Shares in Card Factory are 5% higher this morning, topping the , after a solid acceleration in full year sales growth (FY18) and a satisfactory start to the new year (FY19). Headline sales growth of 6% accelerated from 4.4% in FY18 while like-for-like sales grew 2.9% vs 0.3% prev. Even better news was the online channel posting growth of 67% despite a strong comparable.

It’s a different story in terms of profitability, with pre-tax profits dropping 12% – bang in-line with January’s profits warning guidance – due to unfavourable currency moves and a higher UK living wage, and the outlook suggests little EBITDA growth this year due to continued cost headwinds, but this isn’t deterring income seekers nor bargain hunters. The former are attracted by 2018’s handsome 12%+ yield while the latter like the look of the bounce from 2018 lows.

A 1.6% increase in final dividend (total ordinary dividend +2.2%) may not be much to write/send a card home about, but it is an increase nonetheless. What’s really exciting investors and helping the shares higher, however, is management’s confidence in future cash generation and resilience in the face of high street footfall decline to suggest a 5-10p special dividend in the first half of fiscal 2019. This is less than the 15p of the last three years, but it is at least the promise of another special and, depending on what is paid, keeps the forward yield above 7% and possibly as high as 9.8% (consensus 7.7%).

Brand strength, greetings card market resilience and a product offering favouring physical presence looks to remain a tried and tested recipe at a time when so many retail peers continue to struggle. But is it enough to engineer a break that holds above 200p and eventually encourages a closing of the ugly gap-down in response to January’s profits warning?

Mike van Dulken, Head of Research, 10 Apr 2018