down, and CARD leases are shortish. Landlords have had their day. May take a while to come through, but I think CARD can benefit from this big time. Who wants a shop on the high street any more but the discount retailers like CARD, Wilko, B&M, The Works...think they will all be in a good position at negotiation time.

lastchance23...they did get carried away with the dividends. I'm neutral on CARD at the moment. Could go either way. The market may be shrinking slightly but they are taking a bigger share. If they can renegotiate some rents and close unprofitable stores then what's not to like?

[lastchance23] 16/7/2020 16:19

dave0011<< I don't trust third party information on these posts, its more for general insight in my own analysis, but I worked retail for JJB Sports, when you have 1000 shops only head office know what the FULL performance across all sites is, location is key, if you said leicester then obviously its in lockdown so won't be busy etc. But its only been a couple of weeks give people chance.

Mr Spock<< Some of the figures are distorted in terms of profit, they still made over 60m profit, they made errors dishing out too much dividends and specials in terms of debt, but they are benefiting from these interest rates and covid support, its a very REAL lifeline, and online growth of 300%+ is not to be sniffed at, give them chance, lets see who new CEO is and more info on their strategy first. If they grow online and reduce store to flagship key sites it will shift the business.

[dexdringle] 16/7/2020 16:13

"lastchance23 16 Jul '20 - 15:40 - 2582 of 2584

>>dexdringle I agree with your commentary on share price, but this is still on a relative basis cheap"
-----------------------

If they can get back to making £50 million a year net profit then, yes, a market cap of £150 million does look cheap. They could then pay out £20 million as dividends (7p a share) and reduce the debt by £30 million. All good.

But will they ever make £50 million profit again ? Has the world moved on and physical shop card retailers are no longer desirable ?

They have 1,000 outlets, thousands of staff, and a product / business model that is suddenly old hat and not desirable ?? (oh, and £300 million of debt).

I bought these at 90p and have been under water ever since. I don't expect ever to see 90p again...

[texaspete2] 16/7/2020 16:00

The debt of 289m is where this share also comes under pressure