Costs knock profits as CF acquires Garlanna, confirms US expansion and Aldi business doubles
Extra costs may have knocked Cardfactory’s profits, but it shared plenty of good news in its interim results, with card sales up, new deal doubling its Aldi business, the acquisition of Irish publisher Garlanna, expansion into the US confirmed, and a bolstered partnership down under with The Reject Shop.
The group’s half-year results for the six months to 31 July were released this morning, 24 September, with the greetings, gifts and celebration retail giant saying full-year expectations are unchanged, and calling it a “resilient revenue performance with further strategic progress achieved including successful partnerships expansion”.
The UK’s largest greetings retailer’s card offer has seen an ongoing range development, reflecting the growing diversity in family relationships and dynamics and work has been undertaken to tailor designs for different regions and demographics.
Combined sales performance for spring seasonal ranges demonstrated positive like-for-like performance with a particularly positive showing on Valentine’s Day across card – up 8.3% – and gifting – up 6.8% – which included range development to reflect the growth of family celebrations of this occasion.
On the gift and celebration essentials side, new categories and expansion have seen a baby gifting range introduced, while soft toy sales were up 27% like-for-like, confectionery rose 30%, and limited collections such as Disney and licensed ranges saw an 17% increase.
In the six weeks since the period ended, Cardfactory has secured a multi-year agreement with Aldi, Britain’s fourth biggest supermarket, to be the exclusive everyday greeting card supplier across the grocer’s full 1,020-plus UK and Republic Of Ireland estate. This is a step up from the previous arrangement when it shared the estate with IG Design group for everyday cards.
The group also secured entry into the US market through a nationwide wholesale retail partnership which will roll out in time for Christmas – the retailer’s name has not yet been unveiled,
And the report revealed that, with the store estate now at 1,073 including 35 in RoI, on 4 September Cardfactory completed the acquisition of Co Wicklow-based Garlanna Holdings from founders Alan and Jackie MacNamee, which trades as a publisher and wholesale supplier of cards, wrap and gift bags.
“Well, that’s it,” Alan told PG Buzz. “We finally took the decision to retire. It was not an easy one as I love the industry but, after 40 odd years, when someone comes knocking and creates an exit we decided to take it. I’ll be staying as consultant for a couple of months only.”
In the statement Cardfactory said: “The acquisition will strengthen the group’s position within the Republic Of Ireland market and is expected to provide further wholesale opportunities. It further supports the development of our retail partnerships strategy. We will report Garlanna as part of our Partnerships results going forward, the majority of its revenue derived from sales to retail partners in Ireland.”
Trading into the second half of the year has continued in line with the first period, and preparations for the busy Christmas season are well advanced, as the company continues its advanced discussions with The Reject Shop renew the multi-year agreement including an extension to a full-service model and seasonal range supply.
The statement said: “We are well prepared for our key Christmas trading period, with our seasonal rollout now underway, 80% of our entire seasonal range is new this Christmas, including new toys and the introduction of a baby’s first Christmas range and an exclusive own-label pet gifting range. We have also expanded ranges across own label and limited collections such as Disney.”
The results show first-half revenue increased by 5.9% to £233.8million compared to a year prior, but the adjusted pre-tax profit dropped by £7.6m to £14.5m due to higher costs resulting from freight inflation, the phasing of strategic investments, and increases in the National Living Wage.
There was strong revenue growth in stores, with LFL sales up 3.7%, which the company said showed “effective mitigation of a drop in High Street footfall achieved through strong growth in gifting and celebration essentials revenue” and total store revenue was up 6.1% after 15 new stores opened, while online sales at Cardfactory.co.uk grew by 8.8% following investment in customer experience and range development, although Gettingpersonal.co.uk sales were reduced at £2.1m compared to £2.4m a year ago.
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, with other direct expenses including warehouse costs, store opening costs, utilities, maintenance, point of sale and pay-per-click expenditure, and the group has plans in place to offset inflationary headwinds in both halves of the year.
CEO Darcy Willson-Rymer commented: “I am delighted to be reporting further progress against our growth strategy with this resilient underlying performance in the first half of the year. We continue to deliver against our strategic priorities at pace thanks to the commitment and dedication of our colleagues.
“During the period, we continued to see strong performance across our growing store estate, with gifts and celebration essentials now a core driver of revenue growth, building on our strength in greetings cards. Together with the exciting partnership initiatives we are announcing today, we are helping more customers in more places celebrate life’s moments.”
With the store portfolio remaining at the core of the business and the source of a significant majority of revenue, the plan is still to open over 90 net new stores by FY27, with net store openings of 15 in HY25, ahead of the group’s target run rate.
Darcy added: “As we move into the second half of the year and the important Christmas trading period, our expectations for the full year are unchanged and we continue to focus on managing inflationary pressures within the business.
“Our strategic growth ambitions are underpinned by a robust balance sheet and strong cash flow, alongside our disciplined approach to managing working capital and focus on driving efficiencies and productivity across the business.
“Moving forward, we believe we are well placed with a strong proposition that resonates with a broad customer base and delivers an unrivalled quality, value and choice offering.”
