Card Factory Share Discussion Threads

[rnbf] 26/9/2024 07:59

Based on current numbers I am not sure that it is too cheap at 110p. We know that retail staff costs ( same in hospitality industry) have a huge impact on net margins . Labour will add to the staffing costs and possibly business rates as well. In current environment I see a floor price for this stock at around 90p.Half year results probably only show the rosy side of the problems ahead . Good news I will continue to shop at CF

[haroldthegreat] 26/9/2024 07:59

I pass a Card Factory shop whenever I leave my house and I also retail cards . Their shops are bright ,clean and tidy . I feel they make a marketing mistake in putting their name on their cheapest cards . They have been doing more cut price deals this year like 3 plus one free across the board as opposed to just on specific sections and for longer . Everyone knows they sell cheap cards but does one really want to send someone a card that says on the back I am a cheapskate and purchased you a cheap.card at Card Factory? For childrens cards it does not matter . They should use another brand name on their cheapest cards .These more generous offers must have helped reductions in their profit margins .

[rnbf] 26/9/2024 07:20

I sold yesterday at 111p it was against my better judgement. I bought CF because I like the shop and know that much of the competition have folded ( that's a minor warning as well). The performance shock (contrary to trend) this crazy new menacing government and a 12% profit was my justification for a sell. It may bounce back at Xmas but in a Consumer semi staples sector Sales are not the answer.

[rnbf] 26/9/2024 07:08

A lot of people rush to buy a card last minute so price is not the key issue here. It's about a good well presented selection with everything in one shop.Getting the offering is really important here with balloons, wrapping paper and just maybe some expensive higher margin items like : Big Cards Voucher entertainment gifts Gas Balloons It's about having the shop in the right location with little competition.You need staff for security as well as promoting sales.

[melody9999] 25/9/2024 18:11

Elasticity of demand comes to mind. I am sure our BOD have a good handle on the impact on demand of increasing prices across the board by x %. A low lead in price is a great strategy. Also good is getting the consumer into the shop for a 59p card .... and then selling themn a £5 gift with larger margin.

It is easy for us to say 'just raise prices' But IMV it is the entirety of the product offering and how CARD finesse pricing across the range that leads to optimal margins and hence maximum profits.

Also ..... as investors, I think we have to have confidence in our executives - they run the business. If you find you don't agree with their strategy, be it pricing or whatever, then you will not have the conviction to keep holding...so best to sell at that point and move on . (but maybe not at this price cos its too cheap IMV!)

[bountyhunter] 25/9/2024 17:34

Yes 59p is too cheap for a single card imho. 99p would be fine and virtually no-one would go out empty handed because of that since as has been said where else are they going to go!?
If I pick up a card I like in Card Factory and it's only 59p I don't think 'great that's what I was looking for' I think 'blimey I've hit the jackpot!' :-)

[everton448] 25/9/2024 15:47

Well, down again. Shows how little I understand about markets!

[clem h fandango] 25/9/2024 15:38

Farrugia, I disagree with the statement on pushing prices up."59p per card or £1 for 10" can very easily become "59p per card or £2 for 10" and the same number of people would buy them.You are really saying that if someone goes in to CARD for a 79p card and it's now 99p, they will walk out and get one elsewhere? Where will they go? Clinton's or the supermarket usually start at 2-3 quid.

[farrugia] 25/9/2024 15:33

perhaps i'm pessimistic but i don't like that update much.

and the problem is not Card Factory

salaries are up which are hurting the profits of low margin businesses. You can't really push prices much up.

and then if you're lucky to make a profit after having taken a lot of risk and paid a lot of overheads you end up paying 25% in taxes. This is not limited to Card Factory.

[sevenccc] 25/9/2024 12:40

Regarding divi they have restated that policy is for 3x cover. If year end targets are met for EPS at 14.5p then forecasts for full year divi look too high. With 1.2p Interim declared that looks like 3.6p or so as a final to me.
H2 weighting is usually a 33% uplift in revenue on H1. EPS is usually 50% higher so more of a leap required this year given the substantial drop this H1. And the huge increase in postage stamp prices won't help...

I'm in two minds on this. Inclined to give management the benefit of the doubt as for the last 2 years they have delivered.

[actscap] 25/9/2024 10:48

Exactly - the growth story is still intact in my view. Growing pains for sure, but they're making the right moves to push the top line to try and reach the 650m target. Time will tell but think the reaction is unwarranted. I hope they don't trip up, but I am comfortable with short term ups and downs if directionally they're heading in the right direction.

[fenners66] 25/9/2024 10:36

Since I just had a look at the accounts (and I know this is old news) ...
the Directors remuneration report on its own
was 19 pages long.

And thats not 19 pages of pictures and charts..... thats 19 pages of detail...

Hide the massive rises in plain sight ?

Interesting that the latest interims talk about squeezing 1.6% of margin out of direct labour costs for the second half.
The full accounts said
Management and admin employees 534 vs 482
ie up 11% !

[melody9999] 25/9/2024 10:16

Thanks TT .... I was following a couple of trains of thought there and got stuck in the middle! To avoid confusion, I'll adjust my earlier post.

[fenners66] 25/9/2024 10:13

I read that Panmure recommendation highlighted above
and noted the line - "leveraging the benefits of the group’s vertically integrate business model.’

I thought really ? As far as I remember they were buying from the Far East.

So I have done some more up to date research just now.

Printcraft in West Yorkshire manufactures 70% of the cards they sell.
This does suggest that they cannot cope with additional volume without either expanding their production sites or perhaps buying another printer.

However the last full accounts said this
"The Group purchases approximately half of its goods for resale in US Dollars from suppliers in the Far East."

Which means that they are still beholden to Freight rates and FX to 50% +. I say 50%+ because although they may be printing cards , its likely the raw material comes from abroad.

FX seems to have moved in their favour Freight rates got worse , got better and are moving around all the time not sure if they are better or worse than last year currently.

However they do hedge FX and surprisingly said "Our average USD delivered rate in FY24 of 1.3121 was lower than the prior year (1.3241), but ahead of the average spot exchange rate for the period"

Recent USD rates have peaked at 1.34 or so , this may have presented an opportunity especially if they are weighting stock purchases to the second half (after the US rate cut).

The hit in the accounts is the increase in labour cost - they say they will mitigate 1.6% of margin in the second half when they are busier by getting rid of "non value add hours " including in shops ? This seems a stretch. Why not alredy done if so easy? But busier shops at the same time ? They know their margin improves due to higher sales second half - but this is separated out.

Last accounts contained tons of pages of absolute waffle - as is the case with many listed companies these days.

They seem to have ditched the confused message about online investment from a few years ago


Overall I find them a reasonable place to shop, if you can find what you want , you will not overpay - which is a good thing.
Can they get back that margin ? Not sure.
Will next year bring more cost increases - when govt gives into all public sector wage demands and by comparison pushes up the NLW which caused them such problems in the first half ?

[tradertrev] 25/9/2024 10:11

No, EBITDA MARGIN was down 3.7ppts relative to UBS forecast of down 2.2ppts.
UBS got the direction right but weren't aggressive enough. Still, a poorly timed upgrade though!

[melody9999] 25/9/2024 09:54

Its interesting that UBS came out with such a bullish forecast and price target of 180p just 4 days before the interim results. I saw some comments on Proactive as below:

Card Factory (LSE:CARD) is currently being priced in for 'zero growth' and 'flat margins' going forward according to UBS, which suggests any positive comments in next week’s interims should give its share price a meaty boost.

“Overall, we forecast mid-single digit sales growth for the first half and c220bps EBIT margin dilution year-on-year.”

For the full year, UBS sees sales rising by 5% sales with EBIT margins down only 20bps to self-help initiatives and operating leverage.

The 2nd para refers to H1. Whilst they got the sales growth right, EBITDA margin was -3.7% not -2.2%.

This begs the question as to why UBS would make this release to the market so close to results...Egg on face. However we are where we are.

However H2 looks much more positive. The RNS points to:
Aldi multi-year agreement
Partnership in US market - roll out in time for Christmas.
Acquisition of Garlanna, a publisher and wholesaler of greetings cards, wrap and gift bags in the Republic of Ireland.

Not sure I have seen an acquisition cost but presumably this is one of the 'strategic investments' that has impacted PBT?

they also say:
There are several factors that are supporting our profit margin performance going into the second half of the year. Approximately half of the margin growth in the second half will be driven by the seasonality of sales. Our robust programme of productivity and efficiency savings will also make a material contribution. In addition, we expect to benefit from margin-enhancing range development and prudent management of operating costs.

I also note the new interim dividend of 1.2p which is another comforting factor.

With all that in mind, I kind of understand that our CEO's assertion is reasonable:
"..the strong topline performance in the first half, combined with our robust actions to mitigate inflationary pressures, means that our expectations for the full year are unchanged."

So obviously I am not happy with the share price performance, but having said that, I am prepared to accept that H2 was a blip caused by a number of things coming together at the wrong time. Indeed this was the outlook comment from the FY results back in Apr 2024:
"· The Board remains confident in the long-term compelling growth opportunity for cardfactory, and in its ability to deliver on the medium-term ambitions of £650 million of sales, Profit Before Tax margins of 14% and 90 net new stores by the end of FY27.
· As anticipated, PBT growth in FY25 is expected to be weighted toward the second half of the year due to the phasing of planned investment and inflationary recovery actions."
So no surprises then.

In conclusion .... at 110p, I suspect this is absolutely the wrong time to even think of selling ... so I'm holding tight for a much better H2 and share price recovery.

[garycook] 25/9/2024 09:53

Yield now equals 4.5p + 1.2p = 5.7p/1.11 = 5.135%

[casholaa] 25/9/2024 08:59

I'm guessing that there is an iceberg we've yet to sea??

[ayl30] 25/9/2024 08:48

It's also not run by an egomaniac like Gerald!

[ayl30] 25/9/2024 08:47

I bought more this am as I think it is oversold, all the froth now blown awayWill hold to see more news of US expansion and Xmas trading4% yield and growth prospects can't be bad

[netcurtains] 25/9/2024 08:44

I guess one of the reasons Cardfactory is a bargain is middle class investors hate their shops.
These investors are missing the point. This company is the Ratners of cards - as long as the directors dont say the product if cheap junk everything will be fine.

[caveater] 25/9/2024 08:40

I think its been well oversold, when nothing has really changed for the worse, and will bounce bank slowly but surely. Think we will get further updates from the company long before christmas to reassure investors too.

[chubb24] 25/9/2024 08:13

hxxps://www.independent.ie/business/irish/card-factory-buys-irish-greeting-card-maker-garlanna/a492550362.html

[actscap] 25/9/2024 07:47

Recall they made numerous references to second half weighting, both at fy24 and the recent trading update....From full year reportPBT growth in FY25 is expected to be weighted to the second half of the year, reflecting phasing of planned investments and inflation recovery actions.Think there were a lot of short term traders piling in during August and September but short term isn't my bag. This should settle at the 120 level in the run up to the full year announcement.