Shares Card Factory are down over 7%, at the tail end of the , after reporting negative H1 like-for-like sales growth (-0.2% YoY; excludes new stores) blamed on bad weather and a still cautious consumer. Even if this suggests an improvement to merely flat growth in Q2 vs -0.4% in Q1 (at the time attributed to tough comparable growth and difficult retail environment), H1 growth is still well down on 3.1% this time last year. Furthermore, H1 total sales growth (including new stores) of 3.2% may imply 3.4% growth in Q2 after just 3.0% in Q1, but H1 growth still almost halved from 6.1% last year.

Even these small positives, however, are eclipsed by official EBITDA guidance of £88-91m for FY19 implying contraction of between 3.1% and 6.3%, adding to declines in profits of 4.6% in FY18. And this is still dependent on the critical Q4 doing as well as usual on account of Christmas.

Even if network expansion is slower than last year (25 openings vs 30 in H1; on-track for 50 this year), shareholders are questioning the logic of expansion for total sales growth while like-for-like is in decline, especially with Brexit uncertainty growing to hamper UK footfall.

Even confirmation of a 5-10p special dividend is failing to inspire, probably because it will be well down on the 15p special that shareholders have benefited from annually for the last three years, thus depressing the implied total yield.

That said the shares remain above Feb lows of 185p which were tested in Mar/Apr and flirted with again in Jun/Jul. This could yet see bargain hunters swoop in again hoping for yet another short-term rally back 210p or better. Shares already off their worst levels.

Mike van Dulken, Head of Research, 9 Aug 2018