Online growth forecast at Funkypigeon.com thanks to “stable and substantial” UK greetings market
WHSmith is back in the black and significantly stronger following the pandemic with the group’s enhanced business opportunities including anticipated growth at online personalised greeting card arm Funkypigeon.com.
Wednesday’s (April 27) interim results announcement covered the six months to February 28, 2022, and showed profit before tax and underlying items hit £14million, rebounding from a £19m loss a year ago.
The 230-year-old retailer’s travel arm has bounced back to a total £10m profit in the period with sales more than doubling to £338m after it was hit hard by the pandemic due to lockdowns and the work from home culture when it fell into a £28m loss in 2021, and it now plans to ramp up its travel stores with 125 new stores in the pipeline, including in North America and 31 in Spain.
And, while sales in its High Street locations sales remained flat, trading profit in the division rose 8.3% to £26m, with group chief executive Carl Cowling commenting: “Our High Street business delivered a resilient and profitable performance in the period, despite the challenges facing the UK High Street.”
Regarding Funkypigeon.com, Carl added: “During the period, our online businesses continued to perform well against a strong pandemic-related performance in the prior year. “
In its announcement, WHS recognised that the UK greetings market is “substantial and estimated at £1.6billion”, and underlined that it is a stable market with British adults sending on average 20 cards per person each year.
It forecasts the current estimated online penetration of around 15% to grow to circa 20% of the card market by 2024 thanks to online growth of single card sales over the next three years.
While the pandemic accelerated the growth of online shopping, WHS said it is apparent this is still an under-penetrated market with plenty of opportunity to develop this business further, and the group sees significant growth opportunities with Funkypigeon.com. The company has developed its Funkypigeon.com app to improve customer conversion by extending the fulfilment centre, and also launched a new next-day delivery service, which operates seven days a week.
Just over a week ago (April 19), there was cyber security incident with Funkypigeon.com but WHS’s announcement said no customer payment data, such as bank account or credit card details, was placed at risk as it is processed via accredited third parties and is securely encrypted. The company’s analysis of the situation shows this incident is not expected to have a material impact on the group’s financial position.
Following a very strong prior year and a period of exceptional growth, Funkypigeon.com delivered, as expected, total revenue of £21m (2021: £29m) and EBITDA (earnings before interest, taxes, depreciation, and amortization) of £4m (2021: £9m), and WHS expects the current year will see lower sales and Headline EBITDA as a result of annualising lockdowns last year and ongoing investment in the business.
However, the statement added: “We remain confident of the substantial opportunities to grow the platform further and significantly grow revenue and profits over the medium-term.
CEO Carl said: “The group has delivered a good performance with a strong rebound in profitability. We have seen a recovery across all our travel markets despite the impact of the Omicron variant in Q2, and we are in a strong position to capture growth as the recovery continues. I would like to thank all our colleagues around the world who have worked extremely hard to help the business make such good progress and deliver these results.”
WHS has responded quickly to the humanitarian crisis in Ukraine, donating funds to the British Red Cross, sending product from distribution centres and international stores, installing donation points for customers across every till point in the UK store estate, and supporting staff and their families should they welcome a Ukrainian refugee or family into their home. The business has also committed to support with employment opportunities within the group for any refugee living with a WHS colleague.
And on sustainability, the group’s goal is for net zero by 2050 at the latest by collaborating with suppliers, landlords and customers – for the second year running WHS is one of only 12 retailers globally included in the 2022 Dow Jones Sustainability Index, and currently the highest-performing specialty retailer in Morningstar’s ESG Sustainalytics benchmark.
The statement added: “Across the group, we continue to focus on more environmentally responsible sourcing practices and we have redesigned and removed plastic packaging from our seasonal ranges wherever possible.”
Top: Profit bounced back to £14million at WHSmith
