Card Factory sees Brexit stockpiling hit profits

Retailer Card Factory has revealed a 14% drop in half-year profits as it took a hit from efforts to stockpile ahead of Brexit.

The group reported pre-tax profits of £24.3 million for the six months to July 31, down from £28.4 million a year ago despite a resilient sales performance, with like-for-like sales up 1.5%.

It blamed the costs of its no-deal Brexit stockbuilding, as well as a higher wage bill from the National Living Wage increase and investment in new lines.

But in a dose of cheer for the group, it announced an agreement to supply German discount supermarket Aldi from November following a successful trial across 130 stores.

Shares in the group lifted 2% after its results.

Chief executive Karen Hubbard said the performance came despite increasingly tough retail conditions as fewer shoppers hit the high street.

She said: “A strong seasonal performance, which saw another year of record sales for both Valentine’s Day and Mother’s Day, was achieved against the backdrop of an increasingly challenging UK high street environment and consequent weaker footfall.”

“Although the current economic uncertainty continues to impact consumer confidence, we remain positive about the resilience of the card market, the strength of the Card Factory business model, and our growth opportunities for the business over the medium term,” she added.

Card Factory revealed last month it had been buying in extra stocks amid no-deal Brexit contingency planning.

It did not give any further details on its stockbuilding efforts, but said alongside final results in April that it had been buying in extra goods ahead of the original March 29 Brexit date amid concerns over ports disruption in a no-deal scenario.

The group said total sales rose 5.5% to £195.6 million as it continued to open new stores, launching another 26 on a net basis in its first half.

It stuck by its target for around 50 over the UK and Ireland in the full year.

Its online business Cardfactory.co.uk grew by 25% in the first half.

But the group said its Getting Personal online arm remained under pressure, with the division swinging to an underlying loss of £300,000 against profits of £500,000 a year earlier after sales fell 10.4%.

Jonathan Pritchard, an analyst at Peel Hunt, said the half-year profits fall “does increase the pressure on Card Factory to produce a good Christmas, something that has been difficult in recent years”.

But he said the Aldi deal was “key strategic news” for the group.