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Card Factory describes sales as 'robust' in tough trading environment
Greeting cards, dressings and gifts retailer Card Factory reported first quarter group sales growth of 3.0% on Thursday, with like-for-like sales declining 0.4% against what the board called "strong" comparatives and a tough retail environment.
The FTSE 250 company said it continued its store roll out with 10 net new stores opened in the first quarter, adding it was on track for its target of 50 openings for the full year.
It also reported "strong" cash generation with a reduction in net debt since year-end, with the board saying its expectations for the full financial year remained unchanged as investors gathered for the annual general meeting.
"In the context of a tough trading environment for retailers, Card Factory's total and like-for-like sales over the quarter represents a robust performance, reflecting the strength of our offer and the continuing work to re-design and refresh products, particularly in our seasonal card and gift ranges," the Card Factory board said in its statement.
"Research continues to show these are appreciated and valued by consumers, relative to both discount and more expensive alternatives."
The opening of 10 net new UK stores and one store in the Republic of Ireland brought the total estate to 925 stores in the UK, with a further seven trial stores in the Republic of Ireland as at 30 April.
Card Factory said the planned delivery of approximately 50 net new stores in the current financial year included a number of stores in retail parks, where the company said it continued to see a good performance.
Revenues from the company's e-commerce platform continued to grow strongly following a successful first quarter.
Card Factory said customers were responding well to range expansion and new designs across card and non-card products, both personalised and non-personalised.
Additionally, it said its social media presence was maturing with growing communities and engagement across key platforms, with updated and refreshed creative, photography and landing pages.
The company said the trading performance at its 'Getting Personal' brand had continued to be disappointing, faced with a market environment of heavy discounting and increasing customer acquisition cost.
Against that backdrop, the firm said it was continuing to pursue other channels of customer acquisition, consistent with its strategy of delivering profitable sales.
On the financial front, Card Factory said it remained highly cash generative, driven by its strong operating margins, limited working capital absorption and relatively low capital expenditure requirements.
As at 30 April, before the forthcoming payment of the proposed final dividend for the full-year of £21.9m, net debt was £147.7m - up from £125.4m year-on-year - before the deduction of capitalised debt costs.
That was £13.6m lower than the level reported at 31 January of £161.3m, compared with a reduction in net debt of £10.4m over the same period last year.
The board said it was currently anticipating, subject to trading performance, making a further return of surplus cash to shareholders, in line with its stated policy, towards the end of the current financial year.
"We have had a solid start to the year with further sales growth despite an ongoing sector trend of subdued footfall, which impacted the like-for-like performance," said Card Factory chief executive Karen Hubbard.
"We have seen a good customer reaction to our seasonal products over the quarter, with record card volumes for both Valentine's Day and Mother's Day, as we continue to improve the range and quality of card and non-card options.
"Our store opening programme remains on track and we are pleased with the performance of this year's openings."
Hubbard noted the strong sales growth from Card Factory's e-commerce offer, with its range expansion resonating well with customers.
"Whilst the sales performance of Getting Personal has been disappointing, a cost effective method of customer acquisition is being adopted to enhance the profitability of sales.
"Overall, Card Factory remains in a strong position as we look forward to the lessening impact of cost headwinds and the benefits of a significant number of business efficiencies being implemented during the year.
"This will put in place a platform for further growth in the medium term."