Shares in Card Factory tank on margin warning
The company warned that annual earnings will be in the range of £93 million and £95 million.
Shares in Card Factory collapsed after the retailer said profits will come in lower as it faces a margin squeeze.
The company warned that annual earnings will be in the range of £93 million and £95 million, down from last year’s £98.5 million, because of “continued margin pressure”.
Card Factory, which specialises in greeting cards, dressings and gifts, also said next year it will be clobbered by the weak pound and wage inflation, which will see it book an extra £7 million to £8 million in costs.
Shares fell over 20% in morning trading to 222p.
Boss Karen Hubbard said: “As we have reported previously, the group has faced significant cost pressures in the year; these, together with the further change in margin mix given the ongoing out-performance of lower-margin non-card categories, are reflected in our expected out-turn.
“We anticipate that the combined impact of foreign exchange and wage inflation in full year 2019 will result in £7-8 million of additional costs; whilst we have plans to mitigate this impact as far as possible, we recognise that against this backdrop, any earnings growth for the year is likely to be limited.”
Ms Hubbard signalled that cost headwinds should ease, unless there is a “further dramatic shift in sterling”.
The plunge in the pound since the Brexit vote has hammered retailers, which have seen their costs rocket as a result.
The announcement came alongside a trading update covering the 11 months to December 31, in which total sales grew 5.9% and 2.7% on a like-for-like basis.
Ms Hubbard added: “It is pleasing to report that Card Factory has traded well through the competitive Christmas trading period with customers once again responding positively to our card and non-card ranges.
“As a result, like-for-like store sales have improved in the year to date.”