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(Sharecast News) - Card Factory posted a drop in full-year profit on Tuesday as weak consumer confidence led to softer high street footfall in the second half, but shares of the retailer rose as it announced a 15m share buyback.
In the year to the end of January, pre-tax profit fell 31.5% to 43.9m, while adjusted pre-tax profit was down 15.2% at 56m, towards the bottom end of its revised guidance of 55m to 60m.
Revenue ticked up 7.4% to 582.7m, supported by positive contributions from acquired businesses.
The UK store estate saw a "resilient" first-half performance, it said, with like-for-like sales up 1.3%, but the second half saw sales dip 1.7% amid softer high street footfall.
The retailer said it had been a year of both encouraging progress and challenge. In particular, its performance in the second half reflected more cautious consumer behaviour and softer high street footfall, which it said were "substantially influenced" by macroeconomic conditions.
"The year was characterised by a shift in consumer behaviour," Card Factory said. "Ongoing cost of living pressures contributed to weaker consumer confidence and, consequently, more cautious discretionary spending. This was most evident in the second half, where reduced footfall across all retail formats impacted our UK store performance.
"Despite this, in Q4, cardfactory continued to grow share of the physical UK card market, demonstrating the continued strength and relevance of our value and quality-led proposition."
Card Factory declared a dividend of 5p per share, up from 4.8p a year earlier and also announced a 15m share buyback.
Chief executive Darcy Willson-Rymer said: "We remain committed to disciplined capital allocation and progressive shareholder returns, which is reflected in the proposed final dividend and a commitment to commence a 15 million share buyback programme.
"Looking ahead, as widely documented, the external environment remains uncertain. We have robust plans in place for FY27 to deliver further progress against our strategic priorities and medium-term ambitions."
At 0930 BST, the shares were up 2.7% at 68.07p.
Dan Coatsworth, head of markets at AJ Bell, said: "Card Factory's high street woes have led to a slump in profits and there is no cause for celebration with its outlook statement. The seller of cards, balloons and party accessories is braced for new inflationary pressures.
"The Middle East crisis is pushing up the cost of transporting costs and energy, and that could feed into higher prices for retailers like Card Factory and dampen demand from consumers if there is a new cost-of-living crisis.
"In theory, Card Factory's value-led proposition should work in its favour if consumers are feeling hard up. However, it is still at the mercy of consumer sentiment, and many people might not feel a card, excluding a birthday one, is an essential purchase. A shift into gifts makes Card Factory even more vulnerable to a drop in discretionary spend if the backdrop gets tougher.
"The key reason why the shares moved higher on the results was proof that Card Factory can keep generating solid cash flow even in harder times. A new share buyback, while small in value at 15 million, also sends a positive signal to the market that the business is down but not out."
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