Card Factory's shares rise as sales of gifts and wrapping paper boost revenue

 
Alys Key
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Card Factory has sold more gifts and wrapping, boosting sales but weighing on margins (Source: Geograph)

Gift retailer Card Factory has continued momentum into the third quarter, increasing sales and stocking up on products for the busy Christmas period.

Though the business continues to face cost pressures, management said it was confident its offering would continue to resonate with customers.

Shares were up 3.8 per cent this morning.

The figures

Total sales for the first nine months of the year grew 6.7 per cent, up from last year's rate of 4.4 per cent.

Store openings slowed to 38 compared with 46 in the same period last year, but the group said it was confident of delivering another year with about 50 net new openings. There are now 903 shops in the UK.

Debt grew to £156m as the company accumulated more stock in preparation for Christmas.

Read more: Fears of UK retail nightmare before Christmas as footfall and spending dip

Why it's interesting

The company faces ongoing external pressures from the weaker exchange rate as well as the national living wage. These are set to continue into next year.

Despite this, it has been a strong year for Card Factory so far, under the leadership of Karen Hubbard who came over from B&M in 2016. In summer, the company reported its best first-half sales figures since its IPO.

Non-card products such as gifts and wrapping paper now account for a greater share of sales. "That is good news in many respects," commented analysts at Peel Hunt. "The new product lines are clearly resonating with customers and it makes a further expansion of the store portfolio into retail parks even more likely."

"However, the downside is that these products run a lower gross margin than cards, so the level of growth in gross profit is lower than we had in mind at first glance."

What Card Factory said

Chief executive Karen Hubbard said: "We go into the important final quarter with an exciting and extended Christmas offer and remain confident that our quality and value credentials will continue to resonate well with our customers, with the added benefit of EPOS and contactless in every store."

Read more: No love for Card Factory shares as profits decline

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