Card Factory Share Discussion Threads

[garycook] 31/10/2024 10:29

Pity CARD cannot be all Online. That would solve the problem of too many Staff and Rents to pay !

[bbonsall] 31/10/2024 10:25

The market seems to think it is nearly as bad as Covid when all stores were closed and it was making large losses. Now it is making, and will continue to make, goood profits and generate cash and pay dividends. Ridiculous reaction.

[potty6] 31/10/2024 10:15

Gutted for card

Great business but it’s getting butchered by the government

Add the fact it’s becoming a CO OP and you know why telios ran for the hills

Not getting involved until sub 50 as it’s going to become a 35m pbt business at best moving forward


Just too many staff with too many staff managing the staff with all uniformed up etc too

[fenners66] 31/10/2024 10:03

My calculations so far have been based on someone on NLW working 40 hours a week.

It may be argued that many in shops are working part-time.

So if I reduce the hours to 20 per week - the impact to the employer is about ...

13.2%

[pugugly] 31/10/2024 09:40

Also apparently no relief on business rates

[fenners66] 31/10/2024 09:28

Isn't that XD 1.2p ?

And the share price is down 4.2p

I offer up a falling market (granted) and the above impact of the budget (which applies to the market) as
the reasons

[fenners66] 31/10/2024 09:26

Easy to put up prices , plenty of time to prepare for April cost increases....
Exactly the same this year and yet they clearly blame the increase in NLW for a reason why
EPS fell 46.4% !

So either they just failed or they cannot pass on cost increases as easily as touted.

Looking at the impact of the NLW and NI changes , because ers NI at a higher rate now kicks in
at £5000 a year my calculations have this costing for someone on NLW an extra 10.6%

That is not a measly amount and is MORE than they blamed in the first half :-

"Direct wages, including store and warehouse colleagues, include a minimum 9.8% increase in National Living Wage from April 2024 in addition to the impact of an overall increase in the size of our store portfolio. As a result of the increase in National Living Wage, store and warehouse wages increased as a percentage of sales which has contributed to the reduction in Gross Margin."

Further down the statement :-

"Profit Before Tax for the year was £14.0 million, down £10.7 million from £24.7 million for the previous year. The reduction year on year is predominantly driven by the increase in direct costs as a result of the impact of minimum wage increases of direct wages."

It's catagorical in the accounts and its potentially going to be repeated in April 25

So are they going to actually mitigate this (can they) or are they going to not bother pulling those levers , again?

[chester9] 31/10/2024 09:02

Yes you are right. Makes more sense.

[chester9] 31/10/2024 08:50

Employers NI starts in April 25. Plenty of time to prepare for. We are now 5 weeks past the 24th September.Reject shop discussions were advanced 5 weeks ago. Business as usual.US nationwide roll out pre Christmas. Details were to be shared in 4-6 weeks time. 41 minutes into presentation this was confirmed. XD tomorrow

[grahamytrain] 30/10/2024 15:02

Well modest rise in GCT, a larger increase in overall in employer National Insurance, and an increase of 6.7% in the living wage from April 2025. However those on the living wage will then have more money in their pockets and it’s these low earners that are CF’s target customers. There is plenty of scope for CF to increase their prices to cover these extra costs. So roll on the next update and remember CF goes Ex div tomorrow….onwards and upwards.

[omron] 30/10/2024 07:54

Kaos - I believe you are correct. Imho the NLW increase will generally apply to all store based staff and will be taken into account for the office based staff.

[kaos3] 30/10/2024 07:25

i am not familiar with the UK wages system

but

if min wage is increased - suddenly there is no differentiation. so to keep up with the ratios and proportions and having fairness and peace among the work force the labour costs increase more than the pure minimum wage increase.

[harry_david] 30/10/2024 07:25

If Next can comfortably beat 7% sales growth it makes one realise the challenge facing CF.

[omron] 30/10/2024 07:13

Riverman - these cards have an 80% plus gross margin, so (ignoring VAT) a 99p card has a cost of goods associated with it of under 20p. Tinkering with the size & design could save say 10% of that 20p whilst a 10p price increase (which includes vat) would have a much larger impact on the bottom line.Fenners - in my view management missed the opportunity to continue to increase prices thinking of price rises as a one off action rather than continual process in the face of wage increases that have seen the NLW/NMW more than double in the last ten years.

[riverman77] 30/10/2024 00:13

If you listened to the recent investor call, they said there are a variety of ways to offset higher wages - since they produce and design their own cards, one option is to redesign the cards (eg change the size or make them less fancy, cheaper materials, etc) while keeping the price the same. This obviously takes a bit of time to implement so may not be able to immediately to offset higher costs. Simple price rises are of course another option, but probably the least preferable.

[fenners66] 29/10/2024 23:41

Omron - thanks for the history lesson - but the only thing that really matters - to the P&L and obviously the share price is did they decide they could not pass on any more cost inflation to the customers, because they know their business better than anyone - or did they fail to do the "easy thing" and push up prices.

I would suggest that all your skirting around answering that question is you find both alternatives unpalatable.

Either they cannot do it again next year or if it really is as easy as you think the management performed poorly given the 6 month notice and you don't want to criticise management you have clearly bought into.

[omron] 29/10/2024 22:02

Fenners - this business was started in 1997 with three price points - 59p, 89p and 99p. If they sold in equal numbers the average price would be 82.3p. Today the average price is 121p (see CFO Q&A in the interim presentation). If you look at the ONS figures the RPI index has increased from 154 to 389 between 1997 and August 2024 - ie 2.53xIf you multiply 82.3p by 2.53 you get 208p and the RPI indexed average price. This compares to an actual average card price of 121p - so their card prices have not kept up with inflation. All I am saying is that management should have continued to increase prices during the 1H and it would have offset the wage increase.

[fenners66] 29/10/2024 21:12

We now know the NLW will rise by 6.7%
Likely Ers NI cost to add to that.

[fenners66] 29/10/2024 21:11

Omron with respect you still have not answered.
The period 1H24 inflation was much higher so everyone got away with a bit.

"As for passing on the cost through price rises , since the increase in NLW was known 6 months in advance if it was that easy to pass it on through price rises , don't you think they would have ?
After all the management are happy to blame it.
Or are you saying they just did a very , very , poor job of something that should have been easy?"

So have the management done already only that which they believe they could get away with ?
Or
Have they failed and damaged the P&L and resultantly smashed the share price because they have not addressed the issue ?

[pugugly] 29/10/2024 21:08

Omron:_ Economics 101 also states that you have to be able to supply the product at a price the consumer is prepared to pay - A very fine judgement call - Maybe after the Budget those employed by the state will be the only people able to afford to send cards!!!

[omron] 29/10/2024 20:54

Fenners - as I understand it they put some big price rises through in 1H 2024 which is why the profits were strong then and the share price recovered. They decided to pause the price rises in 1H2025 and then were hit by the rising labour costs. Just goes to show that prices need to keep rising to match the wage inflation - economics 101.

[fenners66] 29/10/2024 16:47

bbonsall - I direct you to my previous post then.
If the impact of the NLW and NI to follow is so easy to mitigate - given 6 months notice - as per the first half , WHY did they not do it?

[bbonsall] 29/10/2024 16:31

CARD has many levers to pull to improve margin and EPS. With over 1000 stores it can decide to close least profitable locations. There is plenty of room to increase prices without affecting demand. It regularly introduces new lines where there is no comparison to judge whether the price is higher or not. They said 80% of this year’s Christmas stock is new.
A 1% or 2% rise in employers’s NICS will have minimal impact. For example on first half wage bill of £64 million it would amount to an extra cost of £0.6 million - £1.2 million on revenues of over £230 million. Even that is an over estimate because employers NICS are only payable on wages above a threshold.

[fenners66] 29/10/2024 16:29

The point about Ers NICs is its not paid on the first £175 per week , but would be paid on all of the increase to the NLW so becomes a higher proportion of the wage cost.
Tomorrow we will see how bad the labour cost rises in total.
As for passing on the cost through price rises , since the increase in NLW was known 6 months in advance if it was that easy to pass it on through price rises , don't you think they would have ?
After all the management are happy to blame it.
Or are you saying they just did a very , very , poor job of something that should have been easy?